What is the Blockchain and How It Works

What is the Blockchain?

Today everyone is talking about the blockchain, but not very many people know what it is. To make it clear, blockchain is a platform and a technology that enables any data base to run on it. So when people think that Bitcoin and blockchain is the same thing, that’s not true. Bitcoin is the first successful application of the blockchain in the world. And others followed suit.
The First Blockchain Principle 500 AD
The first blockchain principle that was used in human history, as early as 500 AD, was the Rai stone of the Island of Yap, an island located in the Caroline Islands of the western Pacific Ocean 1,200 miles east of the Philippines.
Rai Stones, or stone money, are large, circular stone disks carved out of limestone formed from aragonite and calcite crystals. Rai stones were quarried on several of the Micronesian islands, mainly Palau, but briefly on Guam as well, and transported for use as money to the island of Yap. They have been used in trade by the Yapese as a form of currency. The monetary system of Yap relies on an oral history of ownership. Because these stones are too large to move, weighing 4 tons, buying an item with one simply involves agreeing that the ownership has changed. As long as the transaction is recorded in the oral history, it will now be owned by the person it is passed on to and no physical movement of the stone is required. It was only used by tribal chiefs, elders and the wealthy.

Verify Transactions

When the transfer was about to happen, the entire community gathered together to witness the transaction. So the stone was not moved, and the transfer became common knowledge. So nobody could later dispute that the transfer did not happen. All who witnessed the transaction were able to later verify that the transaction took place. And that is exactly how the modern blockchain works today.

Blockchain: Distributed Data Base

Blockchain operates as a distributed data base, and each participant holds the exact same copy of the blockchain, and they are all synchronized, so you cannot compromise it, you cannot delete it, because you could delete all copies, but if only one user has a single copy of the blockchain, he can restore the entire system. That is the basic advantage.

Why Is It Called The Blockchain?

Because all transactions are locked in blocks, and all blocks are chained to each other. All transactions in a block have a limited time frame before they are locked in. For example Bitcoin is 10 minutes, and OneCoin is 1 minute. When the block is open, all transactions in that time period are recorded. After that, the block is closed, and a new one opens. And blocks are connected to each other by a unique hash function. (A hash function is any function that can be used to map data of arbitrary size to data of fixed size. The values returned by a hash function are called hash values, hash codes, digests, or simply hashes.) And each block can only build onto the hash function of the previous block. No blocks can be added in between. They cannot be removed and cannot be changed. Once the block is closed, that’s it. That’s the primary advantage.

How the Blockchain Works?

When someone wants to make a transaction, the block is either created or already existing. When the user makes a transaction, it is broadcast to the entire network. And if the network recognizes the user has enough coins in his account to make the transaction, it is approved and the transaction is sent. If he doesn’t have enough coins, the transaction is automatically declined. After the end of the block time, the block in which the transaction is contained is closed, and the receiver gets the coins. In most cases that takes less than a minute when it comes to newer Digital Currencies. In Bitcoin for example it lasts 60 to 90 minutes. If you want to send money through the banking system to the other side of the world, that will take days. This is what bankers could not understand in the beginning. Now they are catching up.