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Blockchain
What is Blockchain?
Blockchain is a decentralized and immutable digital ledger technology that records transactions across a network of computers. It's the underlying technology behind cryptocurrencies like Bitcoin, but its applications extend far beyond digital currencies.
Key Characteristics of Blockchain
Decentralization: No single entity controls the entire network.
Transparency: All transactions are visible to network participants.
Immutability: Once recorded, data is extremely difficult to alter.
Security: Uses cryptography to secure transactions and control the creation of new units.
Consensus: Network participants agree on the validity of transactions.
How Blockchain Works
The blockchain process typically involves:
Transaction Initiation: A user initiates a transaction.
Block Creation: The transaction is combined with others to form a block.
Verification: Network nodes verify the block's validity.
Chain Addition: The verified block is added to the existing chain.
Transaction Completion: The transaction is completed and recorded permanently.
Components of a Blockchain
Key components of a blockchain include:
Nodes: Computers that participate in the network.
Transactions: The data being recorded on the blockchain.
Blocks: Groups of transactions bundled together.
Miners/Validators: Entities that verify and add new blocks.
Consensus Mechanism: The process by which the network agrees on the state of the blockchain.
Blockchain vs. Traditional Databases
Comparing blockchain to traditional databases:
Structure: Blockchain is distributed; traditional databases are typically centralized.
Data Modification: Blockchain is append-only; traditional databases allow data modification.
Trust: Blockchain is trustless; traditional databases require trust in the central authority.
Transparency: Blockchain offers full transparency; traditional databases often have limited visibility.
Performance: Traditional databases generally offer faster performance for read/write operations.
Similar Terms
Distributed Ledger Technology (DLT): A broader category of technologies that includes blockchain.
Cryptocurrency: Digital currencies that typically use blockchain technology.
Smart Contract: Self-executing contracts with the terms directly written into code, often deployed on blockchain platforms.
Decentralized Applications (DApp): Applications that run on a blockchain network.