Blockchain technology has gained a lot of traction across the world due to its features like transparency, immutability, decentralization and traceability. From enterprises to startups, banks, and governments, everyone has allocated resources and invested money to understand how could blockchain bring a shift in the current computing paradigm.
The blockchain is more robust and secure than the centralized models by its nature as it relies on a decentralized and distributed ledger model. But do you understand what is blockchain, how does it work, what problems it can solve, how and where it can be used?
What is Blockchain?
As the name indicates, a blockchain is a chain of blocks, containing time-stamped digital records. Initially described by a group of researchers in 1991, this technique was intended to timestamp digital records so that no one could backdate or tamper them.
But the concept went unused until Satoshi Nakamoto revived it again in 2009 to create a digital cryptocurrency, Bitcoin.
Understanding the blockchain in more depth, it is a distributed ledger where the saved digital records are distributed across all participating nodes in the network. Each node maintains an updated copy of the ledger.
Once the data has been recorded or added in a blockchain, it becomes difficult to change it. Let’s understand how by taking a closer look at a block.
Every block comprises of-
- Hash of the block
- Hash of the previous block
The data recorded in a block depends on the blockchain type.
For example, Bitcoin Blockchain saves the details about a transaction such as a receiver, sender and number of coins.
A hash of the block is similar to a fingerprint(always unique) that provides identification to the block and its contents.
Once a block is created, a hash gets generated. Hash value gets changed with every change in the block.
Therefore, hash values help in detecting the changes made to blocks.
Containing a hash of the previous block means every block is linked to each other and creates a chain of blocks, known as “Blockchain.”
Let’s consider an example.
We have a chain of 3 blocks.
Each block in this chain has its hash and previous hash.
Previous Hash: 0000
Previous Hash: 3W8F
Previous Hash: 2BR1
Here, we can see that block3 points to block2 while block2 points to block1.