Blockchain

A blockchain is a database, or digital ledger, made up of a series of interconnected blocks containing transaction data from the network over some period of time.

Distributed ledger technology (DLT) is another name frequently used in relation to blockchains.

Blockchain networks are at the heart of cryptocurrencies.

Each block in a blockchain also contains a unique identifier unlike any other block in the chain called a hash. Think of the hash as a fingerprint identifying that block for all other blocks.

The hash is super important to the overall function of the blockchain, as hashing is used in the processing of the transactions that happen on a blockchain.

Hashing makes it possible to quickly and securely process transaction data because it takes transaction data of different lengths and transforms it into a fixed-length value.

The value can be called at any point, providing quick access to transaction details and addresses.

Newly created blocks also contain data in them related to the previous block. This relationship between consecutive blocks is what makes blockchains nearly unalterable, or immutable.

For a block to be changed by a hacker, for example, he’d have to alter not just a single block, but every block after the first block that was altered.

The creation of blocks is possible because of cryptography.

Blocks are created or mined by network participants called miners or validators, depending on the consensus mechanism that is used by the blockchain, who validate network transactions and then package them up in a new block.

Miners and validators are incentivized with rewards (cryptocurrency = money!) for the work they provide to the blockchain network.

The two most famous blockchains in existence today are Bitcoin and Ethereum.

They are examples of public blockchains, which allow anybody to view the transactional history that’s taken place on a blockchain.

Most of today’s most well-known blockchains are public blockchains, as opposed to private blockchains.

Many blockchains are also described as permissionless, meaning anyone can download the software needed to run a blockchain node, allowing them to connect to the network and start creating and validating transactions, and mining blocks.

In the same respect, anyone can take the blockchain software, install it, and then modify it to grant access to only specific users with specific network permissions. This is called a permissioned blockchain.

Related Terms

Genesis Block

The very first block or first few blocks recorded on a blockchain or blockchain-based protocol. The genesis block is often called Block 0 or Block 1. The genesis block sets the foundation for the rest of the blocks that are added to form a chain of blocks. That’s where we get the word “blockchain”. The most famous genesis block, and the very first Bitcoin block, called the Genesis Block, was created on January 3rd, 2009, by Bitcoin’s infamous and mysterious creator, Satoshi Nakamoto. Some consider this date to be the start of the cryptocurrency revolution – the start of it all!

Block Reward

Incentives or prizes given to miners after they use their computing resources to successfully validate a new block of transactions and add them to the blockchain.

Bitcoin (BTC)

Bitcoin (BTC) is most well known as a digital decentralized cryptocurrency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries, such as payment gateways or banks or routing services. Think of bitcoin as Internet money, that you can send and receive directly, to and from anyone, and you can use it to pay for stuff.

Immutability

A core feature of blockchains that makes their ledgers, the data record of transactions, unchangeable and unalterable. Immutability drives the trustworthiness and integrity of blockchain data as chain transactions and rulesets are protected from fraud, hacking and other wrongdoing.

Polkadot (DOT)

Polkadot (DOT) is an open-source blockchain protocol for cryptocurrencies, dubbed the “blockchain of blockchains”, that allows different, incompatible networks to communicate with each other and share data, using a multichain design.