When you think of Bitcoins, you automatically think of blockchain as the latter is the foundation for the Bitcoin. This technology has immense potential that extends far beyond its use in the world of crypto coins alone. Incidentally, the blockchain technology has the power to dramatically revolutionize myriad industries in ways that we cannot imagine.
How does a block get added to the blockchain?
The movement of data is present in almost anything we do, whether it is paying for rentals, hospital expenses, credit card payments, etc. Data like this is stored on blocks that constitute a blockchain. However, instead of storing data in only one location, here the information is distributed across thousands of computers or “nodes” all over the globe. These nodes are interconnected using cryptographic techniques. So, blockchain makes way for transactions to happen without intervention by a third party like a bank, as in traditional money-transfers.
The blockchain works like a decentralized database or a distributed ledger that can be viewed by anyone on the network. Before transactions can be recorded in the blockchain, they must be approved. This has to be done by the nodes or computers in a blockchain. The blocks in the blockchain are composed of digital data and have three key parts, namely, time, date, and amount of the transactions. Purchases are recorded using unique hashes or digital signatures. Every block will have data that can be differentiated from another block through a unique code or hash. The hash is a cryptographic code that is created by an algorithm.
Whenever a block gets new information, it gets added to a blockchain. But for new blocks to be added there are some important requirements: firstly, there must be a transaction between parties, the transaction then must be verified by a network of nodes or computers. The transactions are then stored within a block and the block is assigned a hash. Only after all these four things have happened can a block become part of a blockchain. Once it is added, it is viewable by one and all.
How does a distributed ledger of transactions work?
It is something like a spreadsheet that has been replicated across multiple computers connected in a network. This network has been designed such that the spreadsheet gets updated from time to time. So, the data that is in the blockchain is stored in a shared and reconciled database. Moreover, this database is not in a single location; it is kept public and verifiable. Since the data is not centralized it is hugely challenging for hackers to intercept and tamper with the data.
While the data in the blockchain can be seen by everyone, no user can change it once it has been added. Once data is added, every node in the network gets a blockchain copy that will keep getting updated every time data is added. Every node has its own copy and this means that there may well be millions of blockchain copies. Since every copy is the same, the data cannot be easily manipulated. To do this, hackers will need to manipulate every node. So, even if a hacker attempts to tamper with a block, the minute a change is made; the block hash changes. But the subsequent block still has the previous hash and the hacker must then update this too in order to cover his tracks. This is an ongoing process and to do this, the hacker must have access to a huge amount of computing power that is practically impossible.