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Academy Blockchain Concept Article


2021.12.22 OKX

A form of a distributed digital ledger — or database — most commonly used to record transactions and network state changes in cryptocurrencies

A blockchain is a data storage method that is central to most cryptocurrencies. It takes its name from the way the data is organized for storing — blocks of data are cryptographically linked together to create a chain. Thanks to their distributed design, blockchains can be an incredibly secure way to store data. They provide extremely high assurances that no previously recorded information has been subsequently altered. 

Unlike traditional databases, blockchains do not rely on a central authority to authorize the addition of new data or a central server to record the information. Users, therefore, do not need to trust the integrity of some central entity in the same way that they’re forced to trust a bank to update its own transaction ledger on their behalf. 

Instead, users broadcast new data to a distributed network of computer systems. These systems verify that the data follows the network’s predefined rules by referencing their own copy of all the previously recorded information.

Blockchain technology takes its name from the fact that data is grouped into blocks and then linked together cryptographically. Blockchains make heavy use of a cryptographic function known as hashing. Hashing is a method of turning a dataset into a string of seemingly random characters. Crucially, every hash is unique. Making a tiny change to the input data will produce a completely different hash. 

Each block of a blockchain contains a hash of the data included in the proposed block, the data itself, and the previous block’s hash. Attempting to alter the data in an earlier block completely changes its hash, which changes the hashes of all subsequent blocks. In this way, any effort to rewrite historical data is immediately evident. 

Blockchains leverage what is known as a consensus mechanism to determine which of the distributed network participants is authorized to update the chain next. Consensus mechanisms — such as proof-of-work and proof-of-stake — enable a group of non-trusting entities to agree on a single transaction history.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.