Let's take the example of the buying and selling of land. How would you maintain this information to ensure that there is an unalterable audit trail?
Traditional Database
In a traditional database, this can be represented as a table as shown here. Every transaction is logged as a separate entry.
However, the records in this database can be manually manipulated by anyone with underlying access to the database. In fact, it's likely that any malicious changes to these records may even go undetected.
Blockchain
Now in a blockchain, every block has a block header and block data. The actual data itself is referred to as a transaction.
Each of these blocks are linked together by the previous blocks' hash, creating a chain.
For example, if someone tries to manually manipulate the transaction in the second block...
- The hash linking the 3rd block back to the 2nd block would be broken.
- The entire blockchain is distributed, so other nodes would flag this as a bad chain.
Any chain deemed malicious or broken is flagged on the decentralized, distributed blockchain network.
Terminology
Through this simple example, we learned a few key terms:
Block - Consists of header and data.
Blockchain - Is comprised of multiple chained blocks; linked through a hash.
Block hash - The cryptographic hash function used to hash the current block.
Block header - Contains relevant metadata, such as hash, previous hash, date, etc.
Block data - Contains the actual transactional data.
Transaction - Is stored in the block data, and can contain one or more transactions.
Node - Each blockchain sits on a node and is replicated to other nodes in the distributed network.
Immutable - Unable to be changed.
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