„What Is a Blockchain?
Blockchain is a decentralized digital ledger that securely stores records across a network of computers in a way that is transparent, immutable, and resistant to tampering. Each „block” contains data, and blocks are linked in a chronological „chain”, according to ”investopedia.com” .
A blockchain is a distributed database or ledger shared among a computer network’s nodes. They are best known for their crucial role in cryptocurrency systems for maintaining a secure and decentralized record of transactions, but they are not limited to cryptocurrency uses. Blockchains can be used to make data in any industry immutable—meaning it cannot be altered.
Since a block can’t be changed, the only trust needed is at the point where a user or program enters data. This reduces the need for trusted third parties, such as auditors or other humans, who add costs and can make mistakes.
Since Bitcoin’s introduction in 2009, blockchain uses have exploded via the creation of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.
Key Takeaways
- Blockchain is a type of shared database that differs from a typical database in the way it stores information; blockchains store data in blocks linked together via cryptography.
- Different types of information can be stored on a blockchain, but the most common use has been as a transaction ledger.
- In Bitcoin’s case, the blockchain is decentralized, so no single person or group has control—instead, all users collectively retain control.
- Decentralized blockchains are immutable, which means that the data entered is irreversible. For Bitcoin, transactions are permanently recorded and viewable to anyone
A blockchain consists of programs called scripts that conduct the tasks you usually would in a database: entering and accessing information, and saving and storing it somewhere. A blockchain is distributed, which means multiple copies are saved on many machines, and they must all match for it to be valid.
The Bitcoin blockchain collects transaction information and enters it into a 4MB file called a block (different blockchains have different size blocks). Once the block is full, the block data is run through a cryptographic hash function, which creates a hexadecimal number called the block header hash.
The hash is then entered into the following block header and encrypted with the other information in that block’s header, creating a chain of blocks, hence the name “blockchain.”
Transactions follow a specific process, depending on the blockchain. For example, on Bitcoin’s blockchain, if you initiate a transaction using your cryptocurrency wallet—the application that provides an interface for the blockchain—it starts a sequence of events.
In Bitcoin, your transaction is sent to a memory pool, where it is stored and queued until a miner picks it up. Once it is entered into a block and the block fills up with transactions, it is closed, and the mining begins.
Blockchain Decentralization
A blockchain allows the data in a database to be spread out among several network nodes—computers or devices running software for the blockchain—at various locations. This creates redundancy and maintains the fidelity of the data. For example, if someone tries to alter a record on one node, the other nodes would prevent it from happening by comparing block hashes. This way, no single node can alter information within the chain.
Because of this distribution—and the encrypted proof that work was done—the blockchain data, such as transaction history, becomes irreversible.
Blockchain technology achieves decentralized security and trust in several ways. To begin, new blocks are always stored linearly and chronologically. That is, they are always added to the „end” of the blockchain. After a block has been added to the end of the blockchain, previous blocks cannot be altered.
Pros and Cons of Blockchain
For all of its complexity, blockchain’s potential as a decentralized form of record-keeping is almost without limit. From greater user privacy and heightened security to lower processing fees and fewer errors, blockchain technology may very well see applications beyond those outlined above. But there are also some disadvantages.
Read the full art. on ”investopedia.com” .
