Introduction to Blockchain

1. What is a Blockchain?
   • Understand that a blockchain is essentially a digital ledger used to record transactions across multiple computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks.
   • This technology is mainly associated with cryptocurrencies like Bitcoin but can include other data as well.

Understanding Blocks

1. What is a Block?

   • Recognize that a block is just a collection of data. In the context of Bitcoin, this data primarily consists of transaction records.
   • Visualize a block as a page of a ledger or a record book. Each page can only hold a limited number of transactions.

2. Examples of Block Data:

   • For Bitcoin, data in a block appears as a list of transactions (e.g., X pays Y $50, A pays B $80).
   • Ethereum blocks may include not only transactions but also contracts and other information.
   • Different cryptocurrencies can have blocks that include various types of data like files, contracts, etc.

Process of Blockchain Expansion

1. Adding New Blocks:
   • Learn that as each block reaches its data limit, a new block must be created and added to the chain.
   • This addition of new blocks to accommodate more data is a continuous necessity as transactions or data generation continues.

Mining Process

1. What is Mining?

   • Understand that mining involves adding new blocks through a process called “mining”, which is a computational effort.
   • Mining requires solving complex mathematical puzzles to validate new transactions and record them on the blockchain.

2. Hashing Function:

   • Get familiar with the term “hashing function”, a type of function that takes an input (or ‘message’) and returns a fixed-size string of bytes. The output is typically a ‘hash code’ or ‘digest’.
   • Bitcoin uses the SHA-256 hashing function where the output is always 256 bits long, regardless of the input size.

3. Properties of Hashing Functions:

   • Understand that a hashing function has unique properties:
     • It’s deterministic, meaning the same input will always produce the same output.
     • It’s infeasible to regenerate the original input from the hash output (pre-image resistance).
     • A small change in the input will produce a significantly different output (avalanche effect).

4. Mining Effort and Computational Power:

   • Acknowledge that mining a block isn’t instantaneous and requires significant computational resources and time, especially as the puzzles to be solved can be extremely complex.

Decentralization Explained

1. Decentralized vs. Centralized Systems:

   • Learn the difference between centralized systems (controlled by a single entity) and decentralized systems (control is distributed among all participants).
   • In blockchain, decentralization means anyone can participate in the process of validating transactions and adding new blocks to the blockchain.

2. Benefits of Decentralization:

   • Recognize that decentralization enhances security and reduces the risks of corrupt or fraudulent activities, as no single entity has complete control over the blockchain.

Integrity and Security of Blockchain

1. Linking Blocks:

   • Each block contains a reference to the hash of the previous block, linking them in a chain.
   • This link ensures integrity as changing any information on a previous block would require recalculating every subsequent block’s hash, which is computationally impractical.

2. Immutability of Records:

   • Understand that once data is recorded in a block and added to the blockchain, it is extremely difficult to alter. This immutable nature makes blockchains very secure and trustworthy for transaction records.

Conclusion and Encouragement

1. Reflect on Blockchain’s Impact:

   • Consider the transformative potential of blockchain technology in various fields beyond just financial transactions, like supply chain management, digital identities, and more.
   • Blockchain technology, by ensuring data integrity and security, promises to influence various aspects of modern life.

2. Engage Further and Learn More:

   • Encourage continuous learning by exploring more detailed aspects of blockchain technology such as smart contracts, further cryptographic elements, and different types of blockchains (e.g., public, private).
   • Participate in discussions, join relevant communities, and possibly engage in blockchain development or investment to gain hands-on experience.

This guide has laid out the fundamental concepts and processes involved in blockchain technology. By understanding each step, you can better appreciate the robustness and innovative nature of blockchain and consider its implications for the future.

Welcome to the transformative world of blockchain technology! Whether you’re a curious beginner or an enthusiast looking to deepen your understanding, this guide will equip you with a fundamental grasp of blockchain’s intricacies. Let’s embark on this educational journey together, unlocking the capabilities and potential of this groundbreaking technology.

