Written by Emaad

On April 17, 2020

What is a blockchain?

What is a blockchain?

Distributed ledger technologies are based on a concept known as blockchain. The term “blockchain” refers to the basic structure that is a chain of blocks. The “block” in a blockchain is where transaction records or various pieces of information are kept. Blocks are “chained” together using cryptography & decentralized consensus mechanisms such as PoW (Proof of Work), PoS (Proof of Stake), or hybrid PoW/PoS.

What are blocks?

Blocks are essentially files where transactions or information are recorded. They serve as the universal ledger for all users transacting on the network. In the case of the Bitcoin blockchain, new blocks are initiated every 10 minutes, a concept referred to as “block time.” As users across the network transact, the current block fills up with transactions. Blocks have a limit to the amount of transactions they can contain, as defined by the block size. Bitcoin’s block size is 1mb while individual transactions are approximately 250 bytes in size.

This combination of block time and block size creates a rate-limiting mechanism on the performance of the network. Users must pay fees in order to be included in the next block if they want transactions to be accepted and confirmed by the network. If network usage is high, then they can also expect demand for block space to follow. As often experienced on the Bitcoin blockchain, transaction fees see sharp increases during high demand periods as users bid to have their transactions included for processing. This market for block space is referred to as the “mempool.”

What is a block header?

Each block contains a set of metadata that creates a unique identifier for itself. This metadata is contained within the block header. Metadata included in a block header can differ across implementations. On the Bitcoin blockchain, the block header contains the Bitcoin version number, previous block hash, Merkle root, block timestamp, target block difficulty, and a nonce value used by miners.

How are blocks “chained” together?

By chaining blocks together using cryptography, a blockchain is created. Block header commitments provide binding agreements to key pieces of information using cryptography. The particular piece of metadata that chains a block to another is the hash of the previous block that is lower in block height. Security of the previous block’s hash is guaranteed by the collective hash rate of the network. Therefore, by linking the previous block to the current block using a cryptographic commitment on the block hash itself, animmutable, tamperproof link between the blocks is created, resulting in a blockchain.

Other blockchain lessons:

The history of money

The history of money

What is money? Money is a technology that has been as essential to the development of civilization as the wheel itself. Money is any good that is widely accepted as a medium of exchange during the transaction of goods and services. It facilitates commerce by serving...

What is cryptography?

What is cryptography?

What is cryptography? Cryptography is the study of secure communications. The etymology, or word origin, reveals much of the meaning behind the word. “Crypto”- is the Latin prefix for hidden or secure, while “graphy” means writing.  In computer science, cryptography...

What is a smart contract?

What is a smart contract?

What is a smart contract? Smart contracts are computer programs that run on the blockchain. They are digital agreements encoded or written, with specific sets of rules that govern how and when the contracts will be signed, much like traditional contracts that are...

What are nodes?

What are nodes?

What is a node? A node is essentially a computer on the blockchain that runs network software to recognize and broadcast valid transactions. Nodes communicate which each other and reach consensus, or a common agreement, as to which transactions are legitimate. When we...

What is a consensus mechanism?

What is a consensus mechanism?

What is a consensus mechanism? Consensus refers to the act of coming to an agreement among individuals or groups. A consensus mechanism is the method by which decentralized networks agree on which transactions are valid before being confirmed as legitimate across the...

What is Proof of Work (PoW)?

What is Proof of Work (PoW)?

Proof-of-Work is the original consensus mechanism that is utilized by the Bitcoin blockchain. Bitcoin’s decentralization refers to the global network of nodes and miners that is responsible for broadcasting and confirming valid transactions; they are not controlled by...