Blockchain Basics – What is the Blockchain Technology

The internet surprised us once again with the blockchain.

We frequently hear of this word regarding cryptocurrencies, Bitcoin, and other crypto-related topics.

And if you’re wondering, “What is a blockchain?” or “How does the blockchain work?” You’ve come to the right place.

In this article, we’ll learn everything there is to know about the blockchain, including how it works and how we can use it in our daily lives.

So fasten your seatbelts; it’s going to get bumpy.

History of blockchain

The blockchain was first introduced in 2008 as a public ledger for keeping records of transactions for Bitcoin. This method of recording transactions was transparent. Every record was timestamped, immutable (meaning no one could change/remove a record after it had been added), and decentralized.

It was invented by a guy or probably a group of people, or even an AI who goes by the name Dorian Satoshi Nakamoto.

At the time, the word blockchain wasn’t frequently tossed around as it is now. This ledger technology created by Satoshi helped solve a few major problems. First, it enabled peer-to-peer transactions, where there’s no need for intermediary services to process transactions. Also, it solved the double-spending problem, which is a problem that usually occurs in digital currencies and not physical cash.

Double-spending is when the same digital currency can be spent twice.

Around the year 2014, the blockchain started to gain traction and attention. People began to invest in it after seeing that it had more applications than just cryptocurrency. It could be used in various fields such as insurance and finance, healthcare, voting, transportation, and others.

What is a blockchain?

The blockchain is a distributed database or record-keeping system for storing digital records in a structure that makes it difficult to hack the system. The blockchain does not store data in a centralized location, unlike a traditional database. Instead, each node/computer on the network has a complete copy of the blockchain. When data is saved on the system, it is distributed to thousands of network nodes.

How does the blockchain work?

The blockchain stores sets of data in collections known as blocks. Blocks are like containers. Every container has a limit or a maximum amount of content it can hold. In terms of blocks, the total amount of data it can contain is known as block size limit

The capacity of each block is referred to as the block size, and it varies depending on the blockchain (ranging from a few kilobytes to roughly 1 megabyte).

The block size of Bitcoin is around 1MB, and that of Ethereum is roughly 80KB.

Although the block sizes appear small, they can carry up to 2000 transactions. Every block is stored linearly and chronologically, with each new block added to the end of the chain. When a block reaches its maximum block size, it’s closed and connected to another block using a hashing algorithm, a type of cryptographic validation. As a result, a continuous chain of blocks is formed, giving rise to the name blockchain. However, if a block exceeds the block size, the network rejects it and is not added to the chain.

What makes the blockchain secure and immutable?

The immutability of the blockchain is due to the hashes of the blocks. A hash is similar to a fingerprint. Humans all have different fingerprints. In the case of blocks, hashes serve as unique identifiers/fingerprints. Each block is digitally signed with a unique hash generated by a hashing algorithm/a hash function. The current block, the previous block, and a timestamp are used to generate these hashes, and the slightest change of input will result in a whole new hash.

Hash values normally look like this: 3a42c503953909637f78dd8c99b3b85ddde362415585afc11901bdefe8349102

Think of a hash function as a grinding machine. A grinding machine only works in one direction. It starts with a raw item and grinds it down into smaller pieces. A hash function functions similarly in that it takes raw…