What is Blockchain?
In this article, we are going to explain in very basic terms what Block Chain Technology and how it works so that you can even explain this to a 5 year old.
First let us start with a Block? A Block is basically a bunch of data which can be anything or a collection of records brought together in a storage unit. For a Blockchain like Bitcoin, this data is simply a list of transactions that are happening on the network. For ethereum, it is a list of transactions or smart contracts and for many other coins out there, their data is usually based on what the coin does. For example; the MUDA Token, our block data is essentially going to be all transactions happening on the MUDA CEX and the MUDA DEX.
We call this record of data a ledger, because it a record of value exchanging hands. Note that each block in like blockchain has a limit of record that can be included in a block. In Bitcoin for example, you can have up to 1500. What happens to the block when it becomes full? we need to add it to the network and we do this through a process we call Mining. since Ethereum and Bitcoin are POW networks, we have to prove that we mined it. This brings us to a something we call a Hash.
What is a Hashing Function?
A hashing Function is a system that converts any form of data into a hash. Hash is string of random numbers that are created using a hashing function. There are many types of Hashing Functions and the Bitcoin blockchain uses the SHA-256, a Secure Hashing Algorithm that creates 256 characters. The great thing about Hashes in data encryption is that you cannot see its input and you have to guess it. This makes it a very secure form of data storage. Another great factor about Hashes is that when you try to change its input, it will change the Hash drastically, making it great for Data integrity and Immutable. Hash also takes time depending on the size of data.
The next thing to know about the blockchain is that it is decentralized. Looking at the hospital data, only your Doctor and the hospital have access to the data, only them can change it. In a decentralized system, many people have access to this data. Imagine if all your classmates were able to see your answers anonymously and grade them while you can also see everyone else answers and give them a grade, then you all vote on the grade you get and not only your teacher has access to this. With decentralization, anyone can have access to the bitcoin network, mine and vote on the network. So how do we make sure that someone doesn’t make fraudulent transactions and steal from the system?
In Bitcoin, whoever solves the Block and finds the Magical Hash gets to input the transactions in the block and get paid in bitcoin, in addition they also add the Hash of the previous block and that hash is used to calculate the hash of the new block and this forms the CHAIN Mechanism. Since each new block is based on the previous block. Referring back to our example about Changing a Hash’s input will make it change drastically , When You go back and try to change the hash of an old block all the blocks after it will change too. So that someone doesn’t go back and add more money to their account in this sense whatever gets added to the blockchain is written down in history forever because it can’t be changed.
So why would anyone want to be part of this system, why would you do your teachers’ work of grading the papers. One word Reward. You get paid to participate in the network. For Mining Ethereum you get paid in Eth and in Mining Bitcoin you get paid in Bitcoin.
In a nutshell, we have blocks that consist of data, and we need to get a Password/Hash of the block by mining/guessing it and Connect it to the previous Hash of the block and this forms a chain and that’s what a Block chain is.
MUDA is a Technology Company that is leveraging blockchain technology to build next generation business solutions in the crypto space. From the OTC Exchange, DEFI Platforms and an NFT engine, we are changing how crypto is defined on the continent.
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