A Beginner’s Guide to Blockchain- Part 1
Overview
Everyone is asking questions about Blockchain these days, from your Street Vendor to your friends, right? Don’t worry; I am not going to batter you with too many technical or heavy words about Blockchain in this article. However, I will try to help you understand the concept of Blockchain and how it can be useful in the coming decades.
Topics
1. What is Blockchain?2. How does it work?3. Why it is Secure?4. Why it is called Distributed?
1. What is Blockchain?
As the name implies, a Blockchain is a chain of blocks that contain Information or Data. This technique was originally described in 1991 by a group of researchers and was originally intended to timestamp digital documents so that no one can backdate or tamper with them. However, it went by mostly unused until it was adapted by Satoshi Nakamoto in 2009 to create digital Cryptocurrency Bitcoin.
A Blockchain is a distributed ledger and completely open to anyone. They have an interesting property: once some data has been recorded inside a Blockchain, it’s almost impossible to change it. This is because Blockchain is based on the centuries-old method of the general financial ledger. It is a non-destructive approach to track data which changes over time.
2. How does it work?
Blockchain stores information in a stack called blocks that are linked together in a chronological fashion to form a continuous line. To understand how exactly Blockchain works let’s have a close look at the Blocks. Each block contains some data, the hash of the current block and the hash of the previous block.
The data which is stored inside a block depends on the type of the Blockchain. For example, the Bitcoin Blockchain stores the details as following:
1. Data: It stores the data about a transaction such as the Sender, Receiver and Amount of Coins.
2. Hash: A block also has a Hash. We can compare a Hash with a Fingerprint. It distinguishes a block and all of its contents and it’s always similar to a unique finger impression. Once a block is developed, it’s hash is being counted. If we are changing something inside the block, that will cause the Hash to change. That’s why the Hashes are very useful when you want to detect changes to blocks. To connect it with a fingerprint, consider if a fingerprint of a block changes, it is no longer the same block.
3. Hash of the Previous Block: As you can see in below image, each Block has a Hash and the Hash of Previous Block. So Block Number 3 points to Block Number 2 and Block Number 2 points to Number 1. First Block here is a bit special. It cannot point to the previous Block because it’s the first one and that’s why it is known as “Genesis Block”. In this case, if someone tries to tamper with the second block, it will cause the hash of block to change as well. Resulting, Block 3 and all following Blocks will go invalid because they will no longer store a valid Hash of the previous Block.
3. Why is it Secure?
Using Hashes is not enough to prevent tampering. Computers these days are very fast and can calculate hundreds or thousands of Hashes per second. So, one can effectively tamper with a Block and recalculate all the Hashes of other Blocks to make the Blockchain valid again. And to diminish this, Blockchain has something named as “Proof-Of-Work”.
It’s a mechanism that slows down the generating new Blocks. In the case of Bitcoins, it takes nearly about 10 minutes to calculate the required Proof-Of-Work and add a new Block to the Chain. This mechanism makes it very hard to tamper with the Blocks, because if you temper with one Block, you’ll need to recalculate the Proof-Of-Work for all the following Blocks.
So, the Security of a Blockchain derives from its creative use of Hashing and the Proof-Of-Work. But there is one more way that Blockchains secure themselves by being Distributed.
4. Why it is called Distributed?
Instead of using a central entity in order to manage the chain, Blockchain uses a Peer-to-Peer Network where everyone is allowed to join. When someone joins the network, he/she gets a full copy of Blockchain. The node will use this technique to verify that everything is still in order.
For example, when someone creates a new block, the block will be sent to all the nodes on the network and each of the nodes will verify the Block to make sure that it’s not tampered and if everything checks out, each node adds this new Block to their own Blockchain. All the nodes in the network create consensus and agree upon which Blocks are valid and which are not.
In this case, if someone wants to tamper with the Blockchain, he/she needs to tamper with all the Blocks on the chain, redo the Proof-Of-Work for each and every Block and take control of more than 50% of the Peer from their network(i.e. Peer-to-Peer Network). Only after that, the tampered block will be accepted by everyone else in the Network. And that’s almost impossible to do as I said in the start!
This was all about what is Blockchain; how does it work, why it is secure and distributed. To know about its use cases and implementation in various industries, stay tuned for my upcoming blog. Coming soon ;)
