Blockchain 101: What is blockchain, and how does it work?
So, you are interested in blockchain, and want to invest in it. You have heard about Bitcoin or Dogecoin (yes, that meme coin!) hitting peak values recently, and don’t want to miss out on the fun. But do you know what blockchain is, and how does it work? Fret not, today let us at BHO Network give you the basic idea of this technology that is changing the world day by day!
A brief history of moneyTo start with this blockchain 101 lesson, let’s have a look back at how we exchange things throughout history. Firstly, at the very beginning, we didn’t have money yet, so we traded directly with what we had. For example, I want your cow, so I trade you my wheat. In times, that exchange method became quite inconvenient, because you may not want my wheat, and that’s when a new medium was used: gold and silver. Over time, that led to the paper/polymer money we are using today.
The workings of blockchain
The secret is in the name itself! To put it simply, blockchain is a technology that encrypts data into blocks, then strings multiple blocks together to create a chain. Blockchain! (Rolls credit!). Blockchain is also referred to as Distributed Ledger Technology (DLT). The main perks of this technology is safety from being altered, and complete transparency. Everything happening on a transaction is unalterable, and is visible to everyone.
A simple analogy would be using Google Docs. When you create a document and share it with someone on Google Docs, it is distributed rather than copied or transferred. Everyone can access the document anytime, rather than having to wait for the other party to edit and send the document back to you. Also, any edits made are reflected in real time, making it transparent. Of course, this is a very simple analogy, and blockchain is more complicated than that, but you get the gist.
The secrets behind the perks
There are some concepts relevant to any blockchain 101 lesson: blocks and nodes. Blocks , as mentioned earlier, are encrypted data. It also contains a randomly generated 32-bit whole number called a nonce. Then, there’s also a hash - a 256-bit number wedded to the nonce. Whenever a block is created, a nonce is randomly generated, and with it the hash. It is then considered forever signed and tied to this combo of hash and nonce.
Then, we have the concept of nodes. As you may know, the whole selling point of blockchain technology is decentralization. No one organization owns the chain, rather it is distributed via the nodes connected to the chain. Nodes can be any electronic device that maintains the copy of the blockchain (your smartphones, your laptops, etc.).Each subsequent block in the chain will contain the hash of the previous one as well. If there are any changes to the block, all the nodes in the system must approve it so the changes can be trusted and verified. So basically, if a hacker wants to change some details in a transaction, not only does he/she must change the hash of every previous block, but also hack every device in the system, which can be anywhere from thousands to millions - “not a great plan”, as Tony Stark said. It’s like sending a letter and having to notify everyone in the city that it’s your letter - very troublesome.
Published on July 10, 2021
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