Blockchain Technology Simplified
Blockchain is an emerging technology with many advantages in an increasingly digital world.
Blockchain technology is simply defined as a decentralized, distributed ledger that records transactions and tracks assets across a peer to peer network. Basically, if you are familiar with the General ledger(GL)as a principal Book of Accounts for a business entity, you will understand blockchain technology better. In modern usage, every business has its own ledger, its own book of transactions. If you want to confirm that a transaction took place, you’d have to look at the books of two businesses, a credit to one and a debit to the other. That’s why it’s referred to as double-entry ledger accounting.
Blockchain technology is a digital ledger that records different transactions and details across the network. It is oftentimes a public digital ledger consisting of records called blocks. Blocks are a literal building block of the blockchain, and their primary purpose is to record transactions. They are like storage houses.
What does a block contain?
Every block has a unique number, also called its height. It also contains a timestamp, a small data stored in each block as a unique serial, whose main function is to determine the exact moment in which that particular block was mined and validated by the blockchain network. A block also contains a number called a nonce, an abbreviation for “number only used once”. A nonce is used to create a cryptographic hash that connects to a blockchain. Then last but not least, is a hash of the previous block in the chain. Basically, blocks are batches of transactions with a hash of the previous block in the chain, hence the name Blockchain.
Lol, I know you may be a little bit confused at this point.
What is a cryptographic hash?
A blockchain uses hash functions to create a record of data recorded to the blockchain so that any change to a single piece of data can easily be identified. A hash function is a digital mechanism that is used to compress data into a specific format of a specific length. This hashed data is used to create a link between each individual block, and this is accomplished by writing the hash of each previous block into the next block in the chain. In this way, blocks are linked all the way back to the very first genesis block and are verified by hashes. This is where the immutability comes in. If there are changes made anywhere in the chain, there will be a ripple effect invalidating all the blocks that come afterwards.
In addition to hashing, the blockchain relies on public-key cryptography to acknowledge the idea of ownership on the blockchain. Hashing and public-key cryptography work hand in hand to maintain consensus in the system.
Lol. This is a lot of information to take in all at once. In my next article, I will explain the types of cryptographic keys and the consensus mechanism in the blockchain.