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What is Blockchain Technology? How Does it Work?

What is blockchain technology?

When we talk about Cryptocurrency, the term “Blockchain” we hear. The question comes to our mind, what is blockchain technology? Blockchain is a decentralized distributed ledger technology.

It keeps a record of crypto transactions on the electronic ledger. Moreover, it is cryptographically highly secure, irresistible, fault-tolerant, and consensus-driven, and immutable.

Every transaction on the blockchain network is verified and validated. By its connected nodes or computer machines associates across the distributed ledger.

Transaction on the blockchain

Each transaction recorded in the block is time-stamped and is added to the already existing blocks. Additionally, this makes a chain of blocks; therefore, it is called the blockchain.

Blockchain technology is the underlying technology of coins and tokens. Moreover, it uses to build blockchain applications for thousands of businesses around the globe

Digital Virtual Currency

What is blockchain technology?

In 2009, the world witnessed the emergence of blockchain technology. An anonymous developer, Satoshi Nakamoto, introduced Bitcoin by writing a whitepaper, “PEER TO PEER ELECTRONIC CASH SYSTEM”.

Bitcoin is the first cryptocurrency birth on the blockchain. Bitcoin created with the idea to make electronic transactions of digital virtual currency over the blockchain.

What are Nodes of Blockchain?

What is blockchain technology?

Bitcoin is the first innovation of blockchain technology. Bitcoin is a digital asset & designed to make payments over the blockchain network. Later on, blockchain technology upgraded & used for advanced purposes.

Meanwhile, the Ethereum blockchain platform was created by Vitalik Buterin. Moreover, it executes smart contracts through computer programs run across computers which are termed as nodes of the blockchain.

Trust is Main Key

Smart contracts have the potential to create a trusted environment. Additionally, it creates digital contracts between unknown entities without the involvement of a middleman.

The promising feature of blockchain technology that it has transformed real-world assets and applications into a trusted tokenization system. Additionally, thousands of use cases, including tracking assets, self-sovereignty, governance, ownership rights, etc.

How does it work?

How Blockchain Works

The blockchain contains a chain of blocks. Each block contains data or transactions which are secure cryptographically.

Cryptography refers to the art of writing hidden codes or solving codes. It uses to protect and transfer data between entities without interrupt or tamper with anyone.

What is Public Key Cryptography?

What is blockchain technology?

Let’s see how cryptographically secure transaction happens between two parties:

John wants to send a confidential message to the Marry using public-key cryptography. Moreover, to ensure that his message would not be interrupted over the blockchain network

Cryptography occurs through an algorithm that generates two keys; a public key and a private key for both sender and receiver. The public key used to encrypt or lock data or transactions, while the use of private key intended to decrypt or unlock the message.

How do Both Keys work?

How do Both Keys work

John sends a message or document to the Marry, encrypt/lock the document with the public key of Marry.

Marry will be able to decrypt the message/document using his private key matching the public key which was sent to John & John encrypted the document with Marry’s Public.

Once the document encrypted/lock with Marry’s public key, John would not able to open/change or delete the document. Secondly, even no one on the blockchain network can decrypt the document.

Because the document locked using Marry’s public key matching to her public key. Therefore, Marry is the only person who can decrypt documents using her private key which matches her public key.

What is the Cryptographic Hash function?

The cryptographic hash function applied to data that converts data into a specific hash value consisting of an alphanumeric value. Each block consists of two values, the current hash value, and the previous hash value.

The hash value considered as the digital fingerprint of the valid block. If anyone tries to temper the block, it becomes an invalid block.

What is a Valid & Invalid Block?

There are two types of blocks.

What is a Valid Block?

What is blockchain technology?

In a valid block, the previous hash value in the current block and the current hash value in the previous block will the same. Moreover, it will show in the provided below blockchain. It means the block is tamper-proof, store and transfer information without intervention.

What is an Invalid block?

Invalid block

When the previous hash value in the current block and the current hash value in the previous block will not be the same, it identifies it invalid block & someone tries to temper it.

What is Consensus Algorithm?

Consensus Algorithm

When a valid block creates, it broadcast to every node on the network. All nodes on the network following the consensus algorithm mechanism – a set of rules for nodes to validate the block.

What is Cryptocurrency and How Does it Work?

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