Learn how blockchain technology works


Here, we will try to explain how blockchain technology works. To make it easier to understand everything. We need to give a concrete example of this technology’s most typical use case. The transfer of value (or money) from one user to another. To transfer money from one person to another, the method most of us are used to is wire transfers. What happens, very simply, is that each bank keeps registers. In which it reports the total balance of each account holder and the movements made to and from that particular account.

Transfer cryptocurrency

When I make a transfer (let’s say € 100) from my account to that of another person my bank tracks the movement. And marks on its register a transaction for an amount equal to -€ 100 from my account. Then scales this sum from my total balance and send the money to the bank of the recipient. This, in turn, will do the same by marking (but this time on its register) a movement of + € 100 and adding it to the total balance of the current account holder beneficiary of the transfer.

The same thing happens with a blockchain, except that the register is not held by a bank (as we have illustrated in the previous chapter.). Instead, all the computers participating inthe network have a copy of this document. For example, when I send a Bitcoin (BTC) to a person. All the computers participating in the network mark the movement on the register and deduct 1 BTC from my account while. At the same time, add up the same amount for the benefit of the recipient.

The first question that arises at this point concerns the fact that, since the register is not only shared by all the computers on the network. But is also public (that is, it is accessible to everyone in consultation through special sites called “explorers”). Anyone could have access to the handling of my account. Thus damaging my privacy. In reality, the accounts (or “addresses”) are not attributable to a name and a surname (i.e. to a natural person). Still, they are “strings” consisting of a minimum of 26 to a maximum of 35 alphanumeric characters. For this reason, bitcoin transactions are said to be anonymous.

Bitcoin is not anonymous, but “pseudo-anonymous.”

In reality, bitcoin is not anonymous, but “pseudo-anonymous.”. This means that although the addresses (those we call “current accounts” in the bank) are not registered in the name of real natural persons. It is still possible (though not easy) to follow the computer traces that these transactions leave on the web up to the user.  (I.e. the point where the user is connected to the internet or the device with which he is connected). And thus define the identity of the natural person who controls that particular address.

Let’s go back to our money transfer and introduce another relevant difference compared to what happens in the banking system;. At the same time, when I move my money through a bank it immediately traceseach transaction and does the same with any other movement, in a blockchain the operations made by the various users are “merged” and inserted into blocks. To understand what a block is, we can imagine it as a box that contains the information (sender address, amount handled, recipient address) relating to all transactions “ordered” by users in the unit of time. 


Blockchains are very similar to physical goods

Blockchains are very similar to taking inventory of physical goods. When we do an inventory, all we do is take all the goods we have in stock, put them inside some boxes (numbered in ascending order), recording the contents of each box on a register. Suppose we imagine the inventory of a restaurant that is closing its business, for example. In that case, we find all the kitchen utensils (knives, cutlery, plates, pots, glasses, etc.), stored in a warehouse and placed inside boxes.

Since the boxes are numbered and I have recorded the contents of each box in the register. Whenever I need, for example, the colander, consult the register. I could know its exact location. A blockchain, therefore, can be thought of as the inventory of all transactions Made. In practice, it is nothing more than a huge register that records the trace of all the blocks executed by the network since its birth. As you read this text, for example, the network processes a new block. And adds it to the register of all blocks processed over time. The term “blockchain” translated into Italian means in fact “chain of blocks”. And gives a good idea of how this whole process works; each block registered on the blockchain is linked (like the link of a chain) to the previous one.This aspect is fundamental to understand why this technology is so reliable.

Blockchain is safe

If an attacker tried to manipulate the information contained in one of the blocks already processed by the network, this modification would cause a series of chain anomalies on all the blocks. The other computers on the network, finding themselves dealing with a document different from the one they had at their disposal, would be able to define the vicious nature of the operation, thus blocking it instantly. However, the computers that are part of the network do not limit themselves to transcribing the transactions present within a block on the blockchain; they also validate them. When the network validates the block it can no longer be modified. The blockchain, therefore, is not only an armored and distributed register (or database,) but it is also Immutable.


Let’s stop for a moment to summarize the concepts expressed up to now. When a user wants to transfer money to another user. He sends the sum from his address to that of the recipient. The information of this single transaction is entered inside a block together. With the information relating to all the transactions ordered in the last ten minutes. The network then takes charge of the block, processes it, and validates it. And transcribes it on the blockchain. From that moment, the information contained in the block becomes immutable and can no longer be modified. Easy, right?

Well, in the next we will illustrate how the network validates and processes the blocks. We will have the opportunity to understand why the nodes. That are part of this network cannot in any way manipulate the information contained in the block. They are processing. In other words, we will define who the miners are. What kind of role they have, and why they are so important in the functioning of a blockchain.

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