The word "Blockchain & Web3" has been a buzzword for quite sometime and although it may seem a little buried underneath the AI hype, the technology is growing exponentially and the ecosystem becoming better by day. However, many people still don't understand what this technology and consequently are unable to utilize it effectively or even at all! In this series, I will walk you through the space, all there is, all there have been and perhaps even all there will be! However, today we are going to go through the very foundations of the technology: what a Blockchain is and explore the key underlying technologies & terminologies.
To start with, a block is just a bunch of data, more accurately a collection of records.On the earliest & very first Blockchain, Bitcoin it consists entirely of a list of transactions, `Alice sent bob $100, Bob sent John $20`. Blocks have limits, i.e on Bitcoin', it is 1500 transactions though this number periodically varies. When a block limit is reached, we say we have a full block. When full, it is added to the Network through a process called mining.
Bitcoin miners use a hashing function to determine the next block.Think of a hashing function like a magic box which when given an input, outputs a hash, a form of 0's & 1's.Note that a slight change in the input value, completely changes the output. Calculating a hash, requires time and computing resources, depending on the size of the hash.When someone says they are mining BTC, what they are actually doing is using computer programs that try to add random numbers to whatever block it is so that we can get a special ending.
Over to the biggest elephant in the room, why is it called a Blockchain?. In the Bitcoin Network example, whoever solves the block as we previously explained, adds to the block a transaction that their wallet received a specific predetermined number of Bitcoin for mining that particular Block, consequently creating new Bitcoins. They then add the hash of the previous block to the new block and use it to calculate the hash of the new block, making it a chain. If anyone goes back and edits a transaction in any of the mined blocks, the hash of each block after the block tampered wit changes, this way it is malicious activity is easily detected and the tampered with block 'discarded' making the Blockchain immutable.
Another Critical concept to think about is decentralization. This is upheld by the fact that transactions on a Blockchain are completely transparent, anyone can view the transactions and participate in the Network. No single entity or individual runs, controls or has autonomous power over the Network. It is run collectively by participants and every Blockchain contains a reward for participation and putting in good votes.
Note that Whereas this is good for things like transactions, but not so friendly for things like copyrighted or embarrassing stuff.Blockchains mostly handle transactions and well, others like Ethereum have extended capabilities to handle Smart Contracts.
Here is a link to a video that goes even further.
Follow our series to learn more about Blockchains, web3, Smart Contracts, Crypto & even on where to find the best resources to dive deep into each of the topics.