What is Blockchain Technology?

What is Blockchain technology? This has been the question of every citizen of this earth right after we were introduced to Bitcoin. Bitcoin is considered to be some kind of technical miracle working with the help of some magical mystery called Blockchain. To be frank, if you really wish to understand the technology behind Bitcoin, then we are on the same page.

The main concept of Blockchain technology is—Trust. How would you feel about a transaction where there’s no SINGLE middle man to control it? A system where all your transactions are verified not just by one, but a huge network of people? Where you don’t have to worry about anyone tampering with your assets? In which you don’t have to worry about security because it’s totally fail proof so that even “any three letter organizations” would have trouble hacking into your system? That is the dream of everybody who yearns for some data privacy. In fact, that is Blockchain you are asking for. It’s a transparent, public, decentralized database which stores your transactions in the form of blocks to form an unbreakable chain.

How does it work?

All the records/blocks in Blockchain are distributed via peer-to-peer network—a network where all the nodes/users are connected, but has no server. With this network, all the nodes store a copy of Blockchain and all of them are kept in sync with equal access to the network. This ensures that the network is distributed as well as makes it decentralized. Every updates done to the Blockchain will be updated in each and every node in the network constantly.  In addition to this, the cherry on the top is that it’s almost impossible to change or modify an existing block in ANY ways, do you ask why that is? We’ll come to that soon.

So what exactly is a block?

A block contains the transactions that happened within a certain time period. If we consider Bitcoin, the transactions that happened within the last 10 minutes will be stored inside a block. In short, it has 03 parts,

• Data
• Hash 
• Hash of the previous block

Although the data is visible on the ledger/database, it will be cryptographically disguised, only to be accessed by the owner of that specific data.

Every valid block is identified by Hash—a very unique, random number. You can think of it as a digital fingerprint that is very unique to a certain block.

When a block gets validated, it gets its own Hash. Likewise, when a Block is changed or tampered with, its Hash changes too. Because, the block is not the same anymore.

The 3^rd part of the block is the hash of the previous block. It ensures the Blockchain to remain a continuous unbreakable chain.

Let’s say that Joey manages to tamper with the 2nd block. Regardless whatever change was incurred to that block, The Hash of that Block changes—in this example from “2KoG” to “N3oU”.

Hence, the hash of the 3^rd block stays as the old one, while the Hash of the tampered block changes. This breaks the chain, and in order to keep the change under the fold, Joey has to tamper with all the blocks that follow the 2^nd block. That means he has to redo the computation of all the following blocks to keep it stable. But that’s obviously not an easy task, because Blockchain may have thousands of blocks and the tricky part is any of the Miners—Special nodes who verify all the transactions— could be working on the moment to add a new block to the Blockchain. So what? Working on a new block cannot be a risk to Joey, right? We’ll see about that.

When a new block is successfully added, the whole Blockchain will be updated to all the nodes/users in the network, and Joey’s PC will also be updated and all the computational work he did to cover up the tampering he did with the 2^nd block will be for nothing. So if he wants to tamper with one block, that means he should be ready to tamper with all the other following blocks in the network, before someone adds a new block. Moral of the story, Joey should think twice before tampering with Blockchain or to be exact he should never tamper with Blockchain. But wait, that’s not all! The security of Blockchain is not easy as that. What else could be there? The word is “POW!”—Proof of Work…

But before we get into that, we need to have an understanding about what really happens when a sender requests a transaction. Let’s get into that.

The whole mystery of how Blockchain works can be illustrated within 6 steps.

But the actual procedure is much more detailed than that.

What happens when sender requests a transaction?

As you know, Bitcoin has the Blockchain technology behind it. So let’s just take an example regarding Bitcoin.

Let’s say Monica wants to give 2 Bit coins to Ross. That is to say, Monica—the sender requests a transaction.

Step 01: Sign in with Private key

But before she can proceed with the request, she has to sign in into the network with the Private key she has. In fact, every user has a Private and a public key. This private key is like a very long password you would use to secure your account. So the function of this private key is, that it unlocks the assets you want to spend. Also it ensures that only the owner—in this case only Monica has access to her assets and only she can spend them.

Mining

All the steps under this come under Mining. You'll get to know about it as you keep on reading. So just ignore this title for now and go on to Step 02!

Step 02: Wait for verification

When Monica makes the request to send 2 Bit coins, the transaction is sent to all the nodes in the network and she has to wait until the Miners—the special nodes verify the transaction.

