A brief explanation of blockchain

#blockchain #cryptocurrency

What it is?

A blockchain is a distributed database or ledger shared among a computer network's nodes. They are best known for their crucial role in cryptocurrency systems for maintaining a secure and decentralized record of transactions, but they are not limited to cryptocurrency uses. Blockchains can be used to make data in any industry immutable.
Because there is no way to change a block, the only trust needed is at the point where a user or program enters data. This aspect reduces the need for trusted third parties, which are usually auditors or other humans that add costs and make mistakes.

The main idea behind blockchain is to storage information without being centralized by a user, company, datacenter… Basically consists of programs called scripts that conduct the tasks that you usually would do in a database, spreading this data in multiple machines, and they all must match. So blockchain collects all the information and enters it into a block, once it’s full the information is run through an encryption algorithm, which creates a Hexadecimal number called “hash”.

A blockchain allows the data in a database to be spread out among several network “nodes” at various locations. This not only creates redundancy but maintains the fidelity of the data. For example, if someone tries to alter a record at one instance of the database, the other nodes would prevent it from happening. This way, no single node within the network can alter information held within it.
Because of this distribution the information and history are irreversible. Such a record could be a list of transactions, but it also is possible for a blockchain to hold a variety of other information like legal contracts, state identifications, or a company’s inventory.

Because of the decentralized nature of the Bitcoin blockchain, all transactions can be transparently viewed by either having a personal node or using blockchain explorers that allow anyone to see transactions occurring live. Each node has its own copy of the chain that gets updated as fresh blocks are confirmed and added. This means that if you wanted to, you could track a bitcoin wherever it goes.
For example, exchanges have been hacked in the past, resulting in the loss of large amounts of cryptocurrency. While the hackers may have been anonymous(except for their wallet address) the crypto they extracted are easily traceable because the wallet addresses are published on the blockchain. Of course, the records stored in the Bitcoin blockchain (as well as most others) are encrypted. This means that only the person assigned an address can reveal their identity. As a result, blockchain users can remain anonymous while preserving transparency.