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 In this article, you will read that a blockchain has certain unique features. There are rules about how data can be added, and once data is saved, it is virtually impossible to change or delete it.


Summary: 

What Is a Block (Blockchain Block)?

Public vs. private blockchains

How does blockchain work?

Who invented blockchain technology?

 

Blocks are data structures within the blockchain database, where transaction data in a cryptocurrency blockchain are permanently recorded. A block records some or all of the most recent transactions not yet validated by the network. Once the data are validated, the block is closed. Then, a new block is created for new transactions to be entered into and validated.

 

Public vs. private blockchains

As you may know, Bitcoin laid the foundation for the blockchain industry to grow into what it is today. Ever since Bitcoin has started proving itself as a legitimate financial asset, innovators have been thinking about the potential of the underlying technology for other fields. This has resulted in an exploration of blockchain for countless use cases outside finance.

 

Bitcoin is what we call a public blockchain. This means that anyone can view the transactions on it, and all it takes to join is an Internet connection and the necessary software. Since there aren’t any other requirements for participation, we may refer to this as a permissionless environment.

 

In contrast, there are other types of blockchains called private ones. These systems establish rules regarding who can see and interact with the blockchain. As such, we refer to them as permissioned environments. While private blockchains may seem redundant at first, they do have some important applications – mainly in enterprise settings.

We suggest you read this article as well: What does FORK mean in Crypto?

 

 

How does blockchain work?

There’s no single source to tell users what should be done. Because all nodes have equal power, there needs to be a mechanism for fairly deciding who can add blocks to the blockchain. We need a system that makes it expensive for users to cheat but rewards them for acting honestly. Any rational user will want to act in a way that is economically beneficial to them.

 

Because the network is permissionless, block creation must be accessible to anyone. Protocols often ensure this by requiring the user to put some “skin in the game” – they must put their own money at risk. Doing so will allow them to participate in block creation, and if they generate a valid one, they’ll be paid a reward.

 

However, if they attempt to cheat, the rest of the network will know. Whatever stake they’ve put forward will be lost. We call these mechanisms consensus algorithms because they allow network participants to reach a consensus on what block should be added next.

 

Different mechanisms are used to reach a consensus; the most popular cryptocurrency is proof-of-work (PoW), with proof-of-stake (PoS) becoming more so because of the reduced energy consumption compared to PoW.

 

Mining (Proof of Work)

Mining is by far the most commonly-used consensus algorithm. In mining, a Proof of Work (PoW) algorithm is used. This involves users sacrificing computing power to try to solve a puzzle set out by the protocol.

The first Proof of Work in blockchain was Bitcoin. Since its creation, many other blockchains have adopted the PoW mechanism.

 

Staking (Proof of Stake)

In Proof of Work systems, the thing that incentivizes you to act honestly is the money you’ve paid for mining computers and electricity. You won’t get a return on your investment if you don’t mine blocks correctly.

 

Who invented blockchain technology?

Blockchain technology was formalized in 2009 with the release of Bitcoin – the first and most popular blockchain. However, its pseudonymous creator Satoshi Nakamoto took inspiration from earlier technologies and proposals.

 

Blockchains make heavy use of hash functions and cryptography, which were in existence for decades before the release of Bitcoin. Interestingly, the blockchain’s structure could be traced back to the early 1990s, though it was merely used for timestamping documents such that they couldn’t be altered later. You have read a summary of the blockchain world, in the future, we will mention more, so stay with us.

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