What is Blockchain? ??

People always mention blockchain and suggest applications of blockchain. But why is it called blockchain?

Blockchain is like a digital passbook to record transactions between you and another individual. It is a data structure to record blocks of transactions. One block can only record a limited number of transactions i.e. 2000-3000 transactions, which is equivalent to 1MB. Once a block is full, the transactions will be recorded in a new block, which is connected to the previous block. The more transactions there are, the more blocks are connected which they all form into a chain. Hence why this technology is called blockchain.

When running the blockchain, it requires over 50% of individuals in the network to agree with the transaction being recorded on the chain. In order to encourage individuals to confirm and validate the transaction, blockchain networks utilise the Proof-of-Work (PoW) system which rewards individuals (with cryptocurrency) if they can solve a complex mathematical problem and validate the transaction block. When there are lots of individuals trying to solve the problem and confirm the transaction (mining) at the same time, it indicates high computational effort in the network and hence the electricity consumption will be high. Therefore, new rewarding systems i.e. Proof-of-Stake (PoS) have been adopted in blockchain networks lately.

The architecture of blockchain consists of several layers: Hardware, Data, Network, Consensus, and Application. The hardware layer is the physical infrastructure of the blockchain network i.e. computers. The data layer is to store the blockchain's data, which includes all transactions and blocks. The network layer handles the communication between nodes i.e. users in the network. The consensus layer establishes the rules and protocols that all nodes must follow to agree on the state of the blockchain, PoW and PoS are consensus mechanism examples. The application layer provides the user interface and functionality that allow users to interact with the blockchain. This layer is where decentralized applications (DApps) and other blockchain-based solutions are developed and executed.

As cryptocurrency develops over time, the number of blockchain networks have been increasing since Bitcoin first launched. Although Bitcoin has an underlying blockchain, this does not mean other cryptocurrencies like Ethereum share the same blockchain as Bitcoin. Many developers in the cryptocurrency space have been developing different blockchain networks to improve the issues in existing blockchains. This is why blockchain ecosystems like Ethereum, Solana and Cardano have been developed.

In the next article, we will discuss about the challenges of blockchain, and how the blockchain community have developed frameworks to improve blockchain scalability, efficiency and functionality.