How does blockchain decentralisation works under the hood?
Blockchain technology is a distributed ledger that maintains a continuously growing list of records, called blocks, which are linked and secured using cryptography. This has gained significant attention in recent years due to its potential applications in various industries, including finance, supply chain management, and healthcare.
In this blog post, we will dive into the internals of blockchain and explore how it works.
The basics of blockchain
A blockchain is essentially a database that is spread across a network of computers, called nodes. Each node on the network maintains a copy of the blockchain, and they all work together to validate transactions and add new blocks to the chain. These nodes communicate with each other using a consensus mechanism, which ensures that all nodes agree on the state of the blockchain.
The blockchain consists of a series of blocks, each containing a set of transactions. When a transaction is initiated on the network, it is broadcast to all nodes for verification. Each node validates the transaction using a set of rules, which are defined by the network’s consensus mechanism. If the transaction is valid, it is added to a new block, along with other transactions that have been verified by the nodes.
Once a block is added to the blockchain, it cannot be modified or deleted. This is because each block contains a unique hash, which is a cryptographic signature that is generated using the contents of the block. If any part of the block is modified, the hash will change, and the block will become invalid. This makes the blockchain resistant to tampering and ensures that the data stored on it is immutable.
The role of consensus mechanisms
Consensus mechanisms are an essential part of blockchain technology. They ensure that all nodes on the network agree on the state of the blockchain, even if some nodes are malicious or fail. There are several consensus mechanisms used in blockchain, including Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
PoW is the most well-known consensus mechanism, used by Bitcoin and many other cryptocurrencies. In PoW, nodes compete to solve a complex mathematical problem, and the first node to solve the problem gets to add a new block to the blockchain. This process is known as mining, and it requires a significant amount of computational power.
PoS is a newer consensus mechanism that is used by many newer cryptocurrencies, such as Ethereum. In PoS, nodes are chosen to add new blocks to the blockchain based on their stake in the network. The more cryptocurrency a node holds, the more likely it is to be chosen to validate transactions and add new blocks.
DPoS is a variation of PoS that is used by some cryptocurrencies, such as EOS. In DPoS, nodes are elected by the network’s stakeholders to validate transactions and add new blocks to the blockchain. This makes the process of block validation more efficient, as only a small number of nodes are responsible for validating transactions.
This below video gives a great depiction on how ledger and consensus of proof of work works.
Conclusion
Blockchain technology is a powerful tool that has the potential to revolutionize many industries. By using cryptography and consensus mechanisms, blockchain ensures that data stored on it is secure, tamper-proof, and transparent. As the technology continues to evolve, it will be exciting to see how it is applied in various fields and how it can improve efficiency and security.
