ave to be that way. Because blockchain applications incredibly vast and powerful, the technology can seem quite mysterious and confusing. The thing is, the underlying technology is actually quite simple.
A Chain of Blocks
Blockchain is a series of transactions referred to as “blocks.” Each block contains all of the information and data about one transaction, a hash. It also contains the previous block’s hash. A hash is a code that acts as the fingerprint of the block, it is completely unique to that block and changes each time the data of the transaction is altered.
Because each block contains the hash from the previous block, they can build on top of each other, forming a chain. If someone changes one block’s data, this will make the following blocks invalid since the hashes will no longer match. In which case, the change will need to go through a validation process.
This system is what makes tampering with blockchain information almost impossible. Blockchain is merely a string of chronological transactions, each referring to the last and owning a piece of the previous. If someone or thing wishes to conduct a transaction, they don’t personally edit a block or chain, they submit a request to the peer-to-peer network to be checked, validated, and approved.
Peer-to-Peer (P2P) Structure
More specifically, a P2P network moderates blockchain information. This model distributes authority and responsibility among countless nodes to eliminate bias and error.
The network is built on computers nodes that validate and relay the transactions to the blockchain. Every node acts as a blockchain network administrator and has opted to do so voluntarily. It is like a community watch that protects and manages blockchain information. The transactional data contained within it is verified by millions of computers through a process we call “mining.”
If a new transaction is made or a block is added, all nodes in a network must come to a consensus before it is validated. The Peer-to-Peer structure of the blockchain creates across-the-board accountability as both everyone and no one controls it. Blockchain information necessitates collaboration, meaning that it has no hierarchy.
Imagine blockchain technology as a democratic approach to validating, managing, and circulating the abundance of information we produce daily.
Consensus mechanisms allow a P2P network to work harmoniously without anyone having to trust or even know one other. It operates on a consensus mechanism which has a set of rules to moderate the adding of blocks, assess the validity of blocks, and form conclusions about what is and is not true based on an algorithm.
The collective accountability of the consensus mechanism is what makes blockchain information trustworthy and virtually unalterable. Only in the case of a 51% attack on blockchain could an attacker modify transaction information. As these networks continue to grow, this amount of ownership is increasingly unlikely.
Proof of Work (PoW)
One of the blockchain’s consensus mechanisms is Proof of Work (PoW). The primary goal of the Proof of Work is to make it harder to create invalid blocks. The PoW is hard to produce, but simple to verify. This type of equation makes it easy to check whether the information is valid. To create a new block, miners complete a PoW which includes all of that block’s data. The first miner to solve the problem receives a reward.
In essence, PoW controls the speed at which miners can create blocks. For example, miners can only create a Bitcoin block every 10 minutes. This controlled speed also protects the blockchain from hackers. It ensures that each transaction connects to the previous one and the next.
Proof of Stake (PoS)
Proof of Stake is another means to validate transactions and come to a consensus. PoS and PoW have the same objective but function differently.
By comparison, PoS awards the creation of the new block depending on wealth, meaning stake. Miners in a PoS system are “forgers.” Rather than winning a block reward, forgers receive transaction fees once they’ve completed their task. 