Block and Key

Overview

Blockchain is data, stored in a way that means it cannot be changed in any way once it has been saved. The data is usually made up of transactions, but extra information can also be saved. It allows the owner of data to prove that it is owed by them, by using unique digital signatures.

Explain it to me Like a Child

Imagine you have a special notebook where you and your friends write down all the cool toys you trade with each other. Every time someone gives a toy to someone else, you all write it down in the notebook. But here's the fun part: once something is written in the notebook, no one can erase it or change it. This way, everyone knows who has which toy, and no one can cheat.

Now, imagine this notebook is magical and makes copies of itself so that all your friends have the same notebook. Every time a new trade happens, all the notebooks update at the same time. This way, everyone always has the same information, and no one can lie about who owns which toy.

This magical notebook is like a blockchain. It's a special way of keeping track of things (like toys or even money) so that everyone can see what's happening, and no one can cheat. It's like a super fair and super safe way to share and keep track of things with your friends!

So how does it work?

There is a special process that can be run on any digital data, which creates a "hash", like a fingerprint of the data. If you change just one letter in that data, the hash completely changes, which shows that it has been changed.

At the beginning, there is a block created with no transactions and no additional data, but there is enough data in the block to be able to create a hash.

After a set period of time, the next block is created. All the transactions that happened since the last block are grouped together ready to get their fingerprint.

Here's the clever part. The hash of the last block is taken and added to the transaction data. Then the hash of this is taken. Rinse and repeat!

Why is that clever?

Each block of data contains the hash of the previous block of data. This means that every block is linked to the previous one, creating a chain.

If you were to change just one letter, ANYWHERE in the chain, it changes the hash of that block, and therefore it will change the hash of every other block that follows.

Prove it?

The blockchain is stored on multiple computers around the world. Each "node" talks to the network of other nodes, and they make sure the chain is accurate. When the next block is created, they all share the hash of this new block, and they confirm it is correct by recreating the block themselves. If it is correct, then it is saved to the growing list of data. If it is not correct, they reject the block, and wait for the next node to find the block.

As long as enough nodes agree that the block is correct, all is well. There needs to be a majority of nodes confirming that the data is correct for the data to actually be saved.

Prove I own some data

To access the network and use it, you need to have a special digital "key". This key must stay with you and never be given to anyone else, or they will have access to your data. There is a smaller key that you can create from this private key, and that can be given to anyone.

Using your private key, you are able to take some data, and add a digital signature to it. This signature can be used with the sharable key to prove that the owner that signed it is who they say they are, without seeing your private key. This means they can be sure that the person signing the data owns the key to that shared key.

All transactions that happen are logged against this sharable key, therefore it proves that all of those transactions were made by the person.

Erm, you said this would be simple?

It is! Let's try a simple analogy. I have a wax seal. I send you a message, stamped with my seal. You know it's from me by looking at the seal, but you don't have access to my seal, so you can't pretend to be me. You know that any other messages with that seal will have come from me.

How do people make money?

Most blockchains are kept in operation by thousands of computers working away trying to solve complicated equations. When the problem is solved, it has a has which is submitted to the nodes to check it is valid. Once it is confirmed to be correct, the shared (public) key of that computer owner receives a reward in the form of an amount of coins.

These coins are a product of this blockchain only. They are needed to pay for the transactions that happen on the network, and so the more people that use the network, the more they want the coins, and the more their value increases. People can then sell these coins on the open market if they wish, for real currency or the currency of another blockchain.

Can I make money with this chain?

This is entirely up to the rest of the world. If someone wants to set up a way of trading our coins, then it may be possible.