What Is Blockchain Technology?
Nov 19, 20214 min read
Blockchain stands behind the whole crypto world, and it’s really difficult to imagine it without that mysterious technology. Why? Because it’s a system of recording information that prevents stealing and cheating. It’s both — transparent and untraceable. The first part is about all your transactions being open to the public, and the second part is about the inability to hack or change your personal data. Blockchain allows people to escape centralized authorities and have business with others without any fear of being deceived. That’s because new information could be added by anyone who has access to the Net, but no one can keep track of you. On the contrary, it’s a well-known fact that centralized authorities not only have but even use your personal data, which often leads to personal data breaches and other unpleasant things.
Blockchain Essential Components
Every single chain has many blocks, and those ones have data, a nonce, and a cryptographic hash inside. Each block has limited space, so when it’s filled, the network generates a new block with a new piece of information, that’s where the process of creating a chain of data starts. Another essential thing to notice is that blocks store data on the blockchain forever unless it is mined.
A pivotal point of blockchain technology is decentralization, that’s why nobody owns the chain, it’s spread among thousands of computers worldwide. The chains could be distributed by nodes that are electronic devices connected to each other and create a network. They keep a copy of a blockchain’s history and perform different tasks: from accepting or rejecting transactions to being a point of communication. They are absolutely essential for keeping a cryptocurrency network working. All in all, nodes are up for:
1) validating a block
2) keeping transaction’s history in the block
3) renewing other nodes so that other nodes have the latest information
There are different types of nodes:
1. Bitcoin nodes
Computer nodes allow Bitcoin to be an independent currency with no intermediaries using peer-to-peer (P2P) service. Those nodes can send transactions’ information and verify it to claim if the transaction is legit or not. Thanks to the nodes, Bitcoin users can send transactions and get notifications about any activity in their digital wallets.
If you want to run a Bitcoin node, you need to visit Bitcoin Core and download software, but mind that your hardware should meet definite requirements, and you don’t get a financial reward, only a kind of coin reward.
2. Full nodes
These nodes have a complete copy of the blockchain ledger, and they are in charge of validating and verifying blocks and transactions and relaying them to other full nodes.
Running full nodes isn’t easy and that profitable but it helps Bitcoin system to exist, that’s why there are many volunteers and volunteer organizations that do it.
3. Listening nodes (Supernodes)
The nodes are full and visible for everyone. They provide and communicate with other nodes who are ready to connect with them. They are both — a way of communication and a data source. They usually run 24/7 and provide the capacity for increasing the number of nodes worldwide. As it’s open to the public, it requires more computing power and a better internet connection than a hidden node (non-listening node).
4. Miners’ nodes
These types can add transactions to a blockchain and produce new blocks. Mining is the process of adding a new block to a blockchain. Those nodes aren’t in charge of validating blocks and they club transactions to form a block that must be sealed to protect a ledger from hackers attacks and fraud.
Mining nodes could be quite beneficial, but you need to invest at first, as the whole process demands powerful hardware and software. There are different options for mining — solo, cloud, or joining a pool.
Those guys help the system to exist and keep rolling because they do difficult but necessary work — they mine new blocks, and the process itself is called mining.
Miners solve incredibly complex math problems, and once they are solved, a new block could be added to the blockchain. The miner is always rewarded for his work financially, it’s the way to thank miners for the computing power they shared.
How does a blockchain transaction work?
It’s pretty simple, so to make it even more clear, let’s have a look at the whole process gradually:
- There is a person who wants to make a transaction of cryptocurrency, documents, or any other type of data.
- Thanks to nodes the transaction is sent to a peer-to-peer (P2P) network.
- The nodes validate the transaction and the user’s status carrying out an algorithm.
When the transactions are completed, a new block is added to the blockchain, since that very moment it’s sealed there in a permanent and unchangeable way.
Blockchain is, with no exaggeration, a true people’s victory in terms of hiding from centralized authorities and managing the business in the most secure and trusty way. It also helps us to make quicker and more efficient transactions with nobody in the middle no matter where we are once we have an Internet connection. That’s a new step to the future with no scams, fraud, or data breaches.