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Emerald Crypto | February 26, 2021
So what is Blockchain anyway? By now you've probably heard the term thrown around and you may have some vague awareness that blockchain is connected to the world of cryptocurrency. But what exactly is blockchain and how does it work?
The word itself is made up of two components – block and chain. The block component refers to data (information) and the chain component refers to how that data is stored.
So when we put the word back together we see that a blockchain is a certain way of storing data.
Said another way, it's a type of database.
And what is a database? It's a collection of electronic data or information that is organized so that it can be efficiently located and retrieved. More precisely, a blockchain is a specific type of database. While a blockchain can store many different types of information for our purposes we'll focus on blockchain as a transaction ledger. Think of a ledger in a checkbook that is used to balance your account. Or for younger readers think of the list of recent transactions that comes up after signing into online banking.
In a blockchain a 'block' is filled with data. When the block is full it is 'chained' to a new block which is then filled with additional data. The chains are compiled in chronological order using hashes that help identify each individual block.
Blockchain transactions are distributed or decentralized. This means that they don't take place on a single computer on a single server but on a shared network where all users retain control. The peer-to-peer (P2P) network has many computers (or nodes), often spread out throughout the world and owned by different people or entities, that work together to verify and complete the transaction. If one node makes an error the other nodes through a consensus process will eliminate the incorrect information. Said another way, all of the nodes work together to come to the same conclusion. Incorrect data do not get added to a ledger but once correct information is added it can never be changed.
Thus blockchain transactions are very difficult to falsify or alter. The blockchain ledger records every single transaction that has ever taken place on that blockchain in chronological order. Blockchain transactions also use encryption keys and hashing to secure and protect the data while network nodes complete transactions by solving algorithms. All these factors combined make blockchain nearly immutable (impossible to change) and very transparent (easily verifiable for all to see).
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