Did “Bitcoin” just pop in your mind after seeing this blog title? If it did, it’s good, you are thinking straight. But to understand the real-life implication we need to understand “What actually is Blockchain?”.
Blockchain got the much-deserved exposure and hence the popularity only after Bitcoin made its use and rocked the financial industry globally.
Two things here.
Bitcoin is a digital currency only made possible by the Blockchain framework.
Yes, they are not same and you don’t have to necessarily talk about Bitcoin in a Blockchain discussion forum.
So what is Blockchain?
As the name suggests, its a chain of blocks that contain information. To better understand the concept, let’s just focus on online transactions.
Blockchain is a record-keeping technology or a digital ledger you can say. It’s a disruptive and ingenious invention that can possibly reshape the financial world. Moreover, a technology that allows the distribution of digital information or currency without copying or disturbing its integrity.
In a blockchain, each block contains data, a unique key aka a hash, and the hash of its previous block. Every time a transaction is made, a new block is created with a new hash.
The data stored inside a block in any given blockchain depends upon the type of blockchain. In a public blockchain like Bitcoin, for example, you can have data about the sender, receiver and amount.
A hash is a block’s unique key of random characters (e.g: d324adasfe4sfdsdf5sdsdse45sdf45445ee01c5). Every time the content of a block is changed, the hash of the block gets changed too.
For instance, if someone alters a block, its hash gets changed and thus the interconnection gets disturbed making the entire blockchain invalid. To make the blockchain valid again, one needs to calculate all the following block’s hashes and get verified back again. Doing this for a wrong purpose is not unlikely though because of computers today process at a very high speed. That’s when a mechanism called Proof of Work comes into play.
In a blockchain when someone wants to make a transaction, it has to be verified all the participants. Each participant has a copy of the blockchain, hence its called a distributed ledger.
As in the illustration shown above, when the user ‘A’ wants to create a new block, every other user in the blockchain receives a copy of the same block, it’s only after the verification or consensus by all users it gets verified and linked to the blockchain. This mechanism of verifying a block by unanimous consensus is called the “Proof of Work”.
The user that first verifies the block and approves it is called the Miner. There are millions of blocks mined in any given time.
Other related articles you might be interested in:
Featured Image: freepik.com