The Blockchain: Tamper-Proof Technology
Block + Chain = Blockchain
For efficiency, transaction data are bundled into digital blocks. And each new block is linked to the previous block, creating a continuous chain. Blockchain is not only a name but also the description.
New blocks are created by special nodes called “miners,” which is not actually a miner digging in the ground. It’s a personal computer dedicated to verifying transactions. (However, miners aren’t the only nodes, there are also non-mining nodes). The nodes not only create the block with the new transactions but also link the previous block, which is already linked to the rest of the network. The construction of gapless linked blocks is part of what makes the blockchain secure and robust.
When a block gets added, the blockchain node will send the data to the network to be verified by all the other nodes, triggering a consensus algorithm for authenticity and coherency (it must be perfect, or it does not get added).
Even without a currency, the blockchain algorithms by themselves are priceless. The algorithms protect the blockchain and eliminate the need for middlemen. All a middleman does is prevent funny business, but an algorithm does it better.
Just like in school when your math teacher wanted to make sure you didn’t cheat when you solved a math equation, the blockchain uses a system of proof called proof-of-work. You can’t just come up with an answer; you must show proof. In Bitcoin, verification is done by a node by solving extremely difficult math calculations. The new block is valid because the inputs to the calculations are matched-up perfectly to the previous blocks transaction-history. The work must be shown. (And it must be flawless.) This ensures that when a new block is added, no one can undo the block, remove an old transaction, then create a new block to cover up their wrongdoing. (Instead of clever cryptographics, which can get hacked, it’s simple cryptographics that can only be solved with brute computing force.)
To trick the system would mean creating a new block faster than the combined speed of the entire network, and still have enough juice to solve the math calculations. This is the true power of decentralization; it always makes it an unfair fight, where it’s one hacker’s computer vs. the world’s computing power. Not only would this be unfeasible, but the time and monetary cost to do this would also far exceed the gain. And over time the calculations get more difficult and more demanding.
(Read “The Blockchain: Solving Double-Spend”)