Blockchain Technology – What Is It? Blockchain Technology Explained

Blockchain is a revolutionary technology working wonders in our lives for years. However, most of us don’t even know what it is. The truth is, we can find it everywhere: in the bank, at the hospital, at the airport, or at the elections. 

Do you have no idea what blockchain is? You’re in the right place! You’ll find everything you need to know about blockchain technology on our Wellcoinex website.

What is a blockchain?

According to specialists, blockchain is a distributed and invincible transaction book (or Distributed Ledger Technology – DLT). 

As complicated as it sounds, we will try to explain it in simpler words. Blockchain is just a virtual chain of blocks – those “blocks” are carrying digital data of transactions made on the network this blockchain operates on. Other than that you can also check the best blockchain games and have fun.

We can divide those blocks into 3 types. The first one carries information about transactions: date, time, and the amount of money transferred. The second type has information about the users conducting this transaction. 

And last, but certainly not least, has info distinguishing it from others. Every block has a unique code, called “hash”. 

This hash allows us to differentiate transactions that look identical (they are not, even if you can’t tell the difference). Each block can store even 1MB of data, which means thousands of transactions.

How does it work?

When the block stores new data, it’s added to the chain. Blockchain, as the name suggests, consists of many connected blocks. However, in order for the block to be added to the blockchain, things must occur. 

First, the transaction must happen. Then this transaction should be verified. In the blockchain, transaction verification is the task of computers connected to the network. 

These networks often consist of thousands (or in Bitcoin’s case about 5 million) computers distributed around the world. 

Next, the transaction must be stored in a block. This block must have a hash. 

Once all transactions in the block have been verified, it must be given a unique, identifying code – previously mentioned hash.

 After those requirements are met, the block can be added to the blockchain.

Information stored in a blockchain is public. You can always look up the data you need – time and info about new users.

What is blockchain technology in simple words?

Blockchain is called a chain of blocks. This term should not be taken seriously. It was created, to somehow visualize what blockchain technology is. 

Blockchain technology is hard to understand for new members of the cryptocurrency industry. So we know that there is a chain that contains blocks – but what’s next? 

Blocks are made to capture data connected with transactions such as value, time, and so on. Users are identified by a special sign. 

Each block stores individual data. Moreover, they have unique code so-called hash, which allows them to distinguish different blocks. 

Every block can store up to 1 MB of data. It means, that it can store thousands of transactions, depending on the transaction data size.

Is blockchain private?

Blockchain is public, which means that everyone is able to access the data. Users can decide to allow their devices to connect to the blockchain. By that, devices receive blockchain copies, which are automatically updated after the block is added to the chain. 

When it comes to Bitcoin, there are a million of copies of the same chain. Such wide distribution of blockchain between many devices prevents data to be manipulated.

 Although transactions on the blockchain are not fully anonymous, the personal data of users is limited to a digital signature or just a name.

Is blockchain safe – can blockchain be hacked?

When it comes to the safety and trustworthiness of networks, the technology includes them in a few different ways. Newly added blocks are stored linearly and chronologically. It means, that they are added always on the end of the chain – not at the beginning, nor in the middle.

If we look at Bitcoin’s blockchain, we can see that every block has its own position. After adding another block, reversing the process is very difficult to make, because of the hash code we talked about before. 

Each block contains a part of numbers in its hash from the following block. Practically, if some person would like to edit a transaction in a block, all of the blocks would need a change too. 

That requires a lot of computing power and in a great amount of blocks gets almost impossible. To sum up, when blocks get added to a chain, it remains impossible to be removed.

To solve the problem of trust, block networks implemented tests for computers that want to join Blockchain and add blocks, they were called consensus models. 

One of the most common examples of these tests used by Bitcoin is the so-called Proof of Work. In this system, it is the responsibility of computers to prove that they have done the work – it consists in solving complex mathematical problems.

 If a given computer solves one of these puzzles, it becomes entitled to add a new block to Blockchain. This process is so-called mining. It is not easy – it requires special mining hardware and software. The devices are expensive.

It is worth mentioning, that Proof of Work does not prevent hacker attacks, but it makes such actions more difficult. 

If a hacker would like to coordinate the attack, he would have to solve very difficult mathematical equations. The cost of organizing such an attack would certainly outweigh its benefits.

It is worth mentioning, that Proof of Work does not prevent hacker attacks, but it makes such actions more difficult. 

If hacker would like to coordinate attack, he would have to solve very difficult mathematical equations. The cost of organizing such an attack would certainly outweigh its benefits.