Introduction to Blockchain

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The Blockchain is not that difficult to understand. But before we dig deeper, you need to understand that Blockchain and Bitcoin are two different terms associated with each other. In simple words, Bitcoin is a globally accepted cryptocurrency, while Blockchain is a technology used by Bitcoin. Blockchain provides a secure and anonymous transaction to Bitcoins.

What Exactly Is Blockchain?
The Blockchain is a trusted and cryptographically secure network over which the digital values (such as data and currency) are exchanged. In other words, this is a decentralized network allowing transparent peer-to-peer transactions. A large number of computers (known as nodes) are connected to this network. As large as the number of nodes over a Blockchain, the more secure will be your digital data. It is believed that it is almost impossible to hack into a Blockchain. Well, to do so, the hacker needs to hack into more than half of the nodes running the Blockchain. So, it is better to have more and more of nodes in a Blockchain to make the network more secure.

How Does Blockchain Work?
To understand the functioning of Blockchain, here we will be using Bitcoin as the cryptocurrency. So, before we proceed ahead, you must be aware of the concept of Bitcoin.

Bitcoin can be defined as “A cryptocurrency which is created to store values in it.”

Now, when we talk about Bitcoin Blockchain then it is a ledger (in simple words, a database) which contains all the transaction records associated with Bitcoin. This ledger is distributed over a network of nodes. And in case, if a new transaction is to be added in the blockchain then firstly, the nodes need to authorize the validity of the transaction. In totality, the nodes are responsible for evaluating a real transaction. Once the nodes agree to the authenticity of a transaction, it is called as the consensus. In other words, the agreement of nodes regarding the real Bitcoin transaction is known as a consensus. Only after receiving the consensus of the nodes, a transaction is added to a new block.

A real and valid transaction must fulfill the below-mentioned requirements:

  • The amount that user wants to transfer should be available in his/her account.
  • According to previous pending transactions, the user should have enough balance to transfer the amount to the desired account.

To understand this in simple words, take a look at the two scenarios. In the first case, if Doug wants to send $2 of Bitcoin to Sam and he is having only $1 of Bitcoin in his account then this is an invalid transaction. In another scenario where Doug is having $2 of Bitcoin in his account and he has already sent this to Sam. Now, he wants to send another $2 to Ben which is not possible at all. Thus, the transaction becomes invalid again.