How Do Blockchains Work?

1. Structure: It’s a chain of blocks, where each block contains a list of transactions, a timestamp, and a cryptographic hash of the previous block, linking them securely.

2. Decentralization: Instead of being stored in one central place (like a bank’s server), the ledger is distributed across a network of nodes (computers), each holding a copy.

3. Security: Transactions are verified by network participants (often through consensus mechanisms like proof-of-work or proof-of-stake) and secured with cryptography, making tampering extremely difficult.

4. Immutability: Once a block is added, it’s nearly impossible to alter without changing all subsequent blocks, which requires consensus from the network.

5. Uses: Beyond cryptocurrencies (Cardano, Bitcoin or Ethereum), blockchains are used for smart contracts, supply chain tracking, identity verification, and more, due to their trustless and transparent nature.

Blockchains record unchanging records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data, also called a block, are secured and bound to each other using cryptographic principles, called a chain. Why are blockchains safe and reliable you may ask? One party initiates the transaction process by creating a block. This block is verified by millions of computers distributed around the internet. The verified block is then added to a chain, which is stored across the internet, creating not just a unique record, but a unique record with a unique history.

This means that all data collected is one of a kind and storing different information compared to another, so there can never be a duplicate. Falsifying a single record would mean falsifying the entire chain thus destroying the trust that has been placed into this encryption. Fortunately, that is virtually impossible. Bitcoin uses this model for monetary transactions, but it can be deployed in many other ways. Hence why Bitcoin was able to be so valuable during its peak of popularity.

Blockchains are broken down to a science as it is impertinent that the identity of people and devices remain confidential. This is where cryptography plays a part as it is a mathematical method of doing just that. Hackers always seem to find a way to illegally access your confidential information when you least expect it. For instance, there is always a possibility of them gaining access to your credit card information when you use it online. To remedy this, one digital key ensures only you can enter a transaction to the blockchain involving your assets, and another digital key lets someone else confirm that it was you who added the transaction.