So in our previous post we covered what is web3 so today lets talk about Crypto basics.
What is a blockchain?
Blockchain is an immutable, digital ledger that facilitates the process of recording transactions and tracking assets in a network; it is updated and shared across many computers in a network.
How does a blockchain work?
Each transaction that occurs is recorded as a “block” of data. Each block is connected to the ones before and after it, forming a chronological “chain” of data as an asset moves or ownership of an asset changes. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block being inserted between two existing blocks. Each additional block strengthens the verification of the previous block and hence the entire blockchain, making the blockchain immutable.
But how does it really work?
Blockchain networks are driven by systems of aligned incentives. A well-functioning public blockchain requires a community of users, node operators, developers, and miners, who all play roles in a mutually beneficial network ecosystem.
A blockchain is maintained by a distributed network of parties (“miners” or “validators,” depending on the kind of chain). These parties produce blocks jointly via consensus. In simple terms, the parties vote on how to process a set of transactions—or in other words, how to construct the next block. The block with majority support is the one that is written permanently onto the chain.
What are the benefits of blockchain technology?
Trust: Blockchain’s decentralized nature means that information is stored and synchronized across a number of computers and is tamper resistant, creating trust in the data. Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.
What are nodes?
Nodes are the “boots on the ground” of blockchain networks. They are the physical computer hardware that runs their respective platform’s blockchain software. Nodes serve several critical functions:
- They vote on and validate blocks of transactions
- They communicate with other nodes to agree on the state of the blockchain
- They store the history (state) of the blockchain as a universal source of truth
- They are the endpoints of the network that enable users to access and interact with applications built on the network.
What are smart contracts?
Smart contracts are programs (chunks of code) stored on a blockchain that automatically execute when predetermined conditions are met. Smart contracts are typically used to automate execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. Smart contract applications include everything from games to logistics tools to DeFi dapps.
If you’d like to dig deeper, I will write another article next week. In the mean time, subscribe to our newsletter. You must be able to find the link somewhere in the website or in our twitter account. I’m too lazy to put it here.