What Blockchain is: 1 Best Way To Explain — Moneycrypts

Moneycrypts
9 min readMay 21, 2023

What the Blockchain is?

what exactly Blockchain is Imagine you and your friends are playing a game and keeping score on a piece of paper. Whenever someone scores a point, you write it down on the paper. But what if someone wants to cheat and change the score on the paper? Or what if someone accidentally erases a score?

Now imagine if you could keep the score digitally, and everyone could see the same digital scoreboard. This is what a blockchain is like — it’s a digital ledger that records transactions in a secure and transparent way.

A blockchain is made up of blocks that contain information about transactions, such as who sent money to whom and how much was sent. These blocks are connected to each other in a chain, which makes it very difficult for anyone to change or tamper with past transactions.

Instead of having one central authority that controls the ledger, a blockchain is decentralized, meaning that many different people or organizations can participate in verifying and adding new transactions to the ledger. This makes the blockchain more secure and transparent, because there isn’t just one point of failure or one entity that controls everything.

So, in summary, a blockchain is a digital ledger that records transactions in a secure and transparent way, and it is made up of blocks that are connected in a chain. It is decentralized, meaning that many different people or organizations can participate in verifying and adding new transactions to the ledger.

Understand what blockchain is from above animation

How Blockchains works?

It is like a big book where people write down all the things they buy and sell using digital money. But instead of one person keeping the book, many people keep copies of the book on their computers. These people are called “nodes.”

Whenever someone buys or sells something using digital money, they tell everyone on the network about it. Then, the nodes check to make sure the transaction is real and add it to their copy of the book.

Once a bunch of transactions have been added to the book, they are put together in a “block.” Each block is connected to the one before it, like links in a chain.

To make sure nobody can cheat, each block has a special code called a “hash.” The hash is like a fingerprint for the block. If someone tries to change something in the block, the hash will change too. This makes it easy for everyone on the network to see if anyone is trying to cheat.

Finally, to add a new block to the chain, nodes have to solve a really hard math problem. This is called “mining.” When a node solves the problem, they get a reward in digital money.

So, in summary, the mechanisms behind blockchain are:

  • Distributed ledger: where many people keep copies of the book on their computers.
  • Transaction validation: nodes check to make sure transactions are real and add them to their copy of the book.
  • Block creation: transactions are put together in a block, which is connected to the one before it.
  • Hashing: each block has a special code called a hash that makes it hard to cheat.
  • Mining: to add a new block to the chain, nodes have to solve a really hard math problem and get rewarded in digital money.

Hash Encryption

Hash encryption is a security technique in the blockchain that generates a unique hash value that is a fixed length character string. Hash encryption is used to authenticate and verify any transaction. Whenever a transaction is sent to the blockchain network, the details of that transaction are converted through any hash function like SHA-256 (Secure Hash Algorithm 256-bit). Whether the process generates a unique hash value that acts as a digital signature for that transaction. This hash value is tamper-proof, meaning it is practically impossible to change or hack. For this reason, hash encryption is an important part of blockchain technology and is used to increase the security of the blockchain.

Proof Of Work:

A block in a blockchain consists of multiple headers. The header is the metadata of a block and contains some important information, such as:

  • Block Number: Each block is assigned a unique number which helps in identification and linking with subsequent blocks.
  • Nonce: Nonce is a randomly generated number that is used to process the hash function.
  • Timestamp: Contains a timestamp to store the block’s creation date and time.
  • Transaction Data: Contains the details of the transactions included in the block.
  • Previous Block Hash: Each block stores the hash value of its previous block to prevent tampering and fraudulent activities.
  • Merkle Route: A Merkle Route is a tree-like data structure used to organize transaction data.

Proof of Work Demonstration:

Proof of Work Animation

  1. As the animation progresses, the nonce value increases, resulting in a different hash value each time.
  2. The proof of work is calculated based on the leading zeros in the hash.
  3. Miners in a real blockchain network would perform a similar process of incrementing the nonce, generating the hash, and calculating the proof of work until a valid hash satisfying the required difficulty level (number of leading zeros) is found.

By observing the animation, viewers can understand the iterative nature of the mining process in Proof of Work and can also understand what blockchain is . Miners must continually adjust the nonce value to find a hash with a specific pattern, demonstrating the computational work required to secure and validate transactions in a blockchain network.

Blockchain has four important ideas that make it work:

  • Shared ledger: Imagine a big book where everyone writes down their transactions. But instead of each person having their own book, they all share the same book. This way, there’s only one copy of each transaction, and nobody can change what they wrote without everyone else noticing.
  • Permissions: When you write something in the shared ledger, you need to prove that it was really you. That’s where permissions come in. Only certain people who are allowed to write in the book can do it, and they need to prove their identity first.
  • Smart contracts: Sometimes, when you do a transaction, you want certain things to happen automatically. Like, if you buy a concert ticket, you want the ticket to be sent to you without having to ask for it. Smart contracts are like rules that make sure these things happen automatically. They’re stored in the shared ledger and executed automatically when the transaction is complete.
  • Consensus: When someone writes something in the shared ledger, everyone else needs to agree that it’s true. This is called consensus. There are different ways to do it, but they all involve everyone checking that the transaction is valid and agreeing that it’s okay. That way, nobody can cheat or lie about what happened in the ledger.