Why send it to the miners? Because we are talking about crypto-currency and there is a chance that someone like Joey would try to “Double spend” his assets. Double Spending means spending the same asset more than once, by duplicating the certain transaction and spending it twice. This is where Miners come to the rescue. They verify whether the sender has enough assets to spend. If Monica doesn’t have enough assets to spend, then her transaction would be rejected.

For a transaction to be valid, more than 50% of the computing power of the network is mandatory.

Step 03: Become a part of Candidate block

When a transaction is valid, it will be added into the Candidate Block along with the other similar transactions that happened within the last 10 minutes. Wondering why it’s always 10 minutes? We’ll address that one in a bit. Every Miner has his own candidate block. It is a block that has not yet become a part of the Blockchain.

Step 04: POW! POW! POW!

All candidate blocks need their Miners to provide POW. What is POW? Yes, it’s the Proof-of-Work. But what does it actually mean? POW usually gets commonly labeled as some kind of mathematical puzzle. In fact, it’s a very much time consuming process which requires quite a lot of computing power.

When a miner intends to create a new Block, he needs to submit 2 Hashes.

1.                A Hash of all transactions in a block.          
2.    A Hash that proves that Miner has spent quite an amount of effort on creating the Block.

The first one, we are familiar with. The latter is what takes up all the energy. The miner, who submits these 2 Hashes before any other Miner does, gets a reward. This creates all the Miners to race to submit the hashes, which is not such an easy task.  

A Hash function provides a unique digital value to any piece of data. That means even a name like “peterabbit” will get a long piece of text as its hash value. Even changing a single letter will create another different, random, unique Hash value. 

In this case, if you change the name to “peterabbit1”, it will create some other random piece of text. And let’s say that the network expects the first hash value that has a zero at the beginning, when some number is appended to “peterabbit”. So the miner’s computer would start hashing as Peterabbit0, peterabbit1, peterabbit2….until a value appears with a zero at the beginning, let’s assume the bingo name is “peterabbit19”. Now, that specific name—“peterabbit19” could be submitted, and all the work the receiving computer has to do is just hash THAT name and see if it satisfies all the characteristics specified.

In the hard reality, the same happens with the exception of much more complex conditions. The network expects the hash value that satisfies some characteristics, something like “Provide a valid block with its hash, and the hash value which has a g at the beginning and a 5 in the middle of the number… and ends with 3 zeros.” This of course is just an example. In truth, the conditions the network submits require a lot of calculations than this, and even a faster computer may require several minutes to land on the correct value.

Step 05: Attach to a local Blockchain

Hence the 1^st Miner, who provides the POW, gets his candidate block —containing Monica’s transaction along with others—will get added to a local Blockchain!

Step 06: Propagate the solution to the network

That local Blockchain will be updated in every nodes in the network and syncs.

Step 07: Await verification

Then all the nodes will verify the solution and if its valid the Miner gets a minted Bitcoin for solving it.

Step 08: Block gets added to the Blockchain

Monica’s transaction was successful and Ross got 2 Bit coins from Monica.

And the whole procedure beginning from Waiting for the verification of Monica’s transaction to adding the new Block into the Blockchain, is called “Mining”. In addition to that, in the case of Bitcoin, the average mining time of each new Block is 10 minutes. That is why a block is filled with the transactions that happened within the last 10 minutes, Remember?

Mining image Source: https://blog.ragnarson.com/2016/12/01/blockchains-a-brief-introduction.html

Let’s make it clear that, a lot of miners would be toiling on Monica’s transaction, for the reason that if their Block gets added, they get a Bitcoin.

These hashing and providing POW ensures the safety of transactions. Any Miner would be foolish to spend his precious time and energy to falsely validate an incorrect transaction. Because even if he validates it, it will be rejected by the other miners in the network.

And what happens to Joey, if he tampers with a single existing block? Well, he would have to go through this whole POW process for each and every consequent Block, before some miner adds another block to the Blockchain. And that is almost impossible… Bad luck Joey!

Hence, This is how the Blockchain technology remains as a fail proof system and holds the torch to decentralized techno-future!

For more information, these would prove useful!

https://bitcoin.org/bitcoin.pdf

https://www.investinblockchain.com/proof-of-work-explained/
https://blog.ragnarson.com/2016/12/01/blockchains-a-brief-introduction.html