Blockchain

A general information about blockchain and what it is made up of

Overview

Blockchain technology is a highly secure, decentralized, and unchangeable system. It is composed of data records, called "blocks". Each block holds the record of a transaction (or even several transactions).

These blocks are linked to each other, in a way that each one depends on the previous one, using a unique signature called "cryptographic hash". Each block is therefore related to the previous block.

Block = Data (sender, receiver, and amount to be sent) 
        + Hash (the unique signature) 
        + Hash of the previous block 

This allows every user in the system to examine and confirm the blocks, ensuring openness, accuracy, and dependability. All transactions are checked and agreed upon by all users in the system, through "network consensus".

This makes a blockchain an online and transparent ledger system: hence, it is trustworthy in terms of security, integrity, immutability, and reliability.

Components of Blockchain

Genesis block

A Genesis block is the first block in a blockchain, known as "Block 0". It doesn't have a previous hash but generates a unique hash for the next block, starting the chain of blocks.

The second block uses the previous hash and produces a hash for the next block. This cycle goes on for as long as new blocks are added.

Hash

Each block has a hash, a unique signature, linking it to the next block. The hash is the result of a complex calculation based on both the hash from the previous block, the content of the current block, and a timestamp.

This way, transactions can be validated through their hash: if a block is been modified by a third-party, then the hash from the next block is not a reflection of the previous block anymore, and it is easy to see that a "hack" has been made.

Accounts

Accounts are digital records for managing cryptocurrency, allowing users to send, receive, and hold digital money (such as crypto coins or tokens).

An account is necessary in order to handle cryptocurrency.

There are two types of accounts:

1. Externally owned: this type of account can be operated and controlled by those having private keys. It's a free account through which transactions can be initiated.

2. Contract: this type of account is controlled by the code deployed on your network. A fee is charged as the contract runs on the external network, and charges are incurred for storage. You cannot initiate a transaction however, you can only send transactions against your received transactions.

Usually, both account types can transact and interact with smart contracts.

Transactions

Transactions are digital records of all activities in a cryptocurrency wallet, similar to bank transactions. They include details like the unique transaction ID, sender and receiver addresses, transaction value, and fees.

Gas fees

These are charges for completing transactions or running smart contracts on the blockchain. The fee varies and may increase if the network is busy

Gas fees, or "gas", are charges required to successfully complete a transaction or run a smart contract on the blockchain. It's also a remuneration given to the miners for checking and validating transactions on the blockchain.

The gas fee varies from transaction to transaction. For instance, you may have to pay more gas fees if the network is busy or loaded with a high volume of transactions on the block.

Nodes

Every computer attached a given blockchain network must agree on each new additional block and on the entire chain. These computers, called "nodes," ensure that everyone using the blockchain has identical information.

They use a special process to reach this agreement in a distributed way: a consensus mechanism.

Smart contracts

Smart contracts are digital agreements stored on a blockchain. They are sets of coded rules that execute actions when certain conditions are met. The action could result in exchanging coins or NFTs, for instance.

A smart contract is just a custom script that can be deployed in the blockchain. Most smart contract are written using the Solidity programming languages, which takes inspiration from Python, C++, and JavaScript.

Once set up, smart contracts generally can't be changed, but there are ways to update them with new features or fixes.

Mining

Mining is how new cryptocurrencies are made, and also how transactions are confirmed before being added to the blockchain. Using cryptographic calculations, nodes validate and secure each transaction on the blockchain. This ensures the security of the blockchain

Mining is done using powerful networked computers, called nodes, which are owned by "miners". Miners invest heavily in this process and, in return, earn rewards from the blockchain.

Uncle blocks, or Ommer blocks

Sometimes, two miners produce blocks at the same time. Only one block can be officially added to the blockchain; the others, known as "Uncle blocks," are not used.

Block explorer

A block explorer is a tool for viewing real-time activity on your digital account and the blockchain. It lets you check transactions, view data on blocks, and see other blockchain activities like cryptocurrency exchanges and mining.