The people who follow banking, investing, or cryptocurrency, they probably know about this child of technology named blockchain. This technology makes so much sense only because it keeps the records behind the bitcoin networks. But if this technology is new for you or you want to learn more about this technology, you are in the right place.
This article is all about blockchain and how it works. Do not worry as it is pretty simple and easy to understand so let’s begin:
Blockchain can be simply defined as a ledger that is global, public yet trusted, and cryptographically secure. This technology helps you in recording and verifying large volumes of digital transactions automatically.
There are the following three technologies by which blockchain can be implemented
- By the help of cryptography of private key
- By the help of peer-to-peer networks distribution with shared ledgers
- By following the protocols that are required for performing transactions and also for guaranteeing the security and record-keeping.
To understand how do blockchains work, keep reading:
Working of blockchain:
The main purpose of using blockchain is to help people understand and clear the doubts that people have about trusting each other. It also facilitates people to securely share the precious data in a tamper-proof way.
There are three main concepts of Blockchain: blocks, miners and nodes
Every chain is comprised of various block and there are three basic elements for every block as well.
The first one is the data in the block.
The second is called nonce which can be defined as 32-bit whole number. The nonce is generated randomly after the creation of the block.
The third one is the hash that is generated after the generation of the nonce. The hash can be defined as a 256-bit number that must be very small i.e., it should start with the huge number of zeroes, which is linked to nonce.
The nonce is generated when the first chain block is created, which in return generates a cryptographic hash. After this, block data is seemed to be signed and it is tied to nonce and hash until it is not mined.
Mining is the process by which new blocks are created on the chain. This process is used by miners.
As discussed earlier that there are a unique nonce and hash for every block in a blockchain but is also linked with the previous block hashes in the chain.
There is special software that is used by miners. This software helps to solve math problem which is incredibly complex for finding a nonce that generates a hash. About 4 billion combinations are available for nonce-hash, as nonce is 32-bit whole number or hash is a 256-bit number. These nonce-hash combinations must be mined for finding the golden nonce. Once the right combination is found then the particular block is added to the chain.
Decentralization is considered to be the most important concept. No computer or organization can have its chain. All the nodes that are connected to the chain help to make it a distributed ledger.
There is a unique copy of the blockchain that every node has. To be updated, verified, and trusted, the chain must get a newly mined block approved by the network algorithmically. You can easily check and view all the actions of the ledger as blockchains are quite transparent. There is a unique alphanumeric identification number given to each participant that is used to show the transactions.
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