Understanding blockchain technology
Blockchain uses a distributed ledger technology across a peer-to-peer network to store data. The data is stored in blocks that are linked together in a chain. Every block is linked to the next one with a numeric code called “hash”. So the hash at the start of the new block should match with the hash at the end of the previous block. When any change is made, it creates a new hash.
So, if a hacker attempts to make a change, they need to make changes to all the blocks, which takes a lot of computer power and time. It also causes a discrepancy which makes it easy to detect if something suspicious has taken place. This means as soon as the data is stored, it can’t be deleted, changed, or tampered with.
The technology was initially associated with cryptocurrency which is a form of decentralized digital currency. This way, there was no need for any central bank to operate cryptocurrency. Also, it helps keep transaction and processing fees low. Now, other industries are also exploring its uses.
When transactions need to be added to the blockchain, the participants of the blockchain community need to authenticate them through consensus. Doing so prevents “double spending”, ie: a user fraudulently spends the same cryptocurrency twice. To verify the transactions, the miner needs to find the right hash that acts as the key to the encryption code of the block. This process needs a lot of power & time along with
luck as it is based on guesswork. The miner who is first to get the right match gets compensated, usually with cryptocurrency.
When the encrypted data is too complex for a single miner, computing resources are usually pooled together for easier decryption of the data. As the community grows, the number of miners grows. This strengthens security and makes it tougher for unscrupulous activities to succeed.
Each computer in the blockchain network is a node. These can communicate with each other to process transactions and add data. Collectively, the nodes work on validating the data that gets entered into the blockchain. As the system is decentralized, nodes play a major role in running the process smoothly. The larger the number of nodes, the shorter time it takes to process transactions.
To become a node, the computer must meet certain requirements to ensure it has the required processing power and memory to meet blockchain processing demand. Also, having weak nodes can affect the overall performance as well.
How data gets stored in blockchain?
When a transaction is to occur, the first step is to be requested and authenticated. Then, a block gets created as its representation. This is sent to everybody in the network who validates it. For this Proof of Work, the participants receive payment in cryptocurrency. Once this is done, the block is added and the update gets distributed throughout the network. Only after all these steps take place, the transaction is said to be completed.
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