Blockchain is a distributed database that maintains a continuously growing list of data hardened against tampering and revision. It consists of data structured in blocks that contain a timestamp and are linked. It is the underlying technology for Bitcoin, the cryptocurrency.
In more advanced terms, the blockchain can be thought of as a distributed database. By these means, Blockchain is a particular type or subset of the so-called distributed ledger technology.
DLT is a way of recording and sharing data across multiple data stores. All of these distributed and individual data stores together make up the database.
In practice, blockchain is a technology with many faces. It can exhibit different features and covers a wide array of systems that range from being fully open and permissionless to being permissioned.
How does blockchain work ?
Additions to this database are initiated by one of the members, which are the network nodes. These nodes usually exist in the form of computers. Each node maintains a copy of the entire Blockchain.
The nodes also create new blocks of data, which can contain all sorts of information. Among other information, the block contains a hash. A hash is a string of numbers and letters and each new block generates a hash. The hash does not only depend on the block itself, but also on the previous block’s hash. This is one of the reasons why the order of the blocks matters and why blocks are added to the Blockchain in the order that they occurred. Even a small change in a block creates a completely new hash.
After its creation, a new block is broadcasted to every party in the network in an encrypted form so that the transaction details are protected. The nodes of the network check the validity of each new block that is added. Once a block reaches a certain number of approved transactions then a new block is formed. The determination of the block’s validity happens in accordance with a pre-defined algorithmic validation method. This is commonly referred to as a “consensus mechanism”. The nodes check the hash of a block to make sure a block has not been changed.
Once validated, the new “block” is added to the blockchain. As soon as the nodes have approved the new Block, the Blockchain or ledger is updated with it, and it can no longer be changed or removed. It is therefore considered to be impossible to forge it. You can only add new entries to it and the registry is updated on all computers on the network at the same time.
The blocks are also signed with a digital signature using a private key. Every user on a blockchain network has a set of two keys: Firstly, A private key, which is used to create a digital signature for a block, And secondly, A Public key, which is known to everyone on the network. A public key has two uses. On the one hand, it serves as an address on the blockchain network. On another hand, it is used to verify a digital signature and validate the identity of the sender.