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The Technology behind Bitcoin : Blockchain

technology behind bitcoin called BlockChain
Reading Time: 3 minutes.

Have you ever wondered what makes bitcoin so secure? The technology behind bitcoin is called “Blockchain”. Idea behind blockchain was originally discovered by a group of researchers in 1991 for digital timestamps like a notary . However BlockChain to be used in currency was invented in 2008 by Satoshi Nakamoto and it forms the basis for Bitcoin any any other cryptocurrency in market . As the name suggests BlockChain is a chain of blocks that contains information and they are linked using cryptography.

Blockchain is a distributed ledger that is open-source. It has few properties like once data is stored in a block it become difficult to change it.

Working of Blockchain : The technology behind Bitcoin

Each block contains three parts :

  •     Data (D)
  •     Hash (H)
  •     Hash of previous block (PH)

Data that is stored in a block depends upon type of cryptocurrency . For example in case of bitcoin Data stored is information of sender , receiver and amount transacted.

Hash of a block is always unique and identifies a block. If somehow content of a block is changed then its hash value will also change.Hash of previous block (PH) helps to maintain that chain without the order of blocks getting destroyed.

Example :

B1 : Hash – 2DGC (H1)

Previous hash – 0000 (PH1)

B2 : Hash – 7TBF (H2)

Previous Hash – 2DGC (PH2)

B3 : Hash – 8HBS (H3)

Previous Hash – 7TBF (PH3)

Blockchain the technology behind bitcoin


Here B1,B2,B3 are three block and in order B1->B2->B3

You can see that each block contains the hash of previous block i.e H1 = PH2 and H2 = PH3. The value of PH1 in case of B1 is 0000 since there is no block prior to this. Here B1 is called Genesis Block

In case anyone makes any change in any of the block then its hash value will change , as a result there will be mismatch between PH of next block and H of current block and chain will become invalid. This prevents any intruder from changing its value.

However it is possible to change the value of particular block by using powerful machines and use computer processing to compute PH and H of all the next blocks in chain making it a valid chain.

There is a concept called “Proof of work” in Blockchain to overcome this problem. It is a mechanism that slows down the creation of block. For example case of Bitcoin it takes about 10 minutes to calculate POW and hence create a new block which will be added to chain. This makes changing any block more difficult ,since now changing any block will now require recalculate hashes of next blocks as well as POW for those block. This technology behind bitcoin works like charm.

We know Blockchain works on Peer to Peer technology i.e it is distributed . So anyone who joins this network will have a copy of block chain, which he/she can very if chain is valid. Whenever a new block is created , It is shared in network and once consensus is achieved , that block is added to block chain.

Possible uses of Blockchain are recording of events, medical records, and other records management activities, such as identity management, transaction processing, documenting provenance, food traceability or voting.

This is basic explanation for blockchain . However there are many more things which I will discuss in later posts. Comment down below any of your thoughts.


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