Below is a brief overview of the complex mechanism of Blockchain. Blockchain software automates most of the procedure:
Step 1. Recording a Transaction
A Blockchain transaction reflects the movement of physical or digital assets from one party to another in the Blockchain network. It is recorded as a block of data and may include the following information:
- Who participated in the transaction?
- What happened during the transaction?
- When was the transaction conducted?
- Where was the transaction conducted?
- What were the reasons for the transaction?
- How many assets were transferred?
- How many preconditions were fulfilled during the transaction?
Step 2. Reaching consensus
The majority of participants in a distributed blockchain network must confirm that the recorded transaction is valid. Depending on the type of network, the rules of agreement may vary, but they are usually established at the beginning of the procedure.
Step 3. Block chaining
When participants reach consensus, transactions in the blockchain are recorded in blocks, which are equivalent to pages in a ledger. Along with the transactions, a cryptographic hash is added to the new block. The hash acts as a chain linking the blocks together. If the contents of a block are intentionally or accidentally changed, the hash value also changes, which helps to detect data tampering.
Thus, blocks and chains are securely linked, and editing them is impossible. Each additional block strengthens the verification of the previous block and, consequently, the entire blockchain. This principle is similar to building a tower out of wooden blocks. Blocks can only be stacked on top, and if one block is removed from the middle, the entire tower will collapse.
Step 4. Shared access to the registry
The system distributes the latest copy of the central registry to all participants.
