Blockchain is currently at the peak of the hype cycle. It is the new Internet. But currently, it is in the phase in which the internet was in 1995. Peoples are excited but didn’t know what is it.
Looking at its vast applications and security more and more countries are trying to use this advanced technology.
What is Blockchain Technology?
Blockchain was developed in 1991 by Stuart Haber and Scott Stornetta. But the idea of Blockchain got improved when Bitcoin was invented by a person or a group called Satoshi Nakamoto.
There is no specific definition of Blockchain but it can be simply explained as a chain of blocks. The more advanced definition is as follows:
Blockchain Technology is decentralized, irreversible, public ledger which is formed by digital chain of blocks that contains encrypted information. It is maintained by each and every member of the blockchain.
Characteristics Of Blockchain
- Decentralized: It is not controlled by any central authority or third party. Unlike banks, that are centralized, it is controlled by each and every member of the network.
- Irreversible: Once a piece of information is stored in the block, it will stay there forever. It is almost impossible to alter. For example, if you made a transaction no one can deny that you didn’t make a transaction.
- Chronological: The information stored in blocks is kept chronologically i.e. it tells which transaction was done first.
- Public: It is public as it is controlled by peoples of the network called nodes.
Is Blockchain and Bitcoin Same?
Blockchain has hyped because of Bitcoin, a cryptocurrency. But what is Bitcoin? Is it the same as Blockchain? By the way, what do you think? Ok, let’s find it out.
What is Bitcoin?
Bitcoin is a cryptocurrency, built upon the concept of blockchain. It allows peoples to send money to other peoples anywhere in the world, very securely and fastly.
Bitcoin vs Blockchain
So now we know that what is blockchain, now let’s find out the difference between blockchain and bitcoin.
|A Ledger||A Cryptocurrency|
|Provides decentralized and secured services.||Provides fast and |
|The scope is unlimited and used in many fields||Limited scope to|
Credits: Cem Goksel Ozargun
Now tell your friend that Bitcoin is different from Blockchain and he will be amazed as he did’t know this.
How Blockchain Works?
For now, we know that Blockchain is a secured and decentralized public ledger but how does the whole process happen? Let’s find it out.
Before learning about how does Blockchain works let’s look at what are the things inside the block. It will make it simple to understand the working of blockchain.
What are the things inside a Block?
In general, a block contains three main elements i.e. data, hash and hash of the previous block.
- Data: It is generally the stored information. It can vary from blockchain to blockchain. For example, the Bitcoin blockchain consists of the data of the sender, receiver and transaction amount.
- Hash: It is like a fingerprint. It is a unique mathematical expression that changes as soon as a block is altered. Block 1 has a different hash than that of Block 2.
- Hash of the Previous block: It is the most important part of the block. Let’s understand it by example.
The first block of any blockchain is referred to as Genesis Block as it doesn’t have any previous hash. As you can see the Block 2 has its own hash and the hash of Block 1 and similarly in the third block.Now suppose Block 2 is altered its hash changes to 69A1. But Block 3 has its previous hash as 6BQ1. So it becomes invalid and block 2 can’t be hacked or altered.
To hack any block all the other blocks need to hacked which in reality is almost impossible. So as the blockchain grows it becomes more and more secure. That is the reason why bitcoin is the most secured Blockchain network.
Now we know that what is inside the block but still it is very difficult to understand the mechanism of blockchain. So let’s take some metaphors so that the process of blockchain can be easily understood.
- Box = Block
- Sheet = Capacity of Block
- Key 1 = Unique Hash of the block
- Key 2 = Hash of the previous block
- Tejas initiates a transaction of 5 Bitcoins and sends it to Vijay.
- Now the transactions stand in a queue where all other previous transactions are also standing in order to get confirmation called Mempool.
- Imagine a single sheet of paper full of transaction records given below in the picture. So now Tejas’s transaction also enters into it.
- When the sheet has no space for other transactions to record, it is then put into the box with Key 1 that is the hash of the block.
- It is locked by the key 2 that is the hash of the previous block.
- Now the nodes solve a mathematical problem and create the brand new Block.
- The process is repeated and new blocks are created thereby creating a chain of blocks known as Bitcoin Blockchain.
- Blockchain is a decentralized public ledger.
- It is nearly impossible to hack the Blockchain network.
- Its characteristics are decentralized, public, chronological, irreversible.
- Bitcoin and Blockchain are different from each other.
- A block contains three main elements data, hash and hash of the previous block.