What is Blockchain?

At its core, blockchain is a digital ledger, much like a record book that is accessible across various computers connected in a network. This ledger meticulously records transactions, ensuring that each entry is secure and immutable once entered. The magic of blockchain lies in its ability to maintain copies of this ledger across multiple locations, significantly reducing the risk of unauthorized alterations and hacks.

The Anatomy of a Blockchain: Understanding Blocks

Imagine a blockchain as a tower of blocks, where each block is a container holding batches of transaction records. For example, in Bitcoin, the most prominent application of blockchain, a block might detail transactions like “X pays Y $50” or “A pays B $80.” The versatility of blockchain technology allows it to record not just financial transactions but also complex contracts and operational commands in other applications such as Ethereum.

Key Features of Blocks:

• Data Capacity: Each block can only store a limited amount of data. For instance, a Bitcoin block holds about 1,500 transactions.
• New Blocks: As existing blocks reach their data capacity, new blocks are created and added to the chain, ensuring the continuity of data recording.

The Process of Mining: Adding Blocks to the Blockchain

Mining is the powerhouse process behind blockchain’s ability to add new blocks. Miners use sophisticated computers to solve complex mathematical puzzles that validate and secure new transactions. This process involves the creation of a ‘hash,’ a unique digital fingerprint generated by a hashing function, such as SHA-256 in the case of Bitcoin.

How Mining Works:

1. Hashing: Transforming the information within a block into a short, fixed-length code called a hash. Despite the simplicity or complexity of the input data, the hash output remains a constant length.
2. Security: A hash function makes it nearly impossible to deduce the input data from the hash output, ensuring security. Even a minuscule change in input drastically changes the hash, enhancing the integrity of the process.
3. Computational Effort: Mining requires significant computational power and energy, as the correct hash often requires numerous attempts to find through ‘guess and check’ methods.

The Power of Decentralization

One of the fundamental aspects of blockchain technology is its decentralized nature. Unlike traditional systems where a single entity controls the data, a blockchain distributes control across all participants in the network.

Implications of Decentralization:

• Transparency and Trust: Every participant, or node, on the blockchain network has access to the entire ledger, which can be audited at any time. This transparency builds trust among users.
• Security Enhancements: Decentralization reduces the risk of centralized corruption or system failure. It also makes it incredibly difficult for any single party to alter past transactions or manipulate the system in any significant way.

Ensuring Integrity Through Linked Chains

Every block in a blockchain references the hash of the preceding block, thus creating a continuous link back to the very first block, known as the genesis block. This linking ensures that once a block is added to the blockchain, changing its content would require altering all subsequent blocks, a task that is computationally prohibitive due to the sheer amount of processing power required.

Blockchain’s Immutable Ledger:

• Security: This structure provides a robust security measure, as tampering with any recorded data would necessitate re-mining all subsequent blocks.
• Auditability: The immutable and chronological ordering of transactions makes blockchain an excellent tool for auditing and tracking, providing clear traceability.

The Broader Impact and Future of Blockchain

Blockchain’s capabilities extend far beyond cryptocurrencies. Its potential applications range from supply chain management and secure voting systems to digital identities and decentralized finance (DeFi). As blockchain technology continues to evolve, its impact on various industries appears increasingly promising.

Engagement and Continuous Learning:

• To truly leverage the benefits of blockchain, engage with the community, participate in discussions, and possibly contribute to blockchain development projects. Education is ongoing, and staying updated with the latest advancements and applications will keep you at the forefront of this technological revolution.

In conclusion, blockchain technology is not just about cryptocurrencies. It offers a new paradigm for how we transact and interact digitally. By understanding the foundational principles outlined in this guide, you are now better equipped to discuss, utilize, and potentially innovate within the blockchain space. Dive deeper, keep learning, and perhaps, contribute to the blockchain ecosystem in your own unique way.

