Blockchain, as the name suggests, is a chain of blocks, but not in the traditional sense of these words. Here, ‘block’ refers to digital information stored in a ‘chain,’ which is a public database. Let’s delve deeper into how this technology operates.
Firstly, transactions are recorded in a block. Each transaction in this block is verified, ensuring that the information matches the previous transaction history. Once verified, the transaction is stored in a block. When a block is filled with transactions, it is added to the chain in a linear, chronological order. This chain of blocks forms the blockchain.
Cryptography plays a crucial role in securing these transactions. Each block has a unique code called a cryptographic hash. Even a small change in a transaction creates a completely new hash, enhancing the security of the transaction information.
Decentralization is another key feature of blockchain. Instead of a central authority, multiple copies of the blockchain are stored across various locations, and they are continuously updated. This distribution ensures that no single entity has control over the entire blockchain, and it also makes it difficult for an attacker to manipulate the data.
Consensus algorithms are used to agree upon the validity of transactions. Different blockchains use various consensus models like Proof of Work and Proof of Stake to agree upon the authenticity of the transactions.
In this chapter, we will explore these technical aspects in detail, providing readers with a comprehensive understanding of how blockchain technology functions, laying the groundwork for exploring its applications in various domains in the upcoming chapters.
