What is "Blockchain"
What is Blockchain?
Blockchain is a distributed ledger technology that records transactions across many computers in such a way that the registered transactions cannot be altered retroactively. This technology underpins cryptocurrencies like Bitcoin and has potential applications far beyond digital currencies.
Key Characteristics of Blockchain
Decentralization: Traditional databases like SQL databases are centralized, whereas blockchain is decentralized. In a decentralized network, no single entity has control, and all participants have a copy of the entire blockchain.
Transparency: Transactions on the blockchain are visible to all participants, promoting transparency. Each participant can verify the data, making it difficult to manipulate or falsify information.
Immutability: Once data is recorded on the blockchain, it is extremely difficult to alter it. This immutability is ensured through cryptographic hashing and the structure of blockchain itself, where each block is linked to the previous one.
How Does Blockchain Work?
Blocks: Data is stored in blocks. Each block contains a list of transactions, a timestamp, and a reference to the previous block via a cryptographic hash.
Chains: Blocks are linked together in a sequential manner, forming a chain. This ensures the integrity of the data, as any alteration in a block would invalidate the subsequent blocks.
Consensus Mechanisms: Blockchain networks use consensus algorithms to agree on the validity of transactions. Common consensus mechanisms include:
Proof of Work (PoW): Miners compete to solve complex mathematical problems to add new blocks.
Proof of Stake (PoS): Validators are chosen based on the number of tokens they hold and are willing to "stake" as collateral.
Delegated Proof of Stake (DPoS): Stakeholders vote for delegates who validate transactions and maintain the blockchain.
Types of Blockchains
Public Blockchains: These are open to anyone and are fully decentralized. Examples include Bitcoin and Ethereum.
Private Blockchains: These are restricted to a specific organization or group of organizations. They offer more control but are less decentralized.
Consortium Blockchains: These are controlled by a group of organizations rather than a single entity, providing a balance between decentralization and control.
Hybrid Blockchains: These combine elements of both public and private blockchains, allowing certain data to be public while keeping other data private.
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