What is a blockchain and how it works?

 

Traditional ways of storing transactions always have one or more central authorities. For example, when a credit card transaction takes place, the transaction gets recorded in computer systems in buyer's and seller's bank. A hacker can hack into the bank's computer system and change the records. This is the drawback of the world full of centralized controls. 

Blockchains offers much secured means of storing transactions. The way it achieves this is by using a distributed ledger that is stored on every note of a blockchain network. Thus, every note stores a copy of the ledger. If a hacker wants to hack into a block chain network, he has to change the ledger entries on every single node of the block chain network. Given the structure of the blockchain, it is almost impossible to hack into a blockchain network.

As name suggests, a block chain comprises of blocks containing information tide together to form a chain. Each block stores certain amount of data, hash of the data from the previous block and hash of all the information in the current block. Thus, a change in the information stored in any one block impacts all the subsequent blocks in the block chain network. To avoid the possibility of a hacker recomputing all the blocks, block chain enforces certain amount of time for each block creation. For the bitcoin network its 10 minutes. The mechanism to enforce specific time to create each block is called proof-of-work. On top of having to compute each block in the block chain, the copy of the block chain is stored on each node of the block chain network. This means a hacker has to recompute all the blocks after the changed block, on each on the node in a block chain network. When ever a new block is created in the block chain, all the nodes in the network check the validity of the newly created block to make sure that it is not tampered. Consensus is reached about adding the new block to the block chain if more than 50% of the nodes accept the new block. Thus, block chain offers an impossible to hack system for storing transactions.