What Is Blockchain? - How Does It Work? - Eaglesinvestors

It doesn’t matter if you are entirely new to the cryptocurrency world, what is blockchain? Is a question that has popped into your mind once or twice I know. I’m almost certain you have heard of blockchain and wondered about it. Perhaps you even have a rough idea about what it is. What is blockchain has a very simple answer if explained properly? Stick around with me and learn more about what blockchain is.

What is Blockchain, Really?

what is blockchainIf blockchain technology is so complicated then why name it “blockchain?” the most basic way to define blockchain is that it is a chain of blocks, however not literally. When saying “block” and “chain” in this context, it refers to digital information (the “block”) which is stored in a public database (the “chain”). It may not sound so impressive or convincing straight away, but its significance is amazing. Almost everything on the internet is hackable – the effects of something that is corruption-resistant are enormous.

On the blockchain ‘blocks are made up of digital pieces of data. Precisely, they have three parts:

part 1

Blocks store data concerning transactions such as the date, time, as well as the dollar amount of your most recent purchase from Amazon.

 part 2

Also Blocks store information regarding who is partaking in transactions. A block for your Amazon purchase would record your name together with Amazon.com, Inc. rather than using your actual name, the purchase is recorded with no information of identification using a unique “digital signature,” kind of like a username.

part 3

Blocks store data that differentiates them from all other blocks. Just like you and I have names to distinguish us from each other. Each block stores a unique code known as a “hash” that helps us to tell it apart from all other blocks. Let’s assume you made your purchase on Amazon, however, while it is in transit, you decide you want more. Even though your new transaction details would look almost identical to your previous purchase, we can still differentiate between the blocks because of their unique codes.

Even though the block in the Amazon example is being utilized to store a solitary purchase from Amazon, it is different in reality. One block on the blockchain can store up to 1 MB of data. However, it depends on the size of the transactions, which means one block can house a couple of thousand transactions under one roof.

How Does Blockchain Work?

what is blockchainWhen a block stores new information it is added to the blockchain. For a block to be added to the blockchain, however, four things have to happen:

1. A transaction must occur.

Let’s continue with the Amazon example. After quickly clicking through a lot of checkouts prompts, you go ahead and make a purchase anyway.

2. verification of the transaction must occur.

After making your purchase, verification is required. With some other public records of data such as Wikipedia, the Securities Exchange Commission, or even your local library, there is someone in responsible for screening new data entries. However, with blockchain, it is the responsibility of a network of computers.

These networks usually consist of thousands of computers scattered across the globe. Once you make your Amazon purchase, that network of computers quickly checks that your transaction happened as you said it did. Meaning that they confirm the transaction’s time, participants and the dollar amount.

3. The transaction must be stored in a block.

When your transaction is verified to be accurate it gets the green light. The transaction’s dollar amount, Amazon’s digital signature and your digital signature, are stored in a block. There, the transaction will join others similar to it.

4. The block must get a hash.

As soon as all of a blocks transactions are verified, it should receive a unique identification code called a hash. Furthermore, The block is given a hash of the most recent block added to the blockchain. After being hashed the block can now be added to the blockchain.

After the addition of the new block, the block becomes available for anyone to see.

Pros and Cons

what is blockchainIt may look like a complicated process for moving funds. However, blockchain has its advantages.

With the traditional ways of making payments, every transaction worldwide is registered on privately-held databases which are owned by corporate as well as state entities. Those databases cannot be accessed by the public, and therefore they are closed. Moreover, they are often owned by a single entity. Due to this nature, they are vulnerable to fraud and attacks that can cripple a network, different from bitcoin’s blockchain. Now consider the blockchain as somewhat a beefed-up database. It records every single transaction in bitcoin, does not permit repeat payments, and needs several parties to validate the movement of the digital coin.

Due to the fact that the blockchain is not centralized, if a part of it were down, the entire network would not collapse. There are several different parts of the bitcoin network that make it work. So even if a single part went wrong, transactions would still go on

Problems with the bitcoin blockchain

Bitcoin’s blockchain was intended to be a decentralized network. However, with that comes a lot of problems.
One huge issue is that transaction times and prices in bitcoin have risen as the network has become more crowded. Therefore, leading to disagreements by several parties that uphold the network concerning how the technology would develop in the future so as to address these issues.

Final thoughts

While some industries across the globe continue to experiment with blockchain technology the future remains uncertain and the limitations and power of this technology is still not clear.
Whether blockchain starts to power the world and is also the largest disruptive force since the internet, remains to be seen.

5/5 (2 Reviews)

Leave a Reply

Your email address will not be published. Required fields are marked *

*

everfx
close-link
close-link