In this video, we are going to explain what a blockchain is in very basic terms.  By the end of the video, you’ll be able to explain this life-changing technology to those you love,  saving them from the authoritative dictatorships that never cease to control your every move.  Nevertheless, we don’t really discuss politics on this channel, mostly just ideas, so let’s get into it.

 What is a block?  In terms of cryptocurrency, a block is just a bunch of data.  In fact, the data could be almost anything, but a block is just a bunch of data. In fact, the data  could be almost anything, but usually it’s just a collection of records. For the numero  uno crypto, bitcoin, this data is literally just a list of transactions.

 For example,  it might look like this. X pays Y $50, A pays B $80, and Y pays H $15. If we’re dealing  with Ethereum, it’s usually just transactions, but it can be a few  other things, like things called smart contracts, which are really neat, but we’ll have time to  explain them in another video.

 For other altcoins, they could be the usage of your Wi-Fi, or files,  or documents. Nonetheless, a block is just a collection of records. For this example,  to explain what a blockchain is, I’m going to stick with a record of transactions, like in  Bitcoin. Specifically, we call this record a ledger because it is a record of value exchanging hands.  Now one thing you need to know is that blocks do have limits, and they can only have so many  transactions in them, so we have to keep adding more blocks.

 For our example, Bitcoin has an  average of around 1,500 transactions in one block right now. Now this number changes,  but you don’t really need to know why. Just know that these blocks do fill up and then we have to  do something with them. Well, what do we do when these blocks are full? We add them to the network.  Now you might be asking, how do we do that? Well, we do something called mine them.

 And since  Bitcoin is a proof of work model, we have to prove that we mined them. This brings us to something  called a hash.  So the next big question is what is a hashing function? A hashing function is a system where  you can put something into it and it’ll output a hash.

 Now there’s a ton of math happening inside  this magical black box, but essentially you give it something and it gives you something. In this  case, Bitcoin uses the SHA-256 hashing function. SHA stands for secure hashing algorithm and 256 refers to the  amount of zeros and ones that it has in whatever it puts out.

 So whether you put in your name or  the entire dictionary, it’ll always output 256 zeros and ones. Now our computers are smart so  they convert these zero to ones to letters and numbers and it is a complicated process and could  be a video on its own, but essentially with hashing functions you need to know three main things.

 Number one,  you can’t find the input of a hash, you have to guess and check. So if you give it A,  it will give you D. Then if you give it AA, it’ll give you J. And then if you give it AAA,  it’ll give you U. Imagine if you wanted to find out what gave you an F. You’d have to just keep  adding more As until you found it.

 The second thing you need to know about hashing functions is that  changing the input just a tiny bit changes the output a lot. So basically, if you do SHA-256  of this, subscribe to our channel, you get this as the output. However, if you do please subscribe  to our channel, you get this. See, these are completely different, even though we added one  word. And lastly, the third thing you need to know is that calculating the hash takes some time.

 Now, it might only take a few milliseconds for one tiny string of text, but if you have  an entire book that you’re doing, or if you want to check a few million variations of  it, it starts to rack up time and computing power.  And so what Bitcoin is doing, whenever you mine it, is we’re trying to add random numbers  to whatever the block is so that we get a special ending. For example, let’s say we’re trying to mine this.

 X pays Y $50,  A pays B $50, and Y pays H $15. You’ll get this as the output. Now, this is what Bitcoin is doing.  We ask ourselves, what number do we have to add to the end of that list to get a zero at the end  of the hash? Well, if we start at zero, and then we check it with one, and then we check it with two, and we use my little Python program, we figure out that it takes three  different checks to get to the first one, which is when you put a two at the end of it.

 Now,  let’s make it a little harder. Let’s try two zeros at the end of the hash. After running my little  Python miner, we figure out it takes 438 tries until you hit the first hash that ends with zero  zero. And lastly, just to drive the topic home home that it takes a lot more time to find these hashes,  let’s look at how many times we have to guess for it to get 5 zeros.

 If we run the program, we get a huge number.  So as we look for more zeros, it takes a lot more time to check it.  And essentially, Bitcoin is looking for a lot of zeros, and computers all around the  world and mining farms are mining away to find the right  number.

