How blockchain works step by step
With data spread over several computers, blockchain functions as a decentralised distributed database that is impervious to manipulation. A consensus mechanism is used to validate transactions, guaranteeing network-wide agreement. Blockchain creates a secure, transparent ledger of transactions. Blockchain’s unchangeable record and data integrity make it perfect for supply chain management and cryptocurrency.
Security, transparency, and trust without banks or intermediaries are blockchain’s major benefits. Financial and healthcare companies that demand secure transactions benefit from its architecture, which eliminates fraud and errors. Blockchain streamlines procedures and improves accountability, increasing productivity and lowering costs.
Here are some examples of blockchain works:
Fundamentally, a blockchain is an open electronic ledger based on a peer-to-peer (P2P) system that allows users to freely share information with one another. In essence, it is a public ledger of completed transactions or digital events that have been shared between participating parties, or a distributed database of records. Imagine it as a record book, except instead of being under the jurisdiction of a single authority, all of the network’s users, or nodes, own identical copies of it.
The process of adding data, usually a transaction, to a blockchain is explained in detail below:
Transaction Initiation
A blockchain network user initiates a transaction by executing a smart contract or transferring cryptocurrency. This transaction is digitally signed by the user using their private key. This digital signature attests to the user’s status as the rightful owner of the asset or their authority to take action.
Broadcasting
The blockchain network, a peer-to-peer system of computers (nodes), then broadcasts the initiated and signed transaction.
Gathering and Validation
All network-broadcast transactions are collected and consolidated into a waiting space known as the pending transaction pool, or mempool. A subset of transactions is chosen from this pool by network nodes, especially those responsible for creating new blocks. Then, using the predefined rules of the blockchain, they confirm and validate these transactions. They guarantee, for instance, that the sender has the required cash and hasn’t already spent them (preventing the double-spending problem) in a cryptocurrency blockchain.
Also Read About Types Of Nodes In Blockchain: Full, Light, Mining And More
Block Creation
A block is created by combining the verified transactions. Data (the transactions), a distinct hash (similar to a digital fingerprint), and most importantly the hash of the block before it are all contained in each block. The chain is created by hashing these blocks together. The Genesis block is the very first block.
Consensus
The network’s nodes must concur that a new block is legitimate and ought to be the one after it before it can be formally added to the blockchain. We call this agreement process the consensus mechanism. Different blockchains use PoW or PoS consensus methods.
Mining (in PoW)
Proof-of-Work blockchains like Bitcoin employ mining to gain consensus. Publishing nodes, or miners, compete to solve a difficult maths problem. Besides adding their block to the chain, the first miner to solve the challenge usually gets cryptocurrency. This requires lots of computing power and resources.
Adding the Block
After consensus (e.g., when a miner solves the PoW problem), the new block is time-stamped and added to the chain. After then, it is transferred to every network node to ensure everyone has the latest ledger.
Confirmation
New blocks in the chain confirm transactions. Changes to transactions involve redoing work for that block and every block after it, which is costly and computationally challenging as the chain lengthens.
Also Read About The Blocks, Chaining, And Hashes Of Blockchain Architecture
This procedure creates an immutable transaction record, making the ledger tamper-resistant. A verifiable and auditable record is provided by this write-once, append-many technology. Without depending on a single authority, this system seeks to foster confidence among participants through decentralisation and consensus.