Blockchain Explained

Blockchain is essentially a distributed database that maintains a continuously growing list of records, called blocks. These blocks are linked together using cryptography, forming a chain. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.

1. Decentralization:
   • Distributed: The blockchain is distributed across multiple computers, or nodes, on a network. This means there's no single point of failure and no central authority controlling the data.
   • Peer-to-Peer: Nodes in the network communicate directly with each other, creating a decentralized network.

1. Immutability:
   
   • Once a block is added to the chain, it's virtually impossible to alter it without changing all subsequent blocks. This is due to the cryptographic hash that links blocks together. If a block is changed, its hash will also change, invalidating the chain.

1. Consensus Mechanism:
   
   • To ensure that all nodes agree on the state of the blockchain, a consensus mechanism is used. Common mechanisms include:
     • Proof of Work (PoW): Nodes compete to solve complex mathematical puzzles to create new blocks. The first node to solve the puzzle adds the block to the chain.
     • Proof of Stake (PoS): Nodes stake their own cryptocurrency as a guarantee of their commitment to the network. The more coins a node stakes, the more likely it is to be selected to create the next block.

1. Cryptography:
   
   • Hashing: Cryptographic hashes are used to create a unique digital fingerprint for each block. This ensures the integrity of the data and prevents tampering.
   • Digital Signatures: These are used to verify the authenticity of transactions. When a user sends a transaction, they sign it using their private key. This signature can be verified by anyone using the corresponding public key.

1. Transaction Creation: A user creates a transaction, specifying the sender, recipient, and amount.
2. Broadcasting: The transaction is broadcast to the network.
3. Verification: Nodes in the network verify the transaction to ensure it's valid (e.g., that the sender has sufficient funds).
4. Consensus: The transaction is added to a block and included in the blockchain only after a consensus is reached among the network nodes.