How does a blockchain work – Simply Explained

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Blockchains are incredibly popular nowadays. But what is a blockchain? How do they work, what problems do they solve
and how can they be used? Like the name indicates, a blockchain is a
chain of blocks that contains information. This technique was originally described in
1991 by a group of researchers and was originally intended to timestamp digital documents so
that it’s not possible to backdate them or to tamper with them. Almost like a notary. However it went by mostly unused until it
was adapted by Satoshi Nakamoto in 2009 to create the digital cryptocurrency Bitcoin. A blockchain is a distributed ledger that
is completely open to anyone. They have an interesting property: once some
data has been recorded inside a blockchain, it becomes very difficult to change it. So how does that work? Well, let’s take a closer look at a block. Each block contains some data, the hash of
the block and the hash of the previous block. The data that is stored inside a block depends
on the type of blockchain. The Bitcoin blockchain for example stores
the details about a transaction in here, such as the sender, receiver and amount of coins. A block also has a hash. You can compare a hash to a fingerprint. It identifies a block and all of its contents
and it’s always unique, just as a fingerprint. Once a block is created, it’s hash is being
calculated. Changing something inside the block will cause
the hash to change. So in other words: hashes are very useful
when you want to detect changes to blocks. If the fingerprint of a block changes, it
no longer is the same block. The third element inside each block is the
hash of the previous block. This effectively creates a chain of blocks
and it’s this technique that makes a blockchain so secure. Let’s take an example. Here we have a chain of 3 blocks. As you can see, each block has a hash and
the hash of the previous block. So block number 3 points to block number 2
and number 2 points to number 1. Now the first block is a bit special, it cannot
point to previous blocks because it’s the first one. We call this the genesis block. Now let’s say that you tamper with the second
block. This causes the hash of the block to change
as well. In turn that will make block 3 and all following
blocks invalid because they no longer store a valid hash of the previous block. So changing a single block will make all following
blocks invalid. But using hashes is not enough to prevent
tampering. Computers these days are very fast and can
calculate hundreds of thousands of hashes per second. You could effectively tamper with a block
and recalculate all the hashes of other blocks to make your blockchain valid again. So to mitigate this, blockchains have something
called proof-of-work. It’s a mechanism that slows down the creation
of new blocks. In Bitcoins case: it takes about 10 minutes
to calculate the required proof-of-work and add a new block to the chain. This mechanism makes it very hard to tamper
with the blocks, because if you tamper with 1 block, you’ll need to recalculate the proof-of-work
for all the following blocks. So the security of a blockchain comes from
its creative use of hashing and the proof-of-work mechanism. But there is one more way that blockchains
secure themselves and that’s by being distributed. Instead of using a central entity to manage
the chain, blockchains use a peer-to-peer network and anyone is allowed to join. When someone joins this network, he gets the
full copy of the blockchain. The node can use this to verify that everything
is still in order. Now let’s see what happens when someone creates
a new block. That new block is send to everyone on the
network. Each node then verifies the block to make
sure that it hasn’t been tampered with. If everything checks out, each node adds this
block to their own blockchain. All the nodes in this network create consensus. They agree about what blocks are valid and
which aren’t. Blocks that are tampered with will be rejected
by other nodes in the network. So to successfully tamper with a blockchain
you’ll need to tamper with all blocks on the chain, redo the proof-of-work for each block
and take control of more than 50% of the peer-to-peer network. Only then will your tampered block become
accepted by everyone else. This is almost impossible to do! Blockchains are also constantly evolving. One of the more recent developments is the
creation of smart contracts. These contracts are simple programs that are
stored on the blockchain and can be used to automatically exchange coins based on certain
conditions. More on smart contracts in a later video. The creation of blockchain technology peaked
a lot of people’s interest. Soon, others realized that the technology
could be used for other things like storing medical records, creating a digital notary
or even collecting taxes. So now you know what a blockchain is, how
it works on basic level and what problems it solves. Want to learn how you can implement a simple
blockchain with Javascript? Then checkout this video here. And as always: thank you very much for watching.

100 COMMENTS

  1. Hmm wenn ich das richtig verstanden habe ist der Bitcoin der Tode nah?
    Sagen wir so, ich habe Folgendes verstanden…

    Der Bitcoin ist auf 21 Millionen begrenzt.
    Die meiner dienen zu Sicherheit der Translation und erhalten für das Lösen der richtige Aufgabe Bitcoins, wo durch neue Bitcoins entstehen.

    Nun, aber wenn die meiner so viele Bitcoins ergestellt haben = 21 Millionen dann gibt es auch keine Belohnung mehr da das Maximum erreicht wurde, heißt also das die meiner alle offline gehen…
    Wie gehts dann weiter?
    Dan muss einer ein mega Rechner aufstellen und hohe gebühren für die Translationen nehmen?

    Den die sicherheit ist bis dorthin sicherlich lange nich gewerleistet, grade wen es quanten computer kommen, die in secunden… die hash geknackt haben.

  2. omg i just met this great hacker whos is on a promo looking for followers and pays u 1k dollars for hyping and following them all u have to do is sign up on blockchain and verify the account and u recieve a 1k dollar worth of bitcoin DM him asap @hack_takeover

  3. It was all like a joke to me when allen recomeded qiaug to me and he flipped my PayPal account …couldnt believe it all …you guys could try him up on whatsapp +1845-293-3085

  4. You are such an amazing hacker and best in All types of hacking stuffs..why not try him on his whatsapp +1845-293-3085 and thank me later

  5. Thanks you so much QIAUG I really appreciate all your efforts towards my life you really amazed me I can’t thank you enough and I will keep thanking you forever you hack 8BTC on my blockchain wallet WhatsApp +1845-293-3085

  6. This is a necromancer and selling baked air. It's has no value without backing up with the real money. But gold or silver isn't back up. They're the universe monetary value money.