 When they do, we say that that block is solved and verified, but we’ll get into that in  a little bit. The next thing to know about a blockchain is that it is decentralized. Now,  this doesn’t have to be really confusing. So think about it like this. Centralized means  one person controls it. For example, your grades in high school, only your teacher had access to  add in your grades or change it.

 They could flunk you if they didn’t like you.  And nothing personal here, but maybe you just didn’t understand what they were teaching  because they sucked at teaching.  Anyways, decentralized means that more than one person can have access to look at and  change your grades.  Imagine if all of your classmates were allowed to look at the answers on the test and give  you a grade based on your papers and your tests.

 Imagine if they could vote on what grade you got instead of just your teacher. Now this is essentially what  decentralized means. Instead of one person having a list of all the Bitcoin transactions, literally  anyone who wants to can have them and look at them. And not only that, because this is the  important part, anyone can mine and actually vote on the blockchain.

 This means they can say,  Bill really did pay John $50.  Or they can make fake transactions and say, John paid Bill all of his money.  So you might be asking, how do you make sure that someone doesn’t make a fake transaction  and spend all of my money?  Well, that’s a problem that is solved by using asymmetric encryption with cryptocurrency wallets.

 It’s a little confusing, and we just finished a few videos on it,  so you should go check those out after this video. But bringing us back to what decentralized means, that begs  the question, why would a group of teenagers want to look at your papers and tests? Even more so,  why would they want to spend a lot of time looking at them and then grade the tests? Well,  in this analogy, they would be paid to.

 Almost in every blockchain, you get a reward for participating  and putting in good votes. For example, for mining bitcoin, you get paid in bitcoin. I hope that analogy makes sense. So far, we’ve been over what  a block is, it’s just a bunch of data, what a hashing function is, it’s to make sure that people  actually put in work to participate in the blockchain, and we’ve went over what decentralized  means. It basically means that one person does not control it.

 So if you’re still with us after  me explaining these interesting topics, please consider clicking that like button. It gives us fuzzy feelings inside and promotes our  hard work. Next up, let’s learn why it’s actually called a block chain. With Bitcoin, there are two  extra things you need to know about.

 One, whoever solves the block and finds the magical hash that  has however many numbers of zeros we’re looking for, they add, Yboard Crypto’s account received  two Bitcoins for mining at the top of the block. And this is their mining reward. This is how more bitcoins are actually created.  Although that number two changes and it gets smaller and smaller as time goes on.

 Secondly,  you need to know that they add the hash of the last block to it. So the password of the last  block gets added to this block and that hash is actually used to calculate this block’s hash.  So this makes it a chain since each block refers to the last one.  Now this is where the magic of the blockchain works.

 If you try to go back and edit an old block, the newer ones all change because you’ve  messed up that hash that it pointed to.  Remember when we talked about the hashing function and SHA-256?  If you change it just a little bit, it changes the entire thing.  Well that’s how we can make sure someone doesn’t go back and add more money into their  account in an old block.

 In a sense, whatever gets added to the blockchain is written down in history forever because  it can’t be changed.  Now, this is actually really good for things like transactions, but it’s bad for things  like copyrighted material or embarrassing things.  Tis the nature of the internet, though.  So in conclusion, we have blocks that consist of data.

 And in the case of cryptocurrency,  it’s usually a list of transactions.  Next, after we have a block, we have to find the password to that block, or basically what  is the hash that solves that block.  And miners do this by guessing and checking until they hit the jackpot.  And then after they find the solution to that block, they make sure that it’s linked to  the last block.

 So each block actually has the history of every transaction on it because it refers to a previous block. Now, since each block is connected to the last block,  this makes it a chain. That’s what a blockchain is.

