What is blockchain technology ?
The idea behind the evolution of blockchain technology is to replace existing centralized systems and increase network security.
Satoshi Nakamoto, the creator of Bitcoin, wrote a protocol on which a cryptocurrency called Bitcoin was created.
Currently, we conduct payment transactions using central financial systems such as banks, where they have personal ledgers to keep a record of all your transactions.
In some cases, they may confiscate your money or in other cases, if someone hacks their central server and steals all the money or your personal information.
That means you are at risk and rely on third parties like banks or financial systems to maintain your fiat assets.
On the other hand, we have seen the transformative appearance of money where previously the face of money was only after the exchange of goods turned into gold and copper coins.
With the passage of time it has become a paper currency like dollar, euro rather than plastic currency like credit and debit cards.
So Satoshi Nakamoto thought of the future with a digital currency over which no one would have any control.
So he created a protocol on which the first digital currency Bitcoin was created and that protocol is known as blockchain technology.
This is a brief history of what blockchain technology is and why it was introduced, now focusing on how it works.
How does blockchain technology work ?
Blockchain's previous goal was to solve banking financial problems but later, it was identified to solve much bigger problems.
Blockchain technology is about creating a completely decentralized system where no one has any control over the network.
If you use this blockchain network, how will the security or legitimacy of the transactions on the network be verified as there is no central authority to verify it.
If the bank verifies your transactions in the legacy banking system, then who will do this on the blockchain network?
Don't worry, everything will be explained step by step.
Suppose, any banking financial system has started using blockchain network and any person in the network has started transactions.
Not every transaction on the network will be confirmed unless it is validated by a minor or verifier.
Who do you think is the miner or the verifier? Then wait will be explained later.
First, let's talk about the basics of blockchain, what does it really mean?
In general terms, a block is like a vessel and a chain is a series of blocks.Every transaction initiated on the network will be a part of a block.
Thus, the block will be like a container and the transactions will be like small boxes, where small boxes are fitted in containers.
In a blockchain network, each block contains three pieces of data to record.
Hash (block's own unique code or identity name)
Transaction data (details of all transactions such as quantity, sender, recipient address)
The hash of the previous block.
The number of transactions that can be restricted in a block depends on the size of the block. Suppose Bitcoin has a block size of 1 MB but Bitcoin has 8 MB of cash.
This means that the block has more capacity to hold bitcoin cash transactions. Each block contains the hash (unique identity) of the previous block.
This explains how the actual chain is created in the network. Where each block is connected to the previous block and is called a blockchain.
The first block of the blockchain network is known as the Genesis block because it has no mapping address to the previous block.