How the Blockchain Works:-
The idea of Blockchain literally came from nowhere: One Satoshi Nakamoto published a white paper in 2008 in which he described a crypto-currency called Bitcoin. As it turned out later, Satoshi Nakamoto is a pseudonym and till now no one has been able to find out
who is the real person behind it. The database used for Bitcoin was the first blockchain.
The highlight of the new technology: In case of Blockchain, it deals with a distributed database. There is no central server which stores it. It is also not present in a central instance as expected in case of a currency like Bitcoin; no state and no company owns
it. Instead, the Blockchain is distributed over.
Instead, the Blockchain is distributed over many computers and relies on the security of
the encryption technology. In case of Bitcoin, every member has a copy of the Blockchain which, in turn, registers all transactions. The Blockchain version of the banks and insurances is replaced by the Bitcoin member by the various financial institutes that are involved in financial transactions. Here, every member or every bank has the same rights, i.e.: the Blockchain does not belong to anyone and all at the same time. The main element is important for the protection of the database.
It cannot be hacked or manipulated by individual users. The integrity of the database would be threatened only if a hacker manages to be successful in hacking more than half the members.
Incorruptible and transparent
The Blockchain can be presented as an incorruptible accountant who executes all types of transactions. Cash transactions is only an example, another example is smart contracts. Here, computers take over the contract processing, check the conditions and can automatically execute individual clauses.
The database is ready for use where there are transactions that can be executed securely and stored in an accountable manner. The great strength of the Blockchain is its transparency. It is constantly controlled by the so-called miners. These are members
whose software verify all transactions, block for block, and thereby substantiate their authenticity. Once a block is verified, the result is written in the Blockchain and is
etched in the digital stone.
In reality, the participation in a Blockchain like Bitcoin is not linked to any huge expenditure: You need a software for the PC or an app. A cryptographic pair of Blockchain
software. This pair of keys is made up of a private and a public key. The public key is
visible to all other members but the private key remains a secret. Every transaction in the Blockchain which a user triggers, is signed using a private key.
If User A wants to transfer money to User B, then he will address the transaction with the
public key of B and sign it with his own private key. User B, with the help of the public key from A, can then check whether he has actually initiated the transaction. The further check is then done by the Blockchain, more precisely: the other members. For reasons of efficiency, several transactions are always bundled into one block in the database. Thus, new blocks are continuously emerging by which the database grows. But the new blocks are not simply created by a central point. The
The generation (mining) of new blocks is the confirmation for waiting transactions. Every block must deliver an exact result if it is sent by a Hash function, for example, starting with a specific number of zeros. The miners search for this suitable blocks. But the new block not only includes the transaction but also the Hash-value of the parent blocks and it is also digitally signed.
How the Blockchain works
The Blockchain is a distributed and stored database that is perfectly suited for retaining transactions. In the example, we will show you how to transfer money with the help of Blockchain via a smartphone Only two people are involved. The processing is done automatically via the Blockchain. A trusted third-party, for example, a bank, is not needed for this purpose.
A problem, in reality, is that the Blockchain grows with the number of transactions. In case of Bitcoin, the database, for example, is almost 100 GB by now.
A glance in the Blockchain
Every block saves several transactions which are processed in a jiffy. Apart from the new Hash value, every block also includes the Hash value of the previous block and is thus linked to it.
A future with the Blockchain
The Blockchain as the next big digital thing is not only interesting for banks. Australia wants to implement digital voting with it during elections. Until it is ready, there is still
need for improvement: Currently, every Full Node for Bitcoin must download almost 100
GB Blockchain, while transactions require up to ten minutes – this takes much too long.
Will Blockchain finally make banking cheaper? For the banks, yes. Whether their customers get something out of it? That remains to be seen.
Also, Check What is Blockchain and how does it work