Blog > What is Blockchain Technology & How It Works?
Today the decentralization with over 130 thousand active editors maintains a different type of record in the form of pages. The risk of security is much smaller since each edit is public and can be verified by anyone. Here the decentralization technique helps to reduce the risk for corruption, fraud detection, and manipulation. Here we are going to discuss what blockchain is & how it works.
Blockchain Technology is the latest and innovative way to implement decentralization.
Blockchain Technology
It is a solution to the problem of decentralization. Blockchain Technology
is a system for keeping records by everything, without any need for a central authority. A decentralized way of maintaining a large amount of data that is practically impossible to falsify, which means when so many eyes are watching and verifying everything that’s being done, it’s hard to break the rules unnoticed.
Blockchain technology is a distributed data record that is completely open to anyone. Blockchain Technology’s interesting property is once some data has been recorded inside a blockchain, it becomes very difficult to change it.
Why Blockchain Technology?
Suppose we store records on pages with many pages, and each page begins with a sort of summary of the page before it. If we change a part of the previous page, we also have to change the summary on the current page. So, the pages are linked or chained together. In technological terms, pages are called blocks. Since each block is linked to the previous block’s data, we have a chain of blocks or a blockchain.
Elements of Blockchain Technology
There are four elements of Blockchain such as:
Peer-to-Peer Network
The first thing required to support a blockchain is a peer-to-peer network. A network of computers, also known as equally privileged nodes, is open to anyone or everyone. It’s basically what we already have today with the internet. We need a network so that we will be able to communicate and share remotely.
Cryptocurrency
The second ingredient is cryptography. Cryptography is the art of secure communication in a hostile environment. It allows its users to verify messages, and it proves the authenticity of user’s messages, even when malicious players are around.
Consensus Algorithm
The algorithm for bitcoin is the “Proof of Work” algorithm. This algorithm states that for someone to earn the right to add a new page to the user record, they need to find a solution to a math problem that requires computational power to solve security issues.
Punishment & Reward
This element drives by game theory, and it makes sure that it will be in people’s best interest always to follow the rules. Blockchain sets up a network that has a way to communicate securely and follows a set of rules for reaching consensus.
In Blockchain, use these elements together by rewarding people that help us maintain our records and add new pages. This reward is a token or coin that is awarded each time a consensus has been reached, and a new block is added to the chain.
How does Blockchain work?
Each block contains some data, the hash of the block, and the previous block’s hash. The data that stores in the block depend on the type of Blockchain. The Bitcoin Blockchain, for example, stores the details about a transaction here, such as the sender, receiver, and amount of coins.
A block also has a hash. The user can compare a hash to a fingerprint. It identifies a block, all of its contents, and it’s always unique, just as a fingerprint. Once a block is created, its hash is being calculated. Changing something inside the block will cause the hash to change.
So, in other words, hashes are very useful when the user wants to detect changes to blocks. If the fingerprint of a block changes, it no longer is the same block. The third element inside each block is the hash of the previous block. This effectively creates a chain of blocks, and it’s this technique that makes a blockchain secure.
Author: SVCIT Editorial Copyright
Silicon Valley Cloud IT, LLC.