Blockchain and Bitcoin
BlockchainTechnology

What is a Blockchain and How does it work on Bitcoin?

People involved in banking, cryptocurrency, or investments during the past decade, come across the term “blockchain” quite frequently. In a nutshell, it refers to the record-keeping technology that supports the Bitcoin network. But getting in deeper there are many aspects of this specific database.

How does it differ from technologies similar to it and where does Bitcoin fit in? We will answer these and more facts about blockchain here.

The basics of Blockchain

Blockchain has a complex structure yet its fundamental concept is rather straightforward. It is easier to understand if you know how a typical database works.

Any collection of information that is digitally stored is called a database. The data or information, in a database usually has a table format for easy searching and filtering. So, how is it different from storing information on a spreadsheet?

Spreadsheets are designed for individual use or a small group to access and store a limited amount of data. On the other hand, a database can hold large quantities of information. It can also be edited, accessed, and filtered by as many users as needed simultaneously.

Large databases store their bulk of information on servers built of powerful computer systems. There are most often hundreds or even thousands of computers involved in this feat. As the storage capacity and computational strength needed to allow access to so many users is immense.

Although both spreadsheets and databases are accessible to multiple users, they are often owned by a single organization. A particular individual within that business has full control over the operations and information stored there. That said, we can now define a blockchain more conveniently to you. The information has been divided into sections for better comprehension.

Storage structure

The difference in its structure is the first thing that sets a blockchain apart from a database. Blockchains gather information in the form of groups, referred to as blocks, which hold sets of data. Each block has a particular storage capacity. Once filled, they are linked to the block that was filled previously, thus forming a chain of information.

New information following after the freshly added block takes the form of a new block. This again is added to the chain once the information exceeds its capacity. Hence the process continues on.

Therefore, one of the main differences is that databases store their information as tables while blockchain does it in chunks. It allows blockchains to have an irreversible data timeline when it is decentralized. Any full block permanently becomes part of a timeline. Each block receives an accurate timestamp when included in the chain.

Decentralization

When studying blockchain it is necessary to explore how it influences Bitcoin. Similar to a database, Bitcoin requires several computers to store its blockchain. For this particular cryptocurrency, blockchain is a database that stores every single one of its transactions.

However, the computers storing this information for Bitcoin are not present in the same place. Each induvial or group of computer systems is controlled by a single person or several people. The computers that are a part of Bitcoin’s network are known as nodes.

This implementation of Bitcoin by blockchain is decentralized in nature. But private and centralized blockchains also exist which are controlled and operated by an individual or sole organization.

Transparency

The decentralized blockchain used by Bitcoin allows every transaction to be transparent if viewed by a personal node. Each node has its own copy of the chain that is updated by the addition of fresh blocks. This enables the tracking of Bitcoin’s transaction journey no matter where it is.

For example, there have been occasions in the past when Bitcoin exchanges have been hacked. Although a hacker can make themselves wholly anonymous, the extracted Bitcoins are easy to trace.  If the stolen Bitcoins were moved or spent on anything it would instantly become known.

Is blockchain a secure technology?

This is a question we often have to deal with in our projects related to business assignment help. To answer that, there are many ways that blockchain accounts for trust and security issues.

The new blocks on bitcoin are stored in linear and chronological order. Which means they are always added to the end of the blockchain.

In Bitcoin’s blockchain, each block has a position called height on the chain. Once a block is added it is near impossible to alter its contents without the consensus of the majority. The difficulty is owed to the hash each block contains along with its previous block’s hash and its own timestamp.

Hash codes are digital information that is turned into a string of letters and numbers. Any editing of data also changes the hash code.

This is how the above-mentioned structure contributes to security. If a hacker wants to steal Bitcoin, they will alter a copy of the blockchain they hold access. However, it won’t align any longer with the copies of other users on the chain.

The hacked copy will stand out once everyone crosschecks their copies with each other. The hacker’s version will then be removed as illegitimate.

Conclusion

With this explanation, we are sure it must have become clear how blockchain operates. It is also evident that it is a reliable technology for monetary transactions. Blockchain is the bedrock for other cryptocurrencies besides Bitcoin also.

Being spread across a network of computers, blockchain allows cryptocurrencies to operate without federal authority. Therefore, businesses or individuals in regions with unstable financial structures can rely on it.

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