Blockchain
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Traditional database technologies present several challenges for recording financial transactions. For instance, consider the sale of a property. Once the money is exchanged, ownership of the property is transferred to the buyer. Individually, both the buyer and the seller can record the monetary transactions, but neither source can be trusted. The seller can easily claim they have not received the money even though they have, and the buyer can equally argue that they have paid the money even if they haven’t.
Blockchain mitigates such issues by creating a decentralized, tamper-proof system to record transactions. In the property transaction scenario, blockchain creates one ledger each for the buyer and the seller. All transactions must be approved by both parties and are automatically updated in both of their ledgers in real time
Initiation: A user initiates a transaction by creating a request to transfer or update information on the blockchain. This can involve sending cryptocurrency, recording ownership changes, executing smart contracts, or any other transaction supported by the blockchain.
Transaction Propagation: The transaction request is broadcasted to the network of nodes in the blockchain. The nodes receive the transaction and propagate it further to ensure it reaches all relevant participants in the network.
Validation: The nodes in the network validate the transaction to ensure its correctness and compliance with the blockchain's rules and protocols.
Block Propagation and Consensus: The newly created block is broadcasted to the network. Other nodes receive the block, validate its contents, and reach consensus on its validity. Consensus mechanisms such as PoW, PoS, or others ensure that the majority of nodes agree on the state of the blockchain and the order of the blocks.
Block Confirmation: Once consensus is reached, the block becomes confirmed and added to the blockchain. It is appended to the end of the existing chain of blocks, forming an immutable and chronological record of transactions.
Transaction Finality: After the block is added to the blockchain, the transaction is considered final and cannot be reversed or modified without consensus from the network. It is now a permanent part of the blockchain's history.
In a typical blockchain network, participants are not able to directly alter or modify previously added blocks. Instead, they can only append new blocks to the existing chain.
Once a block is added to the blockchain, it is considered immutable and tamper-evident. The cryptographic hash of each block depends on the data contained within it, including the hash of the previous block. This creates a chain of blocks, where any change in a previous block's data would result in a mismatched hash value. As a result, altering a previous block would require recalculating the hash of that block and all subsequent blocks, which is computationally infeasible in a well-designed blockchain network.
The append-only nature of blockchain ensures that the integrity and historical record of transactions remain intact. New blocks are continuously added to the end of the chain, extending the blockchain's history while preserving the immutability of previously added blocks.
This distributed nature adds another layer of security against tampering. To successfully alter data in a blockchain, an attacker would need to compromise a majority of the network's nodes simultaneously
When a new block is added to the blockchain, it is distributed and replicated among the multiple nodes in a decentralized blockchain network. This distribution ensures that all nodes have an up-to-date copy of the blockchain.
The distributed nature of the blockchain ensures that no single node or central authority has exclusive control over the data. Instead, all nodes collectively contribute to the network's security, maintaining a consistent and synchronized view of the blockchain.
Having the same set of data across all nodes enhances transparency, enables decentralized decision-making, and provides fault tolerance.
