Blockchain is a distributed database that is shared among nodes in a computer network. As a database, blockchain stores information electronically in digital form. Blockchains are well known for their important role in cryptocurrency systems like Bitcoin to maintain secure and decentralized transaction records. Blockchain innovation is ensuring the accuracy and security of data recording and instilling trust without the need for a trusted third party.
Blockchain consists of three important concepts: blocks, nodes, and miners.
Each circuit consists of many blocks and each block has three main elements:
- Data in blocks.
- A 32-bit integer named nonce. The nonce is generated randomly when generating the block, which then generates a hash of the block header.
- The hash is the 256-bit number associated with the nonce. It must start with a large number of zeros (i.e. be very small).
When the first block of the chain is created, the nonce generates a cryptographic hash. The data in the block is considered signed and permanently bonded to the nonce and hash unless dug.
“Blockchain is moving beyond cryptocurrency, and it’s worth paying attention – especially since successful prototypes show that blockchain, also known as distributed ledger technology, will be transformative,” said Julie Sweet, an American business executive. She is chief executive officer of Accenture, a multinational professional services company. She is also a member of the Global Management Committee for Accenture.
Miners create new blocks on the chain through a process called digging.
In the blockchain, each block has a unique nonce and hash, but it is also related to the hash of the previous block in the chain, so digging blocks is not easy, especially for large chains.
Miners use special software to solve the very complex math problem of finding the nonce that generates the accepted hash. Since the nonce is only 32 bits and the hash is 256, there are about four billion possible nonce-hash combinations to dig before finding the right one. When this happens, miners reportedly find a “gold unique number” and their blocks are added to the chain.
A change to the previous block in the chain requires re-excavating not only the block with the change but also all subsequent blocks. Because of this, blockchain technology is very difficult to manipulate. Think of it as “safety in mathematics” because finding the unimportant golden number takes a lot of time and computing power.
If the block is successfully mined, the changes will be accepted by all nodes in the network and the miner will be financially rewarded.
One of the most important concepts in blockchain technology is decentralization. No computer or organization can own a circuit. Instead, it is a distributed book about nodes connected to a circuit. Nodes can be any type of electronic device that supports a copy of the blockchain and helps the network operator.
Each node has its own copy of the blockchain, and the network must algorithmically approve each newly mined block for the chain to be updated, trusted, and verified. Because the blockchain is transparent, every action on the registry can be easily audited and verified. Each participant receives a unique alphanumeric identification number indicating their transaction.
Combining public information with a system of checks and balances helps the blockchain maintain the integrity and build consumer trust. In essence, blockchain can be seen as trust scalability through technology.
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