What is Blockchain?
Blockchain is a decentralized distributed digital ledger that securely records/stores transactions across a computer network. The word “Block” is obtained from transaction grouping i.e. each transaction is grouped into blocks that are securely linked to each other to form a “chain” of blocks hence the reason for the name “blockchain.”
Contrary to popular opinion, blockchain isn’t cryptocurrency but it plays an important role in cryptocurrency due to its top-notch security and exceptional maintenance of decentralized transaction records. Different organizations leverage blockchain to make data immutable.
How Blockchain Work
Blockchain shares similarities with a traditional database but differs in the mode of data storage and access. Like other databases such as MySQL which uses SQL to modify data in the database, blockchain has scripts that facilitate entering and accessing stored data. Let’s break the process into steps using Bitcoin as an example. It is imperative to understand the difference between Bitcoin as a blockchain system that supports transactions and Bitcoin as a cryptocurrency. Distinguishing between cryptocurrency and blockchain is present in the later part of this post.
Data entry/Transaction Initiation
This process involves starting a transaction using Bitcoin (Blockchain) to send Bitcoin (cryptocurrency). I.e This is the point involving using your cryptocurrency wallet to perform a transaction. The created transaction contains vital information such as sender, receiver and amount of cryptocurrency. This transaction is sent to the memory pool known as mempool for acceptance.
Transaction Validation
The transaction created above isn’t part of a block yet, because it is unconfirmed. Several peer-to-peer computers around the world will receive a broadcast of your transaction. Verification of information such as
- Sufficient cryptocurrency for the transaction
- Transaction authorization (signature validity)
Will take place. Upon validation, your transaction is accepted into a mempool and awaits further action by a miner
Block Formation
The bitcoin (blockchain) uses a 4MB block capacity for storing transaction data. In the data entry process, a miner takes in your confirmed transaction and adds it to a new or existing block. A block will continue to get data (Your confirmed transaction and other users’ confirmed transaction) until it is filled up.
The process continues with the creation of a new block linked to the chained block that continues taking transaction data. As part of the security process, every filled block runs through a cryptographic hash function to create a block header hash. Each block header contains a hash which is linked to a previous block header to form chains of blocks.
Completion
Mining Begins once a block gets filled up with transactions and closed. At the closure of the block, a transaction is considered complete, but blocks don’t get confirmed until about six of them are validated. This action takes about an hour. However, mining a block takes 10 minutes The action normally takes ten minutes.
What is Cryptocurrency
Cryptocurrency popularly called crypto is a digital or virtual currency that operates on blockchain technology and is secured by cryptography. It facilitates safe transactions and provides control over the creation of new units, as well as the verification of transactions. An example of cryptocurrencies is Bitcoin and Dogecoin.
Is Blockchain cryptocurrency?
No, it is not. Blockchain is a decentralized and secure technology that records transactions in chains of blocks to ensure transparency and immutability. Cryptocurrency is a digital or virtual currency that operates on blockchain technology.
Conclusion
Blockchain is rapidly emerging as a secure and transparent method of recording transactions, adopted by numerous organizations prioritizing data integrity and trust. Unlike traditional databases, blockchain operates on a decentralized system, ensuring that once data is stored, it is not modifiable. The combination of immutability and decentralization makes blockchain a revolutionary technology for applications requiring security and transparency.
