How Blockchain Works | A Simple Way To Understand It

Although Blockchain appears to be complicated, its underlying concept is quite simple. A database, or Blockchain, is a type of digital ledger. The Blockchain is used to securely transmit assets such as money, ownership, agreements, and other information without the need for a third-party middleman such as a bank or government. It is extremely difficult to modify data after it has been stored on a blockchain. The Blockchain is a computer programme (like SMTP is for email). Blockchains, on the other hand, could not function without the Internet. It's also known as meta-technology because it has an impact on other technologies. Today, the Blockchain technology is being used in many industries, from finance to music.

A database is a collection of data saved on a computer system in an electronic version. Database content, or data, is usually organised in table style to easily access and filter for precise data. A database is designed to keep significantly larger amounts of data that can be accessed, filtered, and changed by many individuals at once. Large databases achieve this by collecting data on servers that are made up of sophisticated computers. These servers can occasionally be built using thousands of computers to provide the processing power and storage space required for several individuals to access the database simultaneously. While anybody can use spreadsheets or databases, they are typically owned by a firm and maintained by a designated individual who has complete control over how they function and the data they contain. Blockchain is a P2P decentralised distributed ledger system that makes any electronic asset's records visible and unchangeable while avoiding the use of a third-party middleman.

Difference between a blockchain and a database

How the data is structured differs significantly between a traditional database and a blockchain. When a block's storage capacity is reached, it is linked to the previous block, forming a data chain known as a "blockchain." All new information added after that newly introduced block is assembled into a new block, then added to the chain after it is filled.

A database organises information into columns, but a blockchain organises information into chunks (blocks) linked together. When applied in a decentralised manner, this method creates an unchangeable data timeline. When a block is occupied, it becomes permanent and part of the chronology. When a block enters the system, it is assigned a precise timestamp.

So, Blockchain is a method of storing and making data immutable. That sounds wonderful.

How does Blockchain work?

Without the necessity of third-party intermediaries, Blockchain may conduct user transactions. All that is required to conduct transactions is the possession of a wallet. A Blockchain wallet is a programme that allows users to spend cryptocurrencies such as BTC, ETH, and others. Cryptographic methods (public and private keys) safeguard such wallets, allowing users to oversee and control their actions. This is how Blockchain works right now. When a user creates a transaction on the Blockchain network, a block reflecting that transaction is created at first. The desired data will be transmitted over the peer-to-peer network, made up of computers called nodes, which then validate the transaction.

Cryptocurrency, contracts, records, or other valuable information can all be part of a validated transaction. After a transaction has been confirmed, it is joined with other blocks to form a new data block for the ledger.

It's worth noting that each new transaction generates a secured block, which is encrypted and linked to the others using cryptographic principles. Every time a new block is formed, it is added to the existing Blockchain network, ensuring its security and immutability.

The architecture of blockchains is frequently copied. In the event of a significant attack on the system, most nodes continue to operate the chain. The credentials of the interested parties are certified and verified using Blockchain. This eliminates duplicate records, lowers rates, and speeds up transactions. Blockchain verifies the inalterability of all activities by documenting transactions in chronological sequence, which means that once a new block is added to the Blockchain of ledger accounts, it cannot be withdrawn or amended.

The principles of shared data and consensus help to stop fraud and theft losses. Blockchain as a monitoring system reduces expenses in logistics-based enterprises. Bringing down a traditional database is the act of attacking a specific target. Since each party has a copy of the original chain thanks to Distributed Ledger Technology, the system stays operational even if many other nodes fail. Everyone can see the changes made to public blockchains.

This increases openness and ensures that all transactions are permanent. Enables customers to transact directly with one another without the need for a third party to act as a middleman. The way a set of rules governs each node exchanges blockchain data. This phase guarantees that all transactions are confirmed before being inserted one at a time.