A blockchain is a shared distributed database or ledger between computer network nodes. A blockchain serves as an electronic database for storing data in digital form. The most well-known use of blockchain technology is for preserving a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin. The innovation of a blockchain is that it fosters confidence without the necessity for a reliable third party by ensuring the fidelity and security of a record of data.
The way the data is organized in a blockchain differs significantly from how it is typically organized. In a blockchain, data is gathered in groups called blocks that each includes sets of data. Blocks have specific storage capabilities, and when filled, they are sealed and connected to the block that came before them to create the data chain known as the blockchain. Every additional piece of information that comes after that newly added block is combined into a brand-new block, which is then added to the chain once it is full.
How Does a Blockchain Work?
Blockchain aims to make it possible to share and record digital information without editing it. A blockchain serves as the basis for immutable ledgers, or records of transactions that cannot be changed, removed, or destroyed. Blockchains are also referred to as distributed ledger technologies because of this (DLT). The blockchain idea was first put forth as a research project in 1991, long before Bitcoin became a widely used application in 2009. Since then, the introduction of numerous cryptocurrencies, decentralized finance (Defi) applications, non-fungible tokens (NFTs), and smart contracts has led to explosive growth in the use of blockchains.
Blockchain Decentralization
What a blockchain does is enable the distribution of the data stored in that database across multiple network nodes located in different places. This not only adds redundancy but also preserves the accuracy of the data stored there; for example, if someone tries to change a record at one database instance, the other nodes won’t be changed, preventing a bad actor from doing so. All other nodes would cross-reference one another and be able to quickly identify the individual who tampered with Bitcoin’s transaction history. This approach aids in creating a clear and precise sequence of events. This prevents any one node in the network from changing the data it contains.
As a result, the data and history (such as those of cryptocurrency transactions) are irreversible. A blockchain may store a variety of data, including legal contracts, state identifications, or a company’s goods inventory. Such a record may be a list of transactions (such as with a cryptocurrency).
Transparency
Due to the decentralized structure of the Bitcoin blockchain, all transactions may be transparently observed by utilizing blockchain explorers, which enable anybody to examine transactions as they happen in real-time, or by owning a personal node. As new blocks are added and confirmed, each node’s copy of the chain is updated. This implies that you might follow Bitcoin wherever it went if you so desired.
As an illustration, exchanges have previously been hacked, and anyone who had Bitcoin stored there lost everything. The stolen Bitcoins are identifiable, despite the hacker’s complete anonymity. It would be known if any of the Bitcoins taken in some of these hacks were transferred or used elsewhere.
Is Blockchain Secure?
Decentralized security and trust are made possible by blockchain technology in several ways. To start, new blocks are always chronologically and linearly stored. In other words, they are constantly added to the blockchain’s “end.” It is very difficult to go back and change the contents of a block once it has been added to the blockchain unless a majority of the network has agreed to do so. This is because each block has its hash, as well as the hash of the block that came before it and the aforementioned date. A mathematical function that converts digital information into a string of numbers and letters produces hash codes.
Imagine a hacker who also manages a node on a blockchain network wanting to change a blockchain and take everyone else’s cryptocurrency. If they changed their copy, it wouldn’t match the copies made by everyone else. When everyone compares their copies to one another, they will notice that this one copy stands out, and the hacker’s version of the chain will be rejected as fraudulent.
For such a hack to be successful, the hacker would need to simultaneously control and change at least 51% of the blockchain copies, making their new copy the majority copy and, thus, the agreed-upon chain. The requirement to rewrite every block because their timestamps and hash codes had changed would make such an attack extremely expensive and resource-intensive.
