From the name itself, we can see that it is made up of two words. One is “block,” and the second is “chain.” These two words describe their meaning exactly as the term refers to a chain of blocks that contain a list of records representing transactions in cryptocurrency. The trick is that the chain contains only properly linked blocks. That means that each block contains information about the previous one.
So, what exact information is in the block?
When the block is created, it contains the cryptographic hash or a mathematical algorithm that maps the data out within the blockchain. The block is also filled with the encrypted “message” with the same algorithm. The encrypted algorithm is designed with a one-way function, making it practically infeasible to invert or reverse calculations. The ultimate goal is to make reverse operations at least economically unjustified. The block itself, however, is very easy to verify.
The block also contains a timestamp that contains the date on which the block was created and when the block was modified and the transaction date. The transaction date represents a hierarchical tree where every “leaf” on every twig or a branch line is labeled with the cryptographic hash of a data block. Every “branch” that is not a “leaf” is called an inner node or an inode. It is inscribed with labels of its child nodes. Such a hierarchy allows any data to be quickly and easily found and verified with a given sample.
Each block is added to a chain and reinforces the previous one. Thus, the blockchain becomes very difficult to modify as the once recorded data cannot be altered without changing the block itself and all subsequent blocks, which is again economically unjustified.
Moreover, the blockchains are self-checked on a peer-to-peer basis through a network and are distributed through nodes as a publically distributed ledger. Any retroactive alterations within one node are immediately rejected by the others.
Sometimes blocks can be created concurrently, causing a temporary fork. Additionally, a blockchain has a specified algorithm for scoring different versions, so one with a higher score can be selected over others. So, blocks that are not selected to be part of the chain may appear from time to time. They are called orphan blocks. The chain updates itself with a new version once a new block is added to it. Peers that support the blockchain only keep the recent highest-scoring version. Once there is an update, this version is transmitted to other peers.
Every 10 minutes, a new block is added to the Bitcoin blockchain, while Ethereum blocks are currently added every 14-15 seconds.
The first algorithm that may be considered as blockchain was proposed by the American computer scientist and cryptographer David Chaum in his dissertation back in 1982. The principles of chains of blocks were described in 1991, and the tree-like structure for data storage was embedded into the design in 1992. However, the first real application of the new technology only appeared in 2008 when decentralized blockchains were first detailed and realized in a Bitcoin blockchain in 2009.
The algorithm of the Bitcoin blockchain was improved by Satoshi Nakamoto, a person, or a group of people that are still unknown to this date. The improvement removed the required trusted party’s signature as now each block was timestamped. The difficulty parameter was also introduced to maintain the rate for each newly added block within the chain.
Blockchain technology is much wider and is not only applied to cryptocurrency. It can be used in any case where public control is needed or to verify consistency and accuracy. So, it could be utilized for all payments, for opening a registry of property, elections, or any other register needed to verify the identity of items and their owners.
Michael Domar, CEO TomiEx exchange and TEX coin