Blockchain is often likened to a digital ledger or a continuously growing chain of blocks. Each block contains a set of transactions, and once it's filled, a new block is created and linked to the previous one, forming a chain.
Transaction Initiation: A user initiates a
transaction, which is then broadcast to a network of computers,
known as nodes.
Verification: These nodes validate the transaction
using consensus algorithms. Once verified, the transaction is
grouped with other transactions to create a new block.
Adding to the Chain: This new block is then added to
the existing blockchain in a way that's permanent and unalterable.
The transaction is now complete.
The potential of blockchain extends beyond just financial transactions. Industries from healthcare to supply chain are exploring its applications for transparent, secure, and efficient operations. As technology continues to evolve, blockchain is set to revolutionize various sectors, making processes more transparent, secure, and decentralized.
Unlike traditional databases, such as a SQL database, where there's a central authority, in blockchain, every participant (node) on the network has access to the entire database and the complete transaction history.
Transactions are transparent to all users, but they are encrypted by a unique cryptographic signature, ensuring privacy.
Once a transaction is added to the blockchain, it cannot be altered or deleted, ensuring data integrity.
These are techniques used to achieve agreement on the data's validity. Common algorithms include Proof of Work (PoW) and Proof of Stake (PoS).
Transactions must be approved through consensus and then encrypted and linked to the previous transaction. This, combined with the decentralized nature of blockchain, ensures robust security.
While blockchain is the technology, a cryptocurrency is a medium
of exchange, like traditional currencies but digital.
Bitcoin, the first and most well-known cryptocurrency, operates on
a blockchain.
However, blockchain's potential extends far beyond just
cryptocurrencies.
DApps are applications that run on a blockchain. They are
decentralized, removing the need for intermediaries and central
control.
Smart contracts are self-executing contracts with the agreement
directly written into lines of code. They automatically enforce
and execute when certain conditions are met, ensuring trust and
transparency.