Blockchain-ABC

A blockchain can be used in many different areas. We will illustrate its functionality with the help of the most well-known blockchain in the world, the Bitcoin blockchain.

It is a concatenation of so-called blocks. A block is made up of three main components. Firstly, the information of the transactions, and two hashes. In simple terms, a hash is a unique combination of numbers and letters that is assigned to a block. Each block contains the hash of the previous block and the current one.

This creates a chain of the individual blocks to the blockchain. Therefore, it is also easy to see why the change of a block affects the entire blockchain. Within this system, there are so-called transactions. These contain a wide variety of information, such as sender, recipient and amount of Bitcoin to be sent. In the so-called mempool, any number of transactions are waiting to be included in a block.

There is only limited space available within such a block, and the transactions are included one by one. Thus, new blocks have to be found again and again in order to process the transactions. In order for a new block to be made available, someone must, simply put, "solve a math problem." Of course, it is not quite that simple. Rather, it is a highly complex arithmetic problem, the solution of which paves the way for a new block. Many miners work on a calculation task, but these are not people, but machines (asic miners) that have been specially manufactured for this purpose and are operated by people. A competition arises among the miners; the first to solve the task is allowed to write the transactions in the next block and in return receives a reward for his work in the form of Bitcoin. This process of "finding the key" is called the "proof-of-work mechanism", better known as mining in the Bitcoin blockchain. The miners are only one part of the network. In addition, there are other nodes as well. After a miner has solved the computational problem or has provided proof of it, the block is presented to the nodes. Only if all nodes accept the block, the block can be attached to the blockchain. The Bitcoin Blockchain is therefore a decentralized ledger system. The blockchain technology thus makes it possible to store digital transactions in a long-term and forgery-proof manner.

Once a block has been attached to the blockchain, the search for a block starts again from the beginning, which takes about 10 minutes.

There is always a different number of miners working on the computing tasks in the Bitcoin network. In order for the search for a new block to take an average of 10 minutes, it is necessary to adjust the difficulty of the tasks to the number of miners.

For example, the difficulty of the task is lowered if there are only a few miners in the network.

If you want to go deeper into the matter, you can find the Bitcoin whitepaper linked below.

The Bitcoin Blockchain is just one application of a Blockchain. Basically, you can create so-called "smart contracts" with the help of a blockchain. But so much for now about the Blockchain.