In simple terms, a blockchain is a list of data records that functions as a decentralized digital ledger. This data is organized into blocks arranged chronologically and secured using cryptography.
Early models of blockchain emerged in the early 1990s, when computer scientist Stuart Haber and physicist W. Scott Stornetta used cryptographic techniques in blockchain as a way to secure digital documents from data tampering.
Haber and Stornetta's innovation became a source of inspiration for many computer scientists and cryptography enthusiasts, which ultimately gave birth to Bitcoin as the first decentralized electronic money system or the first cryptocurrency.
What is Blockchain Technology?
Although blockchain technology is older than cryptocurrencies, its potential was only recognized after the creation of Bitcoin in 2008. Since then, interest in blockchain technology has gradually increased, and cryptocurrencies are now being recognized on a larger scale.
Blockchain technology is generally used to record cryptocurrency transactions, but can also be applied to various other types of digital data for various purposes. Bitcoin, as the oldest, safest, and largest blockchain network, is designed with careful and balanced cryptography and game theory.
Also read: What is Layer 1 Blockchain? How Crypto Layer 1 Works and List
How Does Blockchain Work?
In the context of crypto assets, a blockchain consists of a stable chain of blocks, where each block stores a list of previously confirmed transactions. Because a blockchain network is managed by many computers spread across the world, it functions as a decentralized database.
This means that each participant or node stores a copy of the blockchain data, and they communicate with each other to ensure data consistency.
As a result, blockchain transactions occur within a global peer-to-peer network , making Bitcoin a decentralized, borderless, and censorship-resistant digital asset.
Source: Wikimedia Commons
Blockchain systems are mostly considered trustless because they do not require trust in a single authority. This means that no single entity controls Bitcoin.
The mining process is a key part of almost every blockchain, which relies on hashing algorithms. Bitcoin uses the SHA-256 algorithm (256 bit secure hash algorithm) to secure blocks and transactions.
Hashing is the process of converting input into output of a fixed length. In the cryptocurrency world, hash functions are one-way, making it difficult to calculate input from output.
Once a block is mined, miners broadcast the new block to the network, and other miners check its validity before adding it to their copy of the blockchain.
The integrity of the blockchain is maintained by the principle that each miner owns a copy of the longest and most difficult to generate blockchain.
If a miner tries to cheat, he or she would need more than 50% of the network's computing power, which is very difficult to achieve. This model is known as Proof-of-Work (PoW) , although there are also other models such as Proof-of-Stake (PoS) which require different mechanisms.
Also read:
Layer 1 vs Layer 2 Blockchain, What's the Difference?
What Makes a Blockchain Secure? Listen to the explanation!
Understanding What the Blockchain Trilemma Is: A Beginner's Guide
DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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