Blockchain Basics — What is Blockchain?

In this series, we’ll be exploring the basic concepts behind this incredible technology — blockchain, cryptocurrency, and more!

Blockchain is booming — it’s everywhere. In the news, on your social media feeds, constantly evolving and being used for new and exciting applications. But what is it, exactly?

At the simplest level, it is exactly what its name suggests — a chain of blocks. The ‘block’ represents data and the ‘chain’ is a series of blocks, one after the other, each one validated by the previous block’s ‘hash’ (more on that in a moment!). A blockchain can be added to indefinitely — currently, there is no maximum number of blocks on any particular chain.

What does a ‘block’ do?

Blocks store information focusing on transactions — transaction data, which includes user participation data and unique data specific to that block. A block can contain information about multiple transactions, and each block has a limit of X MB. We’ll use BZEdge as an example — each block has a data limit of 2.5 MB.

Let’s break this down — what is the data and why is it stored?

Transaction data — If you make a purchase, transfer some data, or trade cryptocurrency, for example, this transaction will be stored in a block which will be added to a chain relevant to the transaction taking place. A transaction is, very simply, sending from A to B.

User Participation — You, the buyer, the seller, and whoever else is involved in the transaction — all parties participating in the transaction have their information recorded in the block. This data is not identifying, but rather uses a ‘digital signature’, not dissimilar to a username. Each transaction can have multiple senders and receivers.

Block-Specific— Each block is unique and stores its own unique code, called a ‘hash’. The hash makes the block identifiable from all the other blocks in the chain.

When a new transaction is created, it is stored by the block to be added to the blockchain.

How does that happen?

First things first — a transaction has to take place. Whether that’s a purchase, newly-generated coins — if any, a trade, or a transfer, the transaction must occur before a block can be created.

Once the transaction happens, it needs to be verified. Rather than obtaining verification from a single point (like with a traditional bank, for example), a network of computers checks that the transaction occurred the way you said it did — you bought X, sent Y, and so on.

Success! The transaction has been verified! Now all the necessary transaction data is stored in a block.

The block is then given a hash, which is unique to that block, and also the hash of the most recent block added to the blockchain. This validates the block’s place in the chain, improving security.

The new block then becomes publicly available for anyone to view — a record of one or multiple transactions which cannot easily be tampered with, out in the open for all to see.

Why so many steps?

The goal of blockchain is to allow digital information to be openly recorded and securely distributed — without the ability to edit the existing information. By having these steps to create a block to be added to the blockchain, it is extremely hard to manipulate the data held within. As a decentralized process, this becomes even more difficult — and makes the process much safer and more secure for users.

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