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What is blockchain and how does it work

Wladimiro Navarro, Sales & Marketing Manager at Addalia

Now that we know how blockchain sprung and where it comes from, lets go through what is this model. There are many definitions to what blockchain is. It's a distributed database because the information is not in one computer but in all the ones that participate in the web. It's also a distributed ledger, because the registers are spread out and replicated on the web and not within a unique system.

Blockchain, as its name suggests, is a chained succession of records packaged in blocks. Each block contains a hash generated from its content and the hash of the previous block. That is how the chain is formed. This way of chaining the blocks makes it vulnerable to minimal alterations. Even if just one byte is modified it will affect all the following blocks and this will lead to a wrong result in the hashes. This mechanism secures that the information can be verified and audited easily by anyone but it cannot be modified. That is what secures its immutability.


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The blocks in the chain are replicated in all the nodes that participate in the web. This way if anyone wanted to hack the web, they would have to erase or replace the information on each node unlike in independent models, in which a hacker can mock the security system and alter the information that is used by the whole web.

Any new transaction that is added to the web has to be ratified by the nodes, executing what we know as proof of work. A proof of work involves resolving a complex mathematical problem that requires high skill to be resolved, but it's easy to check if the result is correct. The result is added to the block. This makes it harder for someone to alter the content of a block because in order to be able to modify the information they would have to resolve the proof of work of the block that they want to alter but also all the following ones. Since the time that it takes to resolve the proof of work is higher than the time you need to add the following block, it is impossible to do.


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The nodes that resolve the proof of work are called miners. When a miner resolves the proof of work of a new block, it adds it to the block, it spreads it to the other nodes, which verify the result, and it receives a reward. In the case of Bitcoin, it gets new bitcoins and the taxes of the transactions that each block contains. Adding transactions has a price, not only to reward the miners that keep the web working but also to prevent a possible hack attack in which a hacker could block the web by launching thousands of transactions. This happens on the Internet that is known to us. The hacker would go bankrupt before they could congest the web.

Blockchain transactions are public and anyone with access can check and transaction. At the same time the addresses that are used are encrypted and are not related to the owner. The only person that can command any kind of operation from that address is the one who knows the private password. That secures the transparency of the model as well as the privacy of the operations.

In conclusion, blockchain is a technological architecture that allows us to build records in a collaborative, transparent manner where no one controls the information or the process; it`s unalterable without community consensus, and at the same time it guarantees the confidentiality of the participants.

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