  7. Great explanation, I would appreciate it more if you put a lot more emphasis on how best to make money off the Blockchain platform, Bitcoin Mining for example is a great way to make money off the Blockchain platform..

  8. Great video.. I can't express how gratitude i am for blockchain and putting my ass on the line with it. This is literally the future. I don't care what any body says, it's changing millions of lives. And if you miss out on an opportunity like this, then good luck waiting another decade or so for another discovery to get in on early.

  9. Hi one thing I didn't understand: Why would a hacker recalculate the other blocks after tempering a block? At first I thoguht it was about finding a hash collision but it seems something else is at play here. thanks

  10. Apart from writing your own Java Code, is there any decent Blockchain software out there? Or would you need to hire a Blockchain engineer, if you were attempting to produce a project utilizing Blockchain technology??

  11. Listen to the electrical engineering nerds trying to take credit, and profit, from the very basic mathematical premise of "SHOW YOUR WORK!".
    But many people lie, cheat or misread, don't they? So the inherent premise that the information will be intact, accurate and valuable (particularly in a world full of hackers and trolls) is weapons-grade Absurdium.
    Expect a lot of junk and noise.
    This sounds like communist currency.
    Wtf.
    No thanks, I'll bet on physical entities instead.

  12. This is quite needful but for beginners, we shouldn't settle for videos alone, we should Be prepared to contribute. Sure, there are already financial analysts and PhDs that have shelled out theories and ideas for years, but that doesn’t mean you can’t contribute.

  13. Very good indeed. I still am a bit foggy about the "Proof of Work" part. One of the things mentioned is that a bitcoin will take "10 minutes minimum" to validate the next block – are we talking about existing or new (minted) coins. And before getting to long winded I realize I have not watched your next video, which might explain it more. Thanks very much.

  14. sir could you pls explain how can we update the previous hash of a particular block, when the data in the previous block is updated

  15. 1doubt
    In future we're going to have our brains stored in a computer.
    Because of it's electrical form, it is very much possible that any hacker will get access to our brain and be able to control it.
    Could this block-chain technology be used as to protect our brains from any kind of hacking ??

  16. BITCOIN DOUBLING

    Thanks to (Rickmorrow30 on IG) on Instagram.. He did a hacked transfer for me and sent me over 500btc he is very legit and reliable

  17. If you cannot explain something simple enough for everyone to understand, then you have not understood it well enough. Great video.

  18. so im a little confused on why block-chain would be preferred instead of current banking,amazon, etc. Is the security of the transaction the sole reason pushing people to blockchain?

  19. My brau, this is absolutely the best explanation of blockchain I have ever seen. The problem with others is that they have not actually done it, I’m guessing!

  20. My brau, this is absolutely the best explanation of blockchain I have ever seen. The problem with others is that they have not actually done it, I’m guessing!

  21. Awesome explanation! My lucky day that I needed to understand blockckains and came upon your video first. I am now a subscriber 🙂

  22. hi, thanks for your help but my question is that how can we store medical records or e-notary files and retrieve them when we need if the block is hashed? and we know that the hash function is a one way function, i would really appreciate any help

  23. So what does he mean when he says “anyone can join” and “it’s a p2p network”
    How does someone “join”? Is this blockchain stored on someone’s hard drive or in the cloud or what? I’m having trouble understanding where this information of the blockchain is being stored

  24. Honestly i like this video man .You can still make so much money despite the current fall in bitcoin .For me,I knew the price will run up more, then bleed off and go lower than current lows… Then as it goes higher, Its more like a time pattern , so i am sure that bitcoin will rise, for now all we need to do is invest what we’re Hodling and make more profit, So we don’t feel the lost in fall of price when it happens again, i stumbled upon a comment of someone who helped in increasing of Portfolio of a lady from having *4BTC to 10BTC in two months, i So i contacted him even though I was skeptical, Behold I have made 2Btc in 1 month with his working strategies, if you have lost so much during fall or want to increase your portfolio like me, Reach him on Email [email protected]

  25. Great vid, thank you. Just one question, you mention at 4:02 "the note" is this slang for a person who is acting as a digital notary?

  26. Just discovered it! For anyone else wondering, "Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes (points in a network or diagram at which lines or pathways intersect or branch)."

  27. So if there are at least 51% of the peer can control the network, then the peer can 'force' to temper block and make everyone in concensus?

  28. Don't put all your eggs in 1 basket. Bitcoin will always be around because of the coin exchanges and its own blockchain. I Ran into a video in Feb Early this year, I found so many people showering Accolades to a man named Larry Abdelnour who has made a great Impact to so many young crypto investors since last year, some said he has the best strategy to trade Bitcoin,I was tired of Gdax and Binance small profits i was getting, so I reached out to him and he gave me the best tips to excel in the world of Crypto. Now I don’t just Hodl, I make more Gains, after 3months I can Boast of increasing my Portfolio from 4Btc to 19Btc*, all Thanks to Larry’s Almighty Formula for Trading, Y'all can reach out to him through his, and Mail * *([email protected])

  29. 4:13 HOW do they verify it hasn't been tampered? This is the key to chainblock and you went right over it as if nothing….

  30. If the disasters hits or electricity taken down, all your savings disappear. Who will benefit, of course bankers.All this technology is scary. Only few goes for this, most don't understand and don't needed it. Most population live from paycheck to paycheck,that's why they don't need it, and feel best when they have cash in their hands.Any way it takes decades to get used to it.

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