Blockchain

tecnhnology: How does it work?

Blockchain

components

The basic components of

the blockchain are:

–

The nodes which are the partecipants of

the blockchain and are physically their servers.

–

The transactions which are the data that

needs to be exchanged, verified, approved and registered

–

The block which represents a certain

number of transactions

–

Ledger where the transactions are

registred with transparency in a chronological order. It is composed by the

blockes related thanks to the hash function

–

Hash that is essentialy a digital

fingerprint of some data and identifies in a unique way each block

Each block contains

different transactions and a hash situated in the header. The hash contains all

the information relative to the block and a hash with the information of the

previous block which allows to create a chain and keep the blocks together.

The transaction contains information on the recipient’s

public address, the characteristics of the transaction and the cryptographic

signature that guarantees the security and authenticity of the transaction.

Transactions are placed

into groups called blocks and the blocks are linked through what is called

Blockchain.

The transactions in one

block are considered to have happened at the same time. These blocks

are linked to each-other (like a chain) in a proper linear, chronological order

with every

block containing the hash of the previous block.

How

does it work?

The problem consists in

the fact that any node in the network can collect unconfirmed

transactions and create a block and then broadcasts it to rest of the network

as a suggestion

as to which block should be the next one in the blockchain.

The solution arrives

with the introduction of a mathematical puzzle: each block will be

accepted in the blockchain provided if it contains an answer to a very special

mathematical

problem.

The Blockchain validation process involves a verification

and approval phase based on calculation resources that are made available by

the Blockchain participants and which are aimed at solving complex problems or

cryptographic puzzles and which allow to have a Distributed Consent and no more

than a consent based on a third party intermediary or a centralized institution

or institution. Those who participate in the resolution of the problem and who

therefore contribute to the validation of the process and the transaction are

called Miner and their intervention, which needs to be carried out with

important resources, is remunerated through the issuance of a virtual currency

or cryptocurrency.

The logic that underlies this process starts from the

assumption that in order to avoid fraud risks, in particular by a

“node” of the Blockchain, it is necessary to create obstacles and

complications on the whole validation process. Specifically, each node that

intends to participate in validation must also solve a complex problem in the

form of a cryptographic puzzle. The puzzle is designed to compete all the nodes

and all contribute to the resolution by making available its computing power.

The node that will be able to solve the cryptographic puzzle will have the

right to validate the block with the presentation of the Proof of Work which is

also the proof of the solution of the puzzle. For this commitment and for this

result the node is remunerated with a Unit of value that depends on the type of

Blockchain.

The node generating a

block needs to prove that it has put enough computing resources to solve a

mathematical puzzle. For example, a node can be required to find a “nonce”

which when hashed with transactions and hash of previous

block produces a hash with certain number of leading zeros. The average effort

required is

exponential in the number of zero bits required but verification process is

very simple and

can be done by executing a single hash.

First node, to solve

the problem, broadcasts the block to rest of the network.

The nodes donating

their computing resources to solve the puzzle and generate block are called

“miner nodes” and are financially awarded for their efforts.

The nodes are not “public”, that is, they do

not know each other and the Proof of Work also represents the way to build a

relationship of “trust” based on the concrete collaboration to the

solution of the tests that must be validated.

The network only

accepts the longest blockchain as the valid one. Hence, it is next to

impossible for an attacker to introduce a fraudulent transaction since it has

not only to

generate a block by solving a mathematical puzzle but it has to at the same

time

mathematically race against the good nodes to generate all subsequent blocks in

order for it

make other nodes accept its transaction and block as the valid one. This job

becomes even

more difficult since blocks in the blockchain are linked cryptographically together.