HOW DOES BLOCKCHAIN WORK

You should know that the name “Blockcahin” was not an accident or mistake. This digital ledger is often referred to as a “chain” that’s made up of numerous “blocks” of data. As new and or fresh data is added to the network, a new “block” is created and attached to the “chain.” This process involves all nodes updating their version of the blockchain ledger to be identical.

The key here is the way in which these new blocks are created and why they are considered to be extremely secure. Its set up that a majority of these nodes must verify and confirm the legitimacy of any new data before a new block is permitted to be added to the ledger. For any cryptocurrency, they might involve ensuring that new transactions in a block were not fraudulent, or that coins had not been spent more than once. Thus making it different from a standalone database or spreadsheet, where one person can make changes without any oversight or standards.

After there is a majority confirmation the block is added to the chain and the underlying transactions are recorded in the distributed ledger. Blocks are securely linked together, forming a secured digital chain from the beginning of the ledger to the present.

Transactions are typically secured using cryptography, meaning the nodes need to solve complex mathematical equations to process a transaction. Each transaction typically has a code. That code has to be unlocked. Then these nodes/miners run thousands of potential combinations like that on a combination padlock to confirm the transaction.

Typically as a reward for validating and confirming these transaction there is a reward for their efforts in validating changes to the shared data, nodes are typically rewarded with new amounts of the blockchain’s native currency—e.g., new bitcoin on the bitcoin blockchain.

PUBLIC VS PRIVATE

It's important to note there are both public and private blockchains. Public blockchain allow for anyone to participate meaning they can read, write or audit the data on the blockchain. Notably, it is very difficult to alter these transactions logged in a public blockchain as no single authority controls these nodes.

On the other side a private blockchain, is controlled by an entity such as an organization or group. Only that entity can decide who is invited to the system plus it has the authority to go back and alter the blockchain. This private blockchain process is more similar to an in-house data storage system except spread over multiple nodes to increase security.

This leads me into the next area of interest and point.

HOW TO USE BLOCKCHAIN

Blockchain technology can and is used for many different purposes, from providing financial services to administering voting systems. Here is a list of the most common uses so far. Understand that we continue to use blockchain and it will evolve to do more.

Cryptocurrency

This is one of the most common uses of blockchain. Today it is the backbone of cryptocurrencies, like Bitcoin or Ethereum. When people buy, exchange or spend cryptocurrency, the transactions are recorded on a related blockchain. The more people use cryptocurrency, the more widespread blockchain will become.

“Because cryptocurrencies are volatile, they are not yet used much to purchase goods and services. But that is changing as PayPal, Square and other money service businesses make digital asset services broadly available to vendors and retail customers,” notes Patrick Daugherty.

Banking

Beyond cryptocurrency, blockchain is being used to process transactions in fiat currency, like dollars and euros. This could be faster than sending money through a bank or other financial institution

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