Blockchain technology refers to a distributed database for all the digital transactions, which eliminates the need for the third party to authenticate the transactions.
In simpler words blockchain is a chain of blocks that contains information.
Blockchain can also be defined as, collection of records linked with each other strongly resistant to alteration and protected using cryptography.
This technique was originally described in 1991 by a group of researchers and was originally intended to timestamp documents so its not possible to backdata them or tamper with them, almost like a notary.
However it went by mostly unused until it was adapted by Santoshi Nakamoto in 2009 to create a digital cryptocurrency Bitcoin.
CRYPTOCURRENCY: a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
BITCOIN: a type of digital currency in which a record of transactions is maintained and new units of currency are generated by the computational solution of mathematical problems, and which operates independently of a central bank.)
A blockchain is a distributed ledger that is completely open to anyone. They have an interesting property: Once some data has been recorded inside a blockchain, it becomes very difficult to change it.
Take a look at the block. Each block contains some data, the hash of the block and the hash of the previous block. The data that is stored inside a block depends on the type of blockchain. The bitcoin blockchain for example stores the details about the transaction in here, such as the sender, receiver and amount of coins. A block also has a hash. You can compare hash to a fingerprint. It identifies a block and all of its components and it’s always unique, just as a fingerprint. Once a block is created, it’s hash is being calculated. Changing something inside the block will cause the hash to change. So in other words: hashes are very useful when you want to detect changes to blocks. If the fingerprint of the block changes, it no longer is the same block. The third element in the each block is the hash of the previous block. This effectively creates a chain of blocks and it’s this technique that makes a blockchain so secure.
Here, we have a chain of three blocks. Each block has a hash and the hash of the previous block. So, block number 3 points to block number 2 and number 2 points to number 1. The first block is bit special, it cannot point to the previous blocks because it’s the first one. We call this the genesis block. Let’s say that you tamper with the second block. This causes the hash of the block to change as well. In turn that will make blcok 3 and all following blocks invalid because they no longer store a valid hash of the previous block. So changing a single block will make all following blocks invalid. But using hashes is not enough to prevent tampering. Computers these days are very fast and can calculate hundreds of thousands of hashes per second. You could effectively tamper with a block and recalculate all the hashes of other blocks to make the blockchain valid again. So to mitigate this, blockchains have something called proof-of-work. It’s the mechanism that slows down the creation of new blocks. In Bitcoin case: it takes about 10 minutes to calculate the required proof-of-work and add a new block to the chain. This mechanism makes it very hard to tamper with the bocks, because if you tamper with one block, you will need to the proof-of-work for all the following blocks. So the security of a blockchain comes from its creative use of hashing and the proof-of-work mechanism. There is one more way that blockchains secure themselves and that’s by being distributed. Instead of using central entity to manage the chain, blockchains use a peer-to-peer network and everyone is allowed to join. When someone joins this network, he gets the full copy of the blockchain. The node can use this to verify that everything is still in order.
WHAT HAPPENS WHEN SOMEONE CREATES A NEW BLOCK???
That block is sent to everyone on the network. Each mode that verifies the block to make sure that it hasen’t been tampered with. If everything checks out, each node adds this block to their own blockchain. All the nodes in the network create consensus. They agree about what blocks are valid and which aren’t. Blocks that are tampered with will be rejected by other nodes in the network. So to successfully tamper with a blockchain you will need to tamper with all blocks on the chain, redo the proof-of-work for each block and and take control of more than 50% of the peer-to-peer network. Only then will your tampered block become accepted by everyone else. This is almost possible to do….
Blockchains are also constantly evolving. One of the most recent developments is the creation of the smart contracts. These contracts are simplle programs that are stored on the blockchain and can be used to automatically exchange coins based on certain conditions.
The creation of blockchain technology peaked a lot of people’s interest. Soon, others realised that the technology could be used for others things like storing medical records, creating a digital notary or even collecting taxes.