How Blockchain Works

How Blockchain Works

Blockchain is a piece of software designed to create decentralized databases.

The system is entirely "open source", meaning that anybody is able to view, edit and propose modifications to its underlying code base.

Whilst it has turn out to be increasingly widespread due to Bitcoin's progress - it's actually been round since 2008, making it round a decade old (ancient in computing terms).

The most important point about "blockchain" is that it was designed to create applications that don't require a central data processing service. This means that for those who're using a system build on prime of it (namely Bitcoin) - your data will likely be stored on 1,000's of "unbiased" servers around the globe (not owned by any central service).

The way the service works is by making a "ledger". This ledger allows customers to create "transactions" with one another - having the contents of these transactions stored in new "blocks" of each "blockchain" database.

Depending on the application creating the transactions, they need to be encrypted with completely different algorithms. Because this encryption makes use of cryptography to "scramble" the data stored in each new "block", the term "crypto" describes the process of cryptographically securing any new blockchain data that an application might create.

To completely understand how it works, it's essential to respect that "blockchain" isn't new technology - it just makes use of technology in a slightly different way. The core of it is a data graph known as "merkle timber". Merkle trees are essentially methods for laptop systems to store chronologically ordered "variations" of a data-set, permitting them to handle continual upgrades to that data.

The reason this is essential is because present "data" systems are what could possibly be described as "2D" - that means they haven't any strategy to track updates to the core dataset. The data is basically saved completely as it is - with any updates utilized directly to it. Whilst there's nothing wrong with this, it does pose a problem in that it implies that data both needs to be up to date manually, or his very difficult to update.

The answer that "blockchain" provides is essentially the creation of "versions" of the data. Every "block" added to a "chain" (a "chain" being a database) offers a list of new transactions for that data. This signifies that for those who're able to tie this functionality right into a system which facilitates the transaction of data between two or more customers (messaging and many others), you'll be able to create an entirely independent system.

This is what we have seen with the likes of Bitcoin. Opposite to popular perception, Bitcoin is not a "currency" in itself; it is a public ledger of financial transactions.

This public ledger is encrypted in order that only the participants within the transactions are able to see/edit the data (hence the name "crypto")... however more so, the truth that the data is stored-on, and processed-by 1,000's of servers around the world means the service can operate independently of any banks (its principal draw).

Obviously, problems with Bitcoin's underlying thought and so on aside, the underpin of the service is that it is basically a system that works across a network of processing machines (called "miners"). These are all running the "blockchain" software - and work to "compile" new transactions into "blocks" that keeps the Bitcoin database as up to date as possible.

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