Block Chain isn’t some sort of complex thing to understand, it’s really simple but our goofy tech community makes it harder for beginners to understand the concept of blockchain and how it works.
Let’s jump into the definition of blockchain. Remember blockchain plays important role in bitcoin and other crypto-currencies, and it’s distributed network which it’s means all over the world and the internet, and there is no headquarters like our banks/government means it’s not controlled by someone.
By Definition: Block Chain
“Blockchain is a wide network, which is run by the public (me and you) and blockchain is actually digital data which is being stored in a database by users. So, block refers to data and chain refers to database.”
Explanation: Blockchain is the source/medium of transactions. Which keeps all the records of transactions just as our traditional banks.
But it’s unique from banks because the transactions are not processed by one individual. As I said it’s decentralized so it’s being check by multiple computers and participants. And through an Algorithm they work, to identify the truth of the transaction.
I know the definition sound boring, and you must have questions in the mind? Right?
Let me answer them.
The first question would be: If blockchain is secure so how it allows strangers to work in it? Will they scam?
Answer: That’s the real deal, blockchain allows stranger and make them works honest and consistent through an algorithm which is run by computers.
Now, let’s talk about the digital information in blockchain. The block is a digital information as I said and it stores your transaction, suppose purchase of bitcoins. It will store the data, time and amount in dollar plus it’s exchange rate.
It also store the information about the worker (miner) who processed your transaction. A unique hash of the transaction is generated, which helps in identifying the transaction.
Mechanism of Block chain
Let’s take an example for the explanation
- Tim makes a purchase of 0.2 bitcoins.
- After his purchase, it’s important to verify it. As it’s just like buying things online, when you checkout for payment after that the seller verify your payment and then ships you the product but in blockchain it’s fast and simple.
- Tim transaction is verified by many computers using algorithm.
- After verification, Tim will get the 0.2 bitcoins in his digital bitcoin wallet.
But in your traditional online purchase the transaction you did, isn’t shown to the public or the public cannot view it. But as blockchain generate unique hash address for your transaction, it’s visible for the public to view.
Everyone these days is scared of losing money or important assets. And you are too just like me hahah! 😉
But fortunately, we have blockchain.
Now, let’s take another example. Let’s say we have Olx, and you make a purchase of something with 200Rs and a hacker attack your transaction and change the amount of twice more. And you have to pay twice more for that or maybe contact the support 😛
So, your OLX purchase’s transaction got hacked and you pay the price. But suppose Tim made purchase of 0.02 bitcoins and he tried to hack it to change the information.
It would be impossible and very difficult for tim to change the block (data) because all the blocks are connect and through a mathematical function it works.
If TIM changes his transaction!
He has to change all the transaction before and after them and there are millions of them registered and it would impossible and very very difficult to change!
And would cost lots of CPU Power. Which makes it impossible for hackers to change your transactions.
What is difference between blockchain and bitcoin?
Blockchain provides the medium for bitcoin to do it’s transaction while bitcoin is a digital currency which is decentralized.
Blockchain provides medium to bitcoin and other crypto-currencies and it’s a decentralized network which manages transactions of crypto-currencies using an algorithm.