Blockchain is a shared public ledger system where every user has the updated version of the entire past transaction history represented by the chain of blocks itself. It is the most secure and decentralized way to perform value-based services online.
How is this possible?
Blockchain uses traditional technologies like databases, hashing, and cryptography to replace trust with mathematical proof. Every node has the updated version of the current blockchain and they together verify the transactions in each block before adding them to the blockchain.
The node needs to be updated with the current blockchain after every block creation. It wouldn’t be feasible to download the blocks and thus the transactions within it as it is. The amount of memory used to store the blockchain would be staggering and would discourage nodes from participating. To solve this all the transactions of a given block are compressed using a form of hashing called Merkle hashing.
Hashing returns a unique fingerprint for each block hashed.
This also helps in securing a transaction as any tampering of the transaction can be easily detected.
A miner in the system is a node that helps in verifying a block before the system can add it to the blockchain. All the miners in a system try to solve a complex mathematical puzzle to get the reward associated with it. This is called proof of work and helps in maintaining trust.
Once the block is verified, it is chained to the blockchain by adding the previous
block’s hash value to its block. This chaining prevents tampering of individual blocks as the chain will be broken.
The block is a container of the block header and the transactions.
The header contains the metadata information which is useful for both the mining and the chaining process. The transactions are stored in a Merkle tree structure and the Merkle root obtained is stored in the block header.
In this manner, Blockchain is a decentralized technology that allows for security and integrity of transaction information by eliminating trust between nodes and establishing consensus among through a secure validation mechanism.
Blockchain 101 is a series of posts that aim to make the concepts of blockchain easy and understandable.
Stay tuned for more!