Blockchain 101: What is a Block? What About Chain?
Remember “Blockchain technology represents a potential 3%-10% cost savings on every good that uses it as a medium of exchange”
Most people hear the word Blockchain without any understanding that the word is actually a contraction. Block and Chain are the two symbols that are used to explain how this type of distributed ledger technology (DLT) works.
A “Block” is just a ledger of all transactions that occurred across a certain internet protocol in some duration of time. For Bitcoin it is approximately the past 10 minutes of transactions. For others, the block time can be a matter of seconds. When a block is released, it is signed using a cryptographic digital signature. Validation occurs by a number of competing actors called “miners”. These miners are racing to produce the correct answer to a cryptographic problem. (See – https://cryptomarket360.com/what-is-cryptocurrency-mining/ for more info on mining) Once this answer is found, they are rewarded with the native cryptocurrency that they are mining. This is often called “mining the block.” Before the transactions are put into the block, they are put into what is called the mempool, a decentralized data structure. The miners validate the transactions with the higher fees first. When validated, all of the transactions on the blocks become trusted to be true. Check them out at blockexplorer.io
The “Chain” part of the Blockchain is what truly makes the technology beautiful. Each block cryptographically chains itself to the past block that has been mined. This chaining makes it all but impossible for a bad actor to change any of the transactions and thus game the system. If they were to try to change certain transactions, they would have to change the transactions on the target block, plus all of the blocks that are cryptographically chained to this one… all the way up to the current block. The longer an attacker waits to change a transaction, the less likely it is for the transaction to be reverted
Blockchains can be set up to be basically un-hackable distributed ledger systems. There are huge economic penalties to hacking a blockchain. Namely that if a blockchain is hacked, the hacker would not see any benefit as the hack would be instantly known and the value of the native cryptocurrency would fall to 0. If you had the computing power, the system is set up to reward you by behaving according to the rules as opposed to exploiting the rules of the system and stealing funds from others. This model allows for efficient value transfer that we have never seen before. Instead of the internet being a medium of efficient data transfer, it turns the internet into a medium of efficient value transfer.