What is the blockchain? How does it work? Who makes all transactions? These are only some of the most elementary questions about this still very new technology to the most of us.
Let’s start with the general idea behind the blockchain and what makes this technology unique, in other words better. The blockchain is a distributed ledger, that is available to everyone. The main benefit of this technology is the decentralisation, meaning, that there is no person or institution in control over the ledger. Instead, it is being watched by everyone, since you are all getting the full history of the certain blockchain right after you become a part of it. We can talk about the anonymity of the chain, that is present to a certain level. There are no names or personal information involved, but every account is publicly accessible in terms of the numbers and the history of the transactions. You can think of this as a perfect tool for getting rid of the third parties and tracking down the original source of some product or service.
Let’s take the bitcoin block as an example here, do you know what is hidden inside of one?
The Bitcoin blockchain is probably the most simple one, and the blocks contain mainly three important information. They are data, hash, and the hash of the previous block. In the case of bitcoin blocks the data contains the information about the transaction, such as sender information, receiver information and the amount of the transaction. Every block has its own hash, that identifies all the contents inside of it. You can imagine a hash number as an ID card of the every single block. The third part of the block is the hash of the previous block, this is how the chain is created and this is also the technology, that makes the blockchain so secure.
If you take a look at the various blockchains you will find out, that there are some, that can also store a smart contract on the chain. These contracts are simple programs, that can be responsible for automated trading of some cryptocurrencies for example. You can also find out, that this technology is being used for medical records, collecting taxes or E-notary.
How are the transactions verified? Well, I think, that you already know that the miners are responsible for the verifications of the transactions, and therefore also responsible for the creation of the new blocks, based on the proof of work. The bigger the amount, the higher number of transactions is needed. For the amounts greater than 1 million USD there are 60 confirmations suggested.
Please keep in mind, that this is only super simplified basic information about blockchain. If you are interested in truly getting to know this technology, be ready to spend endless hours in order to achieve better understanding.