Wednesday, December 6, 2023

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    How the Blockchain Works: Technical Details and Nuances

    Before we consider the individual technical details, we will focus on the design of the entire system. This sequence of blocks is a chain, not a vicious circle or something else. Each block contains an array of specific data. And all the blocks are interconnected. That is, a new “array” can be created only after the old array is closed.

    We have come to the main technical point – the formation and closure of blocks. As can be seen from the figure above, each link in the chain contains a specific key. Until it is decrypted, the block (link) will not close. How does this decoding happen? In the cryptocurrency, mining is responsible for this. Cryptocurrency miners do this with the power of graphics cards and processors. Those in turn perform computational operations, the main purpose of which is to search for a cryptographic signature to the block in the form of a hash. As soon as it is picked up – the block is closed. And the miner receives a reward in the form of cryptocurrency.                                                                                                                                                                

    The authors of the book How the technology behind Bitcoin changes money, business and the world have tried to characterize the principle of the blockchain’s work with the words understandable to an ordinary person:

    “Bitcoin or another cryptocurrency is not stored in any file. Transaction information is in a global, publicly accessible database – Blockchain. It confirms and accepts the operation of this large P2P network. The whole chain is distributed: it is supported by computers around the world. There is no central server to break or hack. The blockchain is public and very reliable at the same time, as it uses encrypted data.”

    The functioning of the blockchain and its security is ensured by miners and other participants of the blockchain. They are also called nodes or nodes. There are full nodes. By them are meant miners and ordinary users of full-fledged wallets. This means that they have the full version of the blockchain on their computer or other device. Its volume is constantly growing. If in 2015, the year it occupied 35 gigabytes of memory, in 2017 it is more than 100 and many more now in 2019. Because of this, the number of full-fledged nodes began to decline. An example of a full wallet is Bitcoin-Core. The number of full nodes in the Bitcoin blockchain can be viewed on the Cosmos Validator.

    The more active full nodes in the blockchain, the faster the transaction information is processed. The blockchain would seem to manage to combine the incompatible. It is very reliable and decentralized at the same time. All participants supporting the work of the chain are equal. There is no server or any processing center here. It turns out that the whole blockchain is not built on trusting relationships. For there is no guarantor, at first glance. However, in essence, the guarantor is every blockchain user. Decentralization of the network allows data transfer between entities representing different countries, jurisdictions simply by agreement between each other. Directly. Without any intermediaries or regulators. Blockchain is built so that operations cannot be blocked.

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