With the rapid rise in the value of cryptocurrencies over the past few years, the subject of blockchains and cryptocurrencies has captured the world’s attention. The first implementation of blockchain in a large-scale project was undertaken to support the cryptocurrency bitcoin. The bitcoin project took advantage of the decentralization and security of the blockchain network to create a currency that was not regulated by any country or financial institution. In this way, bitcoin was the first currency not to be controlled by the banking system, achieving greater security and data reliability than banks. It appeared in 2009, intending to be a refuge from the banking crisis. Beyond cryptocurrencies, blockchain technology has the potential to host any service application that exists nowadays, securely mediating transactions between businesses and clients. In this article, we will cover what blockchain technology is, how it works, and what its real-world applications are.
What is blockchain?
Definition: “Blockchain is a distributed database that maintains a continuously growing list of ordered records, called blocks.”These blocks “are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.”
This is the most globally accepted definition of blockchain. I know it sounds complicated but let’s go step by step.
“Blockchain is a distributed database that maintains a continuously growing list of ordered records, called blocks”.
Blockchain is like a network of interconnected computers that process transactions. Transactions can be value transactions like sending bitcoins to a friend, or data transactions, like read and write operations in conventional databases. Transactions are processed by the network and stored in blocks. Blocks are sets of transactions that are cryptographically interlinked. Each block created is linked to the previous one, creating a chain of blocks, hence the name blockchain.
“Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data”.
Each block contains a hash (SHA-256) of the previous block. A hash is a digest of the data, done using an irreversible mathematical method. You can easily calculate any hash of any data set, however, it is impossible to obtain the original data set by using the hash. The hash acts as the data’s fingerprint and is often used to verify the data’s integrity without having to compare its entire content byte by byte.
“A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.”
Since blocks contain the hash of the previous block, then modifying a block retroactively would imply that its hash would be different. As such, to keep a valid chain, it would be necessary to change all the blocks that were produced after that one. Therefore, data integrity security grows exponentially from block to block.