How does a blockchain work – Simply Explained

Transcript:

 Blockchains are incredibly popular nowadays.  But what is a blockchain?  How do they work, what problems do they solve and how can they be used?  Like the name indicates, a blockchain is a chain of blocks that contains information.  This technique was originally described in 1991 by a group of researchers and was originally  intended to timestamp digital documents so that it’s not possible to backdate  them or to tamper with them, almost like a notary.

 However, it went by mostly unused  until it was adapted by Satoshi Nakamoto in 2009 to create the digital cryptocurrency Bitcoin.  Now, a blockchain is a distributed ledger that is completely open to anyone.  They have an interesting property.  Once some data has been recorded inside a blockchain, it becomes very difficult to change  it.

 So how does that work?  Well, let’s take a closer look at a block.  Each block contains some data, the hash of the block and the hash of the previous block. The data that is  stored inside a block depends on the type of blockchain. The Bitcoin blockchain  for example stores the details about a transaction in here such as the sender,  receiver and the amount of coins. A block also has a hash.

 You can compare a hash  to a fingerprint. It identifies a block and all of its contents  and it’s always unique, just as a fingerprint. Once a block is created, its hash is being  calculated. Changing something inside the block will cause the hash to change. So in  other words, hashes are very useful when you want to detect changes to blocks.

 If the fingerprint of a block changes, it no longer is the same block.  The third element inside each block is the hash of the previous block.  This effectively creates a chain of blocks and it’s this technique that makes a blockchain  so secure.  Let’s take an example.  Here we have a chain of three blocks.

 As you can  see each block has a hash and the hash of the previous block. So block number three points to  block number two and number two points to number one. Now the first block is a bit special. It  cannot point to previous blocks because well well, it’s the first one.  We call this block the Genesis block.  Now let’s say that you tamper with the second block.

 This causes the hash of the block to change as well.  In turn, that will make block 3 and all following blocks invalid because they no longer store  a valid hash of the previous block.  So changing a single block  will make all following blocks invalid.  But using hashes is not enough to prevent tampering.

 Computers these days are very fast  and can calculate hundreds of thousands  of hashes per second.  You could effectively tamper with a block  and recalculate all the hashes of other blocks  to make your blockchain valid again.  So to mitigate this, blockchains have something that is called proof of work.

 It’s a mechanism that slows down the creation of new blocks.  In Bitcoin’s case, it takes about 10 minutes to calculate the required proof of work and add a new block to the chain.  This mechanism makes it very hard to tamper with the blocks because if you tamper with  one block you’ll need to recalculate the proof of work for all the following blocks.

 So the security of a blockchain comes from its creative use of hashing and the proof  of work mechanism.  But there is one more way that blockchains secure themselves and that is by being distributed.  Instead of using a central entity to manage the chain, blockchains use a peer-to-peer  network and everyone is allowed to join.

 When someone joins this network, he gets a full copy of the blockchain.  The node can use this to verify that everything is still in order.  Now let’s see what happens when someone creates a new block.  That block is sent to everyone on the network. Each node then verifies the block to make sure  that it hasn’t been tampered with.

 And if everything checks out, each node adds this  block to their own blockchain. All the nodes in this network create consensus.  They agree about what blocks are valid and which aren’t.  Blocks that are tampered with will be rejected  by other nodes in the network.  So to successfully tamper with a blockchain,  you’ll need to tamper with all the blocks on the chain,  redo the proof of work for each block,  and take control of more  than 50% of the peer-to-peer network.

 Only then will your tampered block become accepted by everyone else.  So this is almost impossible to do.  Blockchains are also constantly evolving.  One of the most recent developments is the creation of smart contracts.  These contracts are simple programs that are stored on the blockchain and can be used to  automatically exchange coins based on certain conditions.

 More on smart  contracts in a later video. The creation of blockchain technology piqued a lot of  people’s interest. Soon others realized that this technology could be used for  other things like storing medical records, creating a digital notary or even collecting taxes.  So now you know what a blockchain is, how it works on a basic level and what problems  it solves.

 Want to learn how you can implement a simple blockchain in JavaScript?  Then check out this video here.  And as always, thank you very much for watching