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Blockchain is a type of shared database that differs from a typical database in the way it stores information; blockchains store data in blocks linked together via cryptography. Different types of information can be stored on a blockchain, but the most common use has been as a transaction ledger.
Blockchain is a decentralized, distributed, digital ledger that securely stores records (transactions) across a network of computers (nodes). It uses a chain of blocks to store data in a chronological order that is immutable, meaning it cannot be altered without the consensus of the network.
The stage for blockchain technology was set in 1991 when Stuart Haber and W Scott Stornetta pioneered the idea of a cryptographically secured chain of blocks. This early concept was further developed by Nick Szabo in 1998 with his "bit gold" project, a vision for a decentralized digital currency. In 2000, Stefan Konst contributed to the growing body of knowledge by publishing his theory of cryptographic secured chains. Finally, in 2008, Satoshi Nakamoto's groundbreaking whitepaper brought these ideas together, laying the groundwork for the blockchain revolution.
A block is a container that stores a cryptographic hash of the previous block, a timestamp, and a set of transactions. Different blockchains have varying block sizes. Once a block is full, its data is hashed to create a block header hash. This hash is then included in the next block's header, forming a chain of blocks.
Let's deep dive. A block is a data structure that contains a cryptographic hash of the preceding block, a timestamp, and a collection of transactions. The maximum size of a block varies across different blockchain networks. When a block reaches its capacity, its data is subjected to a cryptographic hash function, generating a hexadecimal number known as the block header hash. This hash is subsequently incorporated into the header of the following block, resulting in a chain of interconnected blocks, hence the term "blockchain."
A block is linked with another block in a chronological order i.e. the earliest block at the beginning and the latest at the end. A "chronological chain" refers to a sequence of events or data points arranged in the order they occurred over time, essentially a timeline where each element is linked to the previous one based on its chronological position, also known as linear order.
A blockchain is composed of blocks, each containing a set of transactions. Once a block is filled with transactions, it is added to the chain and linked to the previous block using a cryptographic hash. This creates a secure and tamper-resistant chain of blocks.
No single entity controls the blockchain. Instead, it is maintained by a network of computers, making it resistant to censorship and single points of failure. This distributed nature makes it nearly impossible for a single entity to control or manipulate the network.
The network's nodes are spread across various locations, increasing its resilience to attacks and failures.
All transactions on the blockchain are visible to everyone, ensuring transparency and accountability.
Smart contracts automate processes, reducing the need for intermediaries and speeding up transactions.
A smart contract is a self-executing computer program that automatically enforces the terms of an agreement or set of rules that govern a business transaction. This code is deployed to a blockchain network, where it becomes an integral part of the distributed ledger and is executed automatically as part of a transaction..
Cryptographic techniques, such as hashing and digital signatures, protect the integrity of the data stored on the blockchain. Each block in a blockchain contains a cryptographic hash. A hash is a unique digital fingerprint generated from the block's data. The hash of a block includes the hash of the previous block. This creates a chain-like structure, where each block is linked to the one before it. If someone tries to alter a block, its hash would change. This change would propagate through the entire chain, as subsequent blocks would reference the altered hash. Nodes in the network would quickly identify the inconsistency and reject the altered block.
Once a transaction is recorded on the blockchain, it cannot be altered or deleted, providing a reliable and verifiable record.
Blockchain networks use consensus mechanisms to validate and add new blocks to the chain. These mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS), require a majority of nodes to agree on the validity of a block.
Once a block is added to the chain, it becomes part of the shared ledger. The collective agreement of the network makes it extremely difficult to reverse or alter the block.
