How does blockchain work ?

Hello Steemians,

Today I would like to explain how does blockchain work. It is good to know some basic rules or elements especially when the blockchain topic is so frequent.

Blockchain technology includes three different elements (technologies):

1. private key cryptography
2. network with shared ledger
3. the service of a networ transactions and serucity

Those three combined technologies briefly give an explanation what do we need to create blockchain.

Let me explain briefly those 3 technologies one by one.

Private key
Imagine two people who want to make secured tansactions over the internet.
Each of them holds two types of key:
A) private key
B) public key
those are our identity which is created by combinig two types of key mentioned before. Our identity is called digital signature.

Nextly, we need an authorisation because identity is not enough to create secured transactions in the internet. In blockchain to authorise something we need a distributed network. And it is point 2.

Distributed network is a network where the number of participants reach the consensus that the network is secured and authorised. That consensus is reached by mathematical verification. In other words - size of network matters a lot.

To make it clear I will show some numbers
For example - bitcoin has a huge computing power. It is secured by more than 3 million TH/s. (computing power unit). A contrary the google network's computing power in the april 2015 was a 100 times smaller than bitcoin.

In shortage, the whole process id divided into:

• taking the private key (1)
• making a notification that there is a transaction form A to B ( form people 1 to people 2 mentioned in 1 point) and it is stage 2,
• sending the information to the public key of the recipent - people 2 - this process creates a protocol ( BLOCK)

Last technology - point 3
Block
it contains a digital signature ( two combined types od key), timestamp and special information. Now it is fully secured and an information of it goes to the whole network to confirm the transaction. Plenty of blocks combined together and confirmed by people who give their computing power make a whole BLOCKCHAIN.

When many people confirm the transaction - the network knows about that single one information and this is how blockchain guaranties secured information. Those people who gives theis computing power to make networ secured - get a reward - coins/tokens/ etc.

And that is in simplification how the whole blockchain works. It can be created in any type of network (company, bank, etc..)

Your thoughts are welcome

grreenn