What is Blockchain?
In simple words, Blockchain can be defined as a chain of the block that contains information. The technique is intended to timestamp digital documents so that it’s not possible to backdate them or temper them.
The blockchain is used for the secure transfer of items like money, property, contracts, etc. without requiring a third-party intermediary like bank or government. Once a data is recorded inside a blockchain, it is very difficult to change it.
The blockchain is a software protocol (like SMTP is for email). However, Blockchains could not be run without the Internet. It is also called meta-technology as it affects other technologies. It is comprised of several pieces: a database, software application, some connected computers, etc.
Sometimes the term used for Bitcoin Blockchain or The Ethereum Blockchain and sometimes it’s other virtual currencies or digital tokens. However, most of them are talking about the distributed ledgers.
In this tutorial, you will learn
What is Blockchain?
What Blockchain is NOT!
What is a Block?
Proof of Work
Distributed P2P Network
Blockchain is not Bitcoin, but it is the technology behind Bitcoin
Bitcoin is the digital token and blockchain is the ledger to keep track of who owns the digital tokens
You can’t have Bitcoin without blockchain, but you can have blockchain without Bitcoin.
Let’s study the Blockchain architecture by understanding its various components:
A Blockchain is a chain of blocks which contain information. The data which is stored inside a block depends on the type of blockchain.
For Example, A Bitcoin Block contains information about the Sender, Receiver, number of bitcoins to be transferred.
The first block in the chain is called the Genesis block. Each new block in the chain is linked to the previous block.
Understanding SHA256 – Hash
A block also has a hash. A can be understood as a fingerprint which is unique to each block. It identifies a block and all of its contents, and it’s always unique, just like a fingerprint. So once a block is created, any change inside the block will cause the hash to change.
Therefore, the hash is very useful when you want to detect changes to intersections. If the fingerprint of a block changes, it does not remain the same block.
Each Block has
Hash of the previous block
Consider following example, where we have a chain of 3 blocks. The 1st block has no predecessor. Hence, it does not contain hash of the previous block. Block 2 contains a hash of block 1. While block 3 contains Hash of block 2.
Hence, all blocks are containing hashes of previous blocks. This is the technique that makes a blockchain so secure. Let’s see how it works –
Assume an attacker is able to change the data present in the Block 2. Correspondingly, the Hash of the Block also changes. But, Block 3 still contains the old Hash of the Block 2. This makes Block 3, and all succeeding blocks invalid as they do not have correct hash the previous block.
Therefore, changing a single block can quickly make all following blocks invalid.
Hashes are an excellent mechanism to prevent tempering but computers these days are high-speed and can calculate hundreds of thousands of hashes per second. In a matter of few minutes, an attacker can tamper with a block, and then recalculate all the hashes of other blocks to make the blockchain valid again.
To avoid the issue, blockchains use the concept of Proof-of-Work. It is a mechanism which slows down the creation of the new blocks.
A proof-of-work is a computational problem that takes certain to effort to solve. But the time required to verify the results of the computational problem is very less compared to the effort it takes to solve the computational problem itself.
In case of Bitcoin, it takes almost 10 minutes to calculate the required proof-of-work to add a new block to the chain. Considering our example, if a hacker would to change data in Block 2, he would need to perform proof of work (which would take 10 minutes) and only then make changes in Block 3 and all the succeeding blocks.
This kind of mechanism makes it quite tough to tamper with the blocks so even if you tamper with even a single block, you will need to recalculate the proof-of-work for all the following blocks. Thus, hashing and proof-of-work mechanism make a blockchain secure.
However, there is one more method which is used by blockchains to secure themselves, and that’s by being distributed. Instead of using a central entity to manage the chain, Blockchains use a distributed peer-peer network, and everyone is allowed to join. When someone enters this network, he will get the full copy of the blockchain. Each computer is called a node.