What is blockchain ?

Blockchain are getting incredibly popular nowadays.
But What is blockchain? How do they work, how can they be used, what real life problem do they solve?

Like the name indicates, blockchain is the chain of blocks that contain information.
This blockchain method was described back in 1991 by group of researchers and was intended to timestamp the documents so that it’s not possible to backdate / tamper them.
However, it went unnoticed until it was used to create a cryptocurrency Bitcoin in 2009.
Blockchain is a distributed ledger that is completely open to anyone.
It comes with interesting property, once some data is recorded inside the blockchain it becomes very difficult to change it.

How does that work? Let take a closer look ….

Each block contains some data, hash of the block and hash of the previous block.

DATA:

The data that is stored inside the block depends on the type of blockchain.
For e.g.: Bitcoin blockchain stores the details about the transaction such as timestamp, sender, receiver and the amount of coins.

HASH:

Block also contains hash. We can compare hash to a fingerprint.
It identifies block and all its contents and its unique just as a fingerprint.
Once the block is created, its hash has been calculated. Changing something inside the block thereafter will change the hash value as well.
So, in order to detect changes in block, hash is very useful.
If the hash value changes, its no longer the same block.

HASH OF PREVIOUS BLOCK:

The 3rd element inside a block is hash value from the previous block, which effectively creates the chain of interconnected blocks.
And this technique makes blockchain so secure.

Let’s take an example, here is the 3 block which are forming a chain by hash values.
As we can see each block has hash value and hash value of previous block.
So, block number 3 points to block number 2 and block number 2 points to block number 1, hence there forth forming as chain of blocks.

First block in the chain is a special block called as genesis block, it cannot point to previous block because it’s the first one.

Now consider someone tampers with the second block, this cause hash of the block as to change as well, in return that will make block number 3 and all the following block invalid because they no longer store the hash values of the previous block.
So, changing single block will make all the following blocks invalid.
Using hash is not enough to prevent from tampering, because computers these days are fast enough to compute and calculate hundreds of thousands of hashes per second.
With such computers in place we can tamper the block and recalculate all the hashes of other blocks in chain.

So, to mitigate this blockchain has something called proof-of-work. It’s the mechanism that slows down the creation of new blocks.
In case of Bitcoins, it takes around 10 minutes to calculate the required proof-of-work and add a new block to the chain.
This mechanism is very harder to tamper with the block, as if we tamper one block then we have to re-calculate the proof-of-work for all the following blocks.
So, the security of blockchain comes from creative use of hashing and proof-of-work (PoW) mechanism.

But there is one more way blockchains secures themselves and that’s by being distributed. Instead of central entity to manage the things, its distributed in peer-to-peer and anyone is allowed to join. When anyone joins he/she will gets the full copy of the blockchain.
The node can use this to verify that everything is still in order.
When someone creates a new block, that new block is send to everyone in the network. Each node then verifies the block to make sure it hasn’t been tampered.
If everything checks out good, then each node adds this block to their own blockchain.
All nodes in this network create consensus. They agree about what blogs are valid and which aren’t.
So, in order to successfully tamper the blockchain we will need to tamper with all the blocks in chain and redo the proof-of-work for each block and take the control of more than 50% in peer-to-peer network.
Only then will the tampered block become accepted by everyone else. This is almost impossible to do.

Blockchain is constantly evolving.

Blockchain technology is getting into to medical records, E-notary, collecting taxes, media industries and many more……