Blockchain Technology (Advanced)
Have you ever wondered what blockchain actually is? If you have, but haven’t really taken time or interest to understand it at least on some level, then we’ll recommend to go through this article. We’re not techies, so we don’t use too many fancy words here.
The blockchain is probably the main technological innovation of Bitcoin. It’s a proof of all the transactions on the network. A block records some or all of the most recent Bitcoin transactions. Once completed, it goes into the blockchain as a permanent database. A block is like a page of a ledger. Everytime a block gets completed, a new block is generated. Blocks are not randomly placed in a blockchain. They are linked to each other in a linear, chronological order with every block containing a hash of the previous block. Because of that, a block is a permanent store of records which, once written, cannot be removed or altered. For Bitcoin, new block is generated in approximately every 9 minutes.
The blockchain network has a unique digital infrastructure. It is made up of many different computers – nodes. The ledger information is not stored on the Internet, but all computers share it on their personal servers. It means that every node in the network updates the ledger details on their hard drive after a transaction is processed.
Blockchain sounds like a simple concept to non – techies, but it’s actually a revolutionary concept. It stands for full transparency and almost perfect security. Marc Andreessen, a venture capital tycoon, has invested over $50 million in Bitcoin related startups.
“The practical consequence […is…] for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.”
– Marc Andreessen
Think of blockchain as a full history of your banking transactions. Banking transactions are also chronological. Cryptocurrencies are based on blockchains. Blockchain records every transaction made on cryptos and these files are available for all users to review.
How Blockchain Works During Transactions
As a Bitcoin owner you have a wallet with two unique cryptographic keys. The public key is to identify your wallet and the private key should only be available to you to secure your wallet. The security of the private key is extremely important, as you don’t want anyone else to access your valuable cryptos.
If you want to send Bitcoins from your wallet, you need both your private and public keys to verify the transaction. The private key is used to unlock your wallet before you can transfer Bitcoins to another member of the network. The public key is needed for the Bitcoin network to verify whose wallet is used to transfer Bitcoins from. Blockchain computers are responsible for the authentication process.
During the transaction encryption process you will create your own digital signature. As this signature is unique, the blockchain computers are able to use it to identify that you are the sender.
As the signature is determined by the transaction details, then if some evil hacker tried to change the amount of Bitcoins that you were sending while they were on route, the signature would need to change. Because of that, the request from the blockchain server would fail. Those dynamics make blockchain one of the most secure encryption solutions in existence.