If you have invested or learned about bitcoin currency, you must have heard about the term ‘blockchain.’ Blockchain is the technology on which the entire bitcoin network is dependent. It is one of the most simplified technologies that are defined as a distributed public ledger that is decentralized in nature that records all the bitcoin transactions. If you don’t know about blockchain, you can learn about blockchain aspects in this article. You can also learn about bitcoin trading by visiting bitcoin era.
What is blockchain technology?
In simple terms, blockchain is a word document. We can say it is a distributed public ledger that records digital transactions that are transparent and unalterable by using cryptographic hashing and decentralization. It is quite simple to understand about blockchain technology that is a Google Document. When a user creates a Google document and shares it, it will help different users, and the document gets distributed instead of being transferred or copied.
It allows users to create a decentralized distributed chain that allows different users to access the Google document simultaneously. No user is kept waiting to access the documents, and the modifications that are made are updated or recorded in real-time and make the changes transparent to all the users. Google Document is quite easy, and blockchain is quite complicated than a document. Still, the analogy of both are same, and this depicts three decisive ideas of blockchain technology that are as follows:
- A distributed ledger that is transparent and records all the changes in real-time, which creates trust.
- Digital assets are decentralized, and these allow users real-time access.
- Digital assets are distributed and made transparent and are not transferred or copied.
Let us move forward and learn in-depth about how blockchain works.
How does blockchain work?
The motive behind developing blockchain is to allow users to share their valuable data in a tamperproof and secure way that they don’t get in fiat currencies. There are three main concepts of blockchain that include miners, blocks, and nodes.
Blockchain is consists of multiple blocks, and blocks contain information and details of users and transactions. The main elements of each block include data, nonce, and hash. The data is the information added or filled into blocks; a nonce is a 32-bit whole number that is generated randomly at the time of the creation of blocks. A nonce then generates a block hash. A hash is a 256-bit number that is committed to nonce. Hash starts with a number of zeros.
When a block is created, the nonce produces the cryptographic hash, and the data that is contained in blocks is considered tied to nonce until and unless it is mined.
The main concept of blockchain technology is its decentralized nature. No central authority is involved in bitcoin and blockchain, working, and no organization or computer owns the blockchain. Instead, blockchain is a distributed public ledger that connects the nodes to the chain. Each node has its copy of the blockchain ledger. The bitcoin network algorithmically approves the newly mined transactions that get assembled into the block for the blockchain to be verified, updated, and trusted.
Each user can view the ledger and can check it, and also, each user is provided a unique alphanumeric identification number that depicts bitcoin transactions.
Miners are the individuals who do the work of verifying the bitcoin transactions and creating new blocks through bitcoin mining. In a chain of blocks, each block has its hash and nonce, but each block has references to previous blocks that are in the blockchain, which depicts that mining isn’t an easy process, especially when there are large chains.
Miners tend to use specialized computers and computing power to solve the complex mathematical algorithms to find a nonce that produces a hash. The bitcoin network would have existed without miners, but no new bitcoins will be mined or discovered. Miners contribute a lot to the bitcoin network, and for their hard work, they are rewarded with newly minted bitcoins. The miners’ main task is to solve complex puzzles to verify the transactions and add them into the blockchain to make the transactions verified and legitimate.