Blockchain is a distributed digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks. The technology allows digital information to be recorded and distributed, but not edited. A blockchain consists of blocks that hold sets of valid transactions. Each block includes the cryptographic hash of the previous block, linking the blocks together. The blocks are linked and secured using cryptography, forming a chain of blocks or a blockchain.
The blockchain concept was introduced with Bitcoin in 2008, and served as the technological breakthrough behind the first successful digital currency that was not regulated by any central authority. Blockchain's decentralized and distributed nature makes it resistant to modification of the data. This makes blockchains suitable for recording transactions, tracking digital assets, and building distributed applications. The blockchain acts as a distributed ledger that can record transactions between parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.
How Transactions Are Added to the Blockchain Technology
For new transactions to be added to the ledger, they must be validated and grouped together into a time-stamped block. This process is managed by competing nodes on the network which race to validate transactions in each block. The first node to solve a complex mathematical puzzle gets to fill the next available block with valid transactions and broadcast it to the rest of the network. This block gets added to the existing Blockchain Technology, forming an ever-growing chain of blocks. Each additional block reinforces the ones before it, making old transaction records increasingly difficult and expensive to modify. This chaining of blocks has led to the technology being called a blockchain.
Consensus and Decentralization
A key feature of blockchains is that they achieve consensus among peers on the network about the state of transactions without requiring a central authority that governs and maintains the records. This decentralized structure means that no single entity owns the data, and no one can easily change existing records. Blockchain uses different consensus mechanisms to validate transactions and maintain integrity across all nodes. Some popular consensus mechanisms used are Proof-of-Work and Proof-of-Stake. This decentralization makes blockchain technology censorship-resistant and immutable, allowing it to function as a distributed system rather than being controlled by any single entity.
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