What is Blockchain?

Blockchain seems to be widely known along with the birth of Bitcoin. Undoubtedly, blockchain technology is a critical or core element of Bitcoin or other cryptocurrencies, however, it appeared a relatively long period before it was used in the cryptocurrency area. Actually, blockchain is not a newly invented technology, but a result of the integration of series of subjects and technologies, including IT, communication technology, economics, cryptography, mathematics, Game Theory, etc.

 

 

Definition 

Blockchain is generally described as a distributed ledger system. It is a place to store the new confirmed transaction records. Each block connects and links to the previous and the subsequent blocks, which form the blockchain (a public database). In addition, blockchain is also an append-only transaction ledger, which means only new information or transaction confirmation can be recorded into the block. And no one can edit, modify or adjust the previous data that has been written into the blocks.

 

Blockchain is considered a consensus-driven huge network. A large number of computers, also called nodes/miners, are connected to the network. This makes blockchain decentralized which aims at preventing the Sybil attack that an attacker to maliciously add transactions on the network. The results of the ledger are shared with all other nodes within the blockchain network.  All nodes should achieve the necessary agreement/consensus on the updated ledger broadcast and sync with it.

 

So to conclude the features of blockchain are decentralization, tamper-proof, immutable, consensus-driven, and anonymous. Read more about the features of blockchain. 

 

Important Terms

Before we get to know how blockchain works, there are some important terms we need to know.

 

Public Key is a string consisting of numbers and letters, which represents the wallet address, similar to the bank account.

 

Private Key is the same form as a public key. It’s the password of the crypto wallet. No matter you want to send or receive cryptocurrencies, you need a private key to log in to your wallet.

 

 

Miner is a professional device that obtains cryptocurrency rewards by conducting a large number of calculations to verify and keep the transaction data, solving complex math problems.

 

Hashrate can be simply considered as an evaluation of a miner's performance, measuring the speed at which a miner works out the puzzle. The higher the hash rate, the higher probability that the miner may get a block reward by mining.

 

How Does Blockchain Work?

Understanding the important and basic terms introduced above, let's see how blockchain works.

 

Different from the traditional currencies or fiats which are issued by the central banks, most of the cryptocurrency is created by mining and maintained by all miners/nodes in the whole network. These "miners", are some high-equipped and purpose-built computers that are actually competing to solve complex mathematical problems in order to verify and confirm a transaction to make it go through.

 

Here we will take the bitcoin blockchain as an example. Suppose that many people are making BTC transactions. Each transaction is sent from a wallet address, which is a public key. There is also a private key, which is secured with a digital signature as well as cryptocurrency. The network will require miners to provide mathematical proof that the transaction has come from the owner of the wallet.

 

Actually, there are thousands of millions of BTC transactions are taking place at the same time around the world. Miners compete to validate the transactions and grouped the confirmed transactions into a block. Then, the block will be broadcast to the bitcoin network. Once the majority of nodes agreed on the broadcast block, it will be added to the blockchain. The miner who first solves the problem and packs it block will receive a certain amount of BTC reward.