You’ve probably heard of Blockchain in the context of bitcoin and cryptocurrency, but what does it really mean?
Blockchain is the technology that makes bitcoin (and other cryptocurrencies) work. A blockchain is a publicly disturbed ledger system. It’s essentially a detailed record of which bitcoins belong to which addresses.
The ledger system is a way of publicly distributing, and replicating a record system on thousands (or millions) of computers worldwide. The decentralized nature of this peer-to-peer network is part of what makes bitcoin so secure.
What is a bitcoin node? A bitcoin node is a computer on the internet that keeps a complete copy of the bitcoin blockchain. It’s also possible for computers to keep an abbreviated or pruned copy to save data.
Multiple nodes must reach consensus about the true record in order for a transaction to be validated. This check and balance system prevents rouge nodes from altering the record, and having it be accepted by the network.
Why is it called a Blockchain?
The term Blockchain is used because it’s made from a string of blocks which are connected like a the links of a chain.
What is a block? A block in the blockchain is a little chunk of data that contains a hash unique to that block, a reference to the previous block hash (known as the parent block), and some additional data – part of which stores transaction data.
What is a hash? A hash is is like a digital fingerprint that goes in the header of each block. For bitcoin blocks, a hash is created using the SHA256 cryptographic hash algorithm.
The very first block in a blockchain is referred to as the ‘genesis block’. It’s the original block. All future blocks are build on top of the previous block in a successive manor.
This system of referencing the previous block’s hash makes it extraordinarily difficult (impossible) to alter a block in a blockchain because all previous and successive block hashes would become invalidated. No computer is capable recreating an altered bitcoin blockchain in real time.
Part of the genius of the system is that as time goes on and computers become more and more powerful, the difficultly to accomplish hacking the blockchain becomes proportionally more difficult – this is part of the game theory which protects bitcoin.
Want to learn more? Check out all my other articles about Bitcoin!