Participants of a blockchain network:

So, a blockchain is like a big group of people who want to keep track of things they’re doing together. There are different types of people in the group, like:

  • Blockchain users: These are the people who actually use the blockchain to do things, like buying and selling things with each other. They need permission to join the group and do things.
  • Regulators: These are special people who make sure that everyone in the group is doing things the right way. They have extra permissions to keep an eye on things and make sure everyone is following the rules.
  • Blockchain network operators: These are the people who make the blockchain work. They have special permissions to create and manage the blockchain, and to make sure everything is running smoothly.
  • Certificate authorities: These people give out special certificates that let other people in the group know that they’re allowed to be there and do things. It’s like a secret password that only the people in the group know.

All of these people work together to make sure that the blockchain is safe and secure, and that everyone in the group can trust each other.

What is Hyperledger in the Blockchain?

Imagine a big group of friends who want to build something really cool together. They all have different skills and ideas, but they all want to work together to make something amazing. That’s kind of what Hyperledger is like.

Hyperledger is a group of big companies like IBM, Intel, and SAP who want to work together to build something called a blockchain. A blockchain is like a big notebook that everyone can see, but no one can change once they write something in it. This makes it really safe and secure for keeping important information, like how much money someone has or where a product came from.

The people in Hyperledger think that by working together and sharing their ideas, they can make blockchains that are really good for businesses to use. They want to make sure that their blockchains work really well and are easy to use for people all over the world

Is Blockchain Secured?

Blockchain is a type of technology that is really hard to hack because it is very secure. But there is something called a 51% attack that can happen where bad people get control of more than half of the blockchain’s power and mess up the information. This kind of attack is very hard to do, but it shows that blockchain is not perfect and we need to be careful with it.

There are two types of blockchain, public and private. Public blockchains are open for anyone to join and see what is going on, while private blockchains only let certain people join. This means that private blockchains might be better for businesses who want to keep their information secret.

Also, people who use public blockchains can be anonymous, but people on private blockchains have to be known and trusted. This is important because it means that only the right people can change things on the blockchain. But there are still some problems, like bad people who work for the organization, and we need to make sure that the infrastructure is very safe.

Blockchain is becoming more and more popular and is being used for lots of different things. But it’s really important to make sure that blockchain applications are very safe and secure. Developers who make blockchain applications need to think about security from the very beginning and do things like checking for risks and testing their code to make sure it’s safe.

Types of Blockchain:

There are mainly four types of blockchain, such as:

  1. Public Blockchain: It a blockchain In which any person can verify and add any transaction, and all transactions can be seen publicly. Bitcoin, Ethereum, Litecoin, etc. is a public blockchain.
  2. Private blockchain: In this type of blockchain only authorized users can verify transactions and no one else, it is used only for transactions between organizations for which the private network has been created.
  3. Consortium Blockchain: This type of blockchain network is established between multiple organizations and only all authorized users of all participating organizations can verify and add transactions.
  4. Hybrid blockchain: It has elements of public and private blockchain, due to which there is control and privacy of transactions.
  5. Federated Blockchain: It consists of nodes from multiple organizations, which work together and verify transactions. In this, the balance of both privacy and scalability is maintained.

Is bitcoin the biggest application of blockchain technology.

Yes, the biggest application of blockchain technology is bitcoin, but it can be used in many other areas as well. Its industries can be used for financial services, international transactions, IoT, healthcare industry, decentralized networks, and private consumer transactions.

Through blockchain technology, financial services such as microloans and micropayments can reach places where traditional banking services are not available. Furthermore, because of the decentralized nature of blockchain technology, untrustworthy third-party intermediaries can be avoided.

In the case of international transactions, blockchain technology can have a big impact on the concept of trust. With its help, organizations troubled by lack of resources and corruption can benefit.

Through IoT, blockchain technology can help manage smart devices. Smart contracts can allow any organization to optimize its operations and keep more accurate records.

As a decentralized network, blockchain is the technology that can be used to power apps such as Airbnb and Uber. With its help, people can pay toll fees, parking fees, and other things.

Blockchain technology can also be used as a secure platform for the healthcare industry. With its help, sensitive patient data can be stored and shared with authorized people.

For private consumer transactions, blockchain technology can be used to conduct transactions between parties. Apart from this, there are also strong details that both the parties have to decide, such as what information to share and what kind of transactions are to be done.

Originally published at moneycrypts.com on May 21, 2023.

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