Blockchain for Beginners
Blockchain… you keep hearing it, but what does it mean?
It’s a mystery. You’ve got that one friend that keeps on raving about investing in blockchain and how powerful the technology is, but you’ve really got no idea what he’s on about.
It all seems so confusing at first. The thing is, when you boil it down, the basics of blockchain are fairly simple. It can, of course, get very deep. Not today though. We’re going to look at blockchain in the simplest way possible: blockchain for beginners.
What is Blockchain?
The hint is in the name. Blockchain is a chain of blocks. These blocks are special because they store information.
To start, think of blockchain as a spreadsheet that a lot of people have access to. Everyone with access works together to control the new data that goes in to make sure it’s accurate. Here’s the important part: they can’t change the old data that has already been put in the spreadsheet. Once it’s been agreed upon by the team and added to the spreadsheet, that’s it. It’s locked in, stored forever.
That’s an oversimplified way of looking at it, but it helps to paint the picture in the blockchain for beginners way.
In the Blocks
The next important thing to know is that, most often, blockchains are distributed, also known as decentralised. This means that computers all around the world store copies of the blockchain.
A blockchain stores identical copies of something in multiple places across the world to ensure the data it is safe.
Blockchain works by comparing all of the copies that are available. The copies around the world talk to each other to make sure they are the same. If all of the copies remain identical, everything is fine. Everyone’s happy.
If someone makes a change to one of the copies, it is clearly different to the other copies. The copies talk to each other and spot the difference. Since the majority of the copies agree and still contain the same data, the majority remains and the edited copy is ignored. This way, the correct version is kept the same. This is very important because it means the data stored in blockchain is highly reliable. A bad actor cannot change the data stored.
Adding Data – blockchain for beginners
Of course, new stuff is added to the blockchain. New additions must be run through the official process and be accepted by the majority of copies before being added.
The reason it is called blockchain is because every new thing added to the copies is added into a ‘block’. This is the technical term which just means something new has been added and accepted by all the other copies around the world.
Blocks are cool because they contain data about all of the blocks before them, so it’s impossible to take one out. That would break the chain. Everyone would know. This just adds to the security and data reliability that we were talking about.
Blockchain is Everywhere
A blockchain’s entire purpose is being decentralised, which just means that there is no central location which controls everything. Blockchain is created to overcome the issue of there being a central point of failure. If something has a central point of failure, there is a centralised entity that is vulnerable to attack. A hacker could enter and tamper with data stored in a centralised location and cause a litany of issues. Blockchain is decentralised which removes this possibility.
What’s the Point of Blockchain?
One of the most important aspects of a blockchain is the security. Any data that has successfully been transmitted and stored on the blockchain cannot be altered, changed or deleted. It’s immutable.
Blockchain is also known for being a very transparent way of maintaining and storing data. The data can be made publically viewable and due to the data security previously mentioned, it’s guaranteed that the data is correct and unedited.
How Does it Work?
First and foremost, for a blockchain to function it requires people to contribute to maintaining the network. Each person stores a version of the database which they believe to be correct. Every computer that is storing a version of the database and contributing to the upkeep is known as a node. Each node stores its version of the database, communicating with other nodes to ensure that all copies of the database are identical.
Nodes do this job because they are rewarded financially for their efforts. The financial element also ensures that nodes are incentivized to do the right thing and maintain network integrity.
Every new entry into a blockchain database is a transaction. Each transaction made on this database is known as a ‘block’. When new data is entered onto the database, a new block is created.
I’m sure you have heard about mining. Every entry into the database needs to be verified by miners before being permanently written onto the blockchain. This ensures that the new data being entered is legitimate. Miners are a certain type of node that work to process transactions and write them on the blockchain. Regular nodes only maintain the current database to ensure no changes are made, they do not process transactions. Miners process these transactions to earn rewards credited in cryptocurrency.
The reason data stored on the blockchain cannot be changed is because the database is stored in a distributed nature, and all of the distributed copies are constantly talking to each other to ensure the data they are storing is the same. If someone were to make a change and remove data on their copy, it would not be reflected on all of the other copies around the world, so the change would be rejected.
Blockchain and Cryptocurrency
You might be aware that blockchain technology is the heart and soul of cryptocurrencies like Bitcoin.
Copies of Bitcoin transactions are stored across the globe. When a new transaction is added it must be approved and added to all the copies around the globe. Someone cannot add fake transactions because it won’t get approved by all the other copies.
When a Bitcoin is sent from one person to another, the record of it being sent is stored on the blockchain. It records where it comes from and where it went to. This is to make sure all transactions that have ever happened are recorded.
Wrapping it Up
That’s it. Basically, a blockchain is a chain of data that is controlled by no-one and is maintained by people all across the world. It’s a highly secure method of data storage.
For more guides on The Daily Chain like this Blockchain for Beginners article click here.
About Alex Aves
Alex is a crypto enthusiast that has been enthralled with the crypto space for over two years now. He currently works in the marketing team for Liquid, one of the leading crpytocurrency exchanges. Alex is passionate about spreading knowledge, introducing more legitimacy to crypto and stopping traders from losing money. If you reduce your losses, your profits will grow.
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