3/3/2023 - Technology and Innovation

Understand the technology behind blockchain to see its value

By Elisa Mosquera

Understand the technology behind blockchain to see its value

What makes blockchain transparent, safe and unhackable?

We all heard about Blockchain and Crypto after the Bull Market in late 2020 and 2021. This seemingly new technology that was applied to cryptocurrencies meant a paradigm shift. And effectively, themes such as DeFi and NFTs appeared in everyone's mouth. But do we really understand why blockchain is transparent, safe and inhackable? Or are we blindly trusting?

The idea of this article is to be able to explain in a simple way, but not to embrace the important concepts, how blockchain works. First definition of blockchain in few words: a decentralized database. Great, what's a decentralized database for? Especially when two parties have to exchange information and do not trust each other. Without blockchain, it is necessary from some intermediary or auditor to carry out this exchange safely and transparently. But in addition to being decentralized, it is mathematically almost impossible to falsify. Once a given is written in the blockchain, one cannot modify. Well, now that we have these clear bases we can begin to inquire into the small (or not so small) details that make the blockchain... the blockchain.

Block chain and validation process

It is important to understand that this database consists of a chain of blocks where each has a record of information that has been encrypted and has been assigned a unique identifier that we will call “hash”. The way to validate transactions is through the mine that perform computers with high computational power, since the block is validated this is added to the block chain and transmitted to the other nodes. In such a way, everyone has a copy of the database (which is key to decentralization). Since there is no centralized institution that checks and validates any type of data-based blockchain change, blockchain security depends on a consensus algorithm. In other words, the only way to change or add information to the blockchain is if all network computers accept it, which makes the hack extremely unlikely because it must have the consensus of all other computers while new blocks are mined and validated. The longest and most validated block chain will be the accepted chain, this is fundamental to understand the difficult it would be to try to hack this network.

Structure and operation of blockchain blocks

Once this process is completed, the block enters the blockchain as a permanent record. And once the block is completed, it passes to the next where the mine process starts again and validation. Each block has a hash that is dependent on the previous block hash making all blocks linked. So if you try to change a block all the blocks linked to this will be changed and must be validated by the blockchain again (here it is important to remember that the chain will be used as valid with more validated blocks, because that is why it cannot be hacked).

If we focus on the structure, blockchain is a chain of information blocks that are securely linked to each other. Whenever an individual performs a transfer of information or creates new information, a block will be created. These blocks are encrypted and are assigned a "hash" that identifies them. Basically, "hashing" works as an algorithm that is run on the information that has the block validating and crushing in a 64-character hexadecimal code. This algorithm is a one-way cryptographic function, the original data can be recovered through the cipher. That is, the hash can be calculated and the same hash will always be obtained to confirm that the original record has not been changed. However, the reverse process cannot be done. That is, since the hash get the original information.

So since, as mentioned earlier, the new blocks are chained to the previous block, the hash of the new block is dependent on the previous hash. Thus, once validated and chained the block information cannot be changed without necessarily changing the registry of the following blocks. And this is exactly what makes the register unchangeable, since it is incorporated into the database is almost impossible to change.

This may be a bit of annoyance, so I propose this example before you finish this article so that you understand well how the hash works that I mention:

If you enter the following text: " Hi readers of FinGuru”, the algorithm returns the following hash: 868e6febbe1915d2b86bf3608dcb2c8b8aee904fbd004a368df7904f917a7. If someone comes to you this fact: 868e6febbe1915d2b86bf3608dcb2c8b8aee904fbd004a368df7904f917a7, has no way of knowing it means since it has been encrypted by a unidirectional cryptographic function, but if I pass the previous text by the algorithm I will always receive the same hash. I hope you've been clearer in This link will be able to test different hashing algorithms to finish understanding the encryption that returns to the... cryptos.

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elisa mosquera

Elisa Mosquera

Hello! My name is Elisa Mosquera, I am a Bachelor of Economics and Blockchain developer. I'm passionate about blockchain technology and the environment. Therefore, I am co-Founder of PILTRI a web3 donation platform to help all those projects that care for our planet and that need our help to repair the damage that society has generated on Earth.

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