What Is The Blockchain Or Chain Of Blocks : How It Works And What It Is For

What Is The Blockchain Or Chain Of Blocks : How It Works And What It Is For

If you have heard or read about Bitcoin and cryptocurrencies, surely also about “blockchain”. If you want to know what the blockchain or blockchain is, then we will explain how it works and what it is for.

What is the blockchain or chain of blocks?

To define Blockchain, the most direct way to define it is that it is a mathematical structure from which various types of data can be stored, with the added advantage of the security of preventing hacking and falsification of the protected data.
It can also be said that it is an electronic book, it can be shared between users, in addition to generating an unchangeable record of transactions if it is the case. This chain of blocks or blockchain is a digital ledger, which means:
  • An ever-increasing list of electronic records of transactions
  • It is maintained over time
  • is not centralized
  • It is based on cryptography -algorithmic code- that allows the structure itself to be protected.

How does the blockchain work?

A blockchain is a digital database, which is built on cryptography. The blockchain is made up of digital files of a certain size, which are grouped. In the case of the Bitcoin blockchain, these are bkl.dat format files, whose size does not exceed 128 MB.

What kind of blockchain exists?

There are two main types of blockchain, such as the following:
  • Private blockchain (permission)
  • A public blockchain (permissionless)
They can be defined as permission and permissionless blockchain.
  • Blockchain of permissions: they are private calls since they are usually developed by private entities, and especially for internal use so the users of said blockchain must have permissions from the network administrators to be able to access the protocol. They are the type of blockchain that is applied by certain banks, being centralized blockchain, controlled by the entity that developed it instead of by the users.
  • Blockchain without permissions: there are no restrictions to carry out transactions, generate new blocks, and use functionalities, so cryptocurrencies or digital assets of the said network are usually offered as a prize or reward to users who maintain it. It is usually a decentralized blockchain.

cryptocurrency blockchain

In the case of a cryptocurrency blockchain, it is a large book in which each of the transactions made with Bitcoin or some other cryptocurrency is recorded, including the amounts and dates of each purchase-sale transaction.

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The blockchain will have to have multiple copies. There are thousands of similar copies held by other users of the same cryptocurrency – such as Bitcoin – or platforms in different places around the world. These thousands of users must have similar data/copies.

Each user who owns a copy -nodes- must agree with the other user owners to include new transactions or data, to achieve a degree of validity and that the data of the book remain uniform in the different versions.

Cryptocurrencies have their own blockchain or other platforms, regardless of who the platform is, they have to register each of their transactions in one of them for its operation to be valid. Said blockchain can be “decentralized” from the distributed network of nodes/computers and based on a consensus algorithm that validates the data or transactions, and the cryptography can be defined as a “public key” that allows opening new wallets.

Why is it called a blockchain?

The denomination as “chain of blocks” is because the pages of the book are more like “blocks” of information that are chained sequentially between each block from the beginning to the end, forming the aforementioned chain. The element in charge of keeping them intertwined is cryptography, which in turn allows the immutability of the information contained, something that may or may not occur, since for example it can be allowed to be exchanged or not, as is the case with cryptocurrencies.

Blockchain anonymity and privacy

For some years the way we conceive money has been transformed. The appearance of Bitcoin almost ten years ago transformed all the experiences known until then.

But all this incredibly encouraging scenario, and we say this because its rapid evolution has stunned the markets, is due to the technology on which virtual currencies, in general, have been created: the blockchain.

To advance in this analysis, it is important to understand the meaning of the word ” privacy ” on the one hand and ” anonymity ” on the other, since at first glance both concepts may seem similar, but they contain important differences.

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When we refer to anonymity, we emphasize the possibility of carrying out untraceable transactions, in which neither the sender nor the recipient needs to identify themselves or provide any type of personal information. In another order, privacy refers to the possibility of leaving in total ignorance what and how much we have bought during an operation.

Therefore, keep in mind that some cryptocurrency transactions can be private, but not anonymous (100%). And this is where the Blockchain, or chain of blocks, takes center stage since it is a technology that works like a database, or what was formerly known as an accounting book, in which each of the transactions is recorded, carried out.
What is innovative in that this mechanism encrypts all the information behind the operation and makes it completely secure?. But not everything is here, since, in addition to the above, the transfer carried out does not need intermediaries to approve or not the action, because the information is distributed in thousands of independent nodes around the world, who first register it and then validate it. This whole situation has made a potential Bitcoin hack very difficult, actually almost impossible.
The protection of personal data is a reality that technologies such as Blockchain are very aware of. Making transfers with Bitcoins does not allow us to have constant activity in complete anonymity 24 hours a day, but it is enough if we know how to work with them.
The decentralization of information and, therefore, the distribution of trust are aspects that make it a very useful technology (even outside the world of cryptocurrencies).

So… what should I keep in mind to maintain anonymity?

While all Bitcoin can be stored in a single address, it is recommended (not enforced) that you use them only once per trade. The proliferation of addresses is a way of keeping certain information secret, such as who is the individual who controls them and what their fund’s flow is. As there is no limit to the number of addresses, this will not be a problem for any of the investors.

The mixers (or also called tumblers) are mechanisms to, precisely, “mix” or mix backgrounds and make possible monitoring difficult. The use of this method can serve as a way to thwart the loss of anonymity, since, as the number of users involved in the operation increases, following its path becomes quite an impossible mission.

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However, it is important to read the contracting conditions of this type of service very well to fully trust the control of bitcoins and not to be branded in the investment community as illegal.

Geolocation is an aspect that can contribute to the disclosure of data on the identity of the transactions or the investor. Anyone who wants to link identity and a Bitcoin address can do so if they know some information about the actions carried out that day, such as a lunch in a restaurant that accepts cryptocurrencies and has a fixed address for their transactions.
The IP address on a computer is another element that eliminates privacy in Bitcoin transactions. Both the input and the output data of a transaction can be ascertained by knowing data of such a personal nature like this since it consequently allows knowing who is the owner of said connection.
Finally, anonymity also disappears when, through a “centralized exchange”, we sell or buy bitcoins. Which ends up directly linking the movements of funds with the identity.

Frequent questions

As a complement, you can consult some of the frequently asked questions that are usually asked on the subject:

What is crypto for?

If it were a book as such, the function of the ink of said book is fulfilled by cryptography, leaving all the information and messages that appear inside the book, encrypted, which ensures the authenticity of the information and prevents access by people who do not have permission or the power to read that information. It also cannot be hacked or deleted or modified

What is blockchain immutability?

Immutability is one of the properties that is applied to the blockchain, being in this case the capacity of the data registered in the chain of blocks not to be able to be deleted or modified from the registry in which they appear.

What is the Bit2Me blockchain?

The Blockchain Bit2Me Explorer is a multi-chain search engine whose function is to allow direct and rapid analysis of the status of any type of transaction, address, or block of cryptocurrencies.

In what other types of situations is blockchain used?

Transactions can be used for other types of authenticity validation as in the case of smart contracts or also called smart contracts, documents, or different types of messages, cryptocurrencies, payment systems, supply chains, decentralized applications (Dapps), digital commerce, or entertainment.

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