What are Blockchains?
Cryptocurrency balances store their data on a blockchain. At its core, a blockchain is little more than an electronic database – i.e. a collection of information – that is shared across many different computers.
Unlike a traditional database, blockchains organize data into groups known as blocks. These blocks have limited storage capacity, so when they become full they are locked and linked to the previous block with a “hash”. This forms a chain – hence the name, blockchain.
These hashes are extremely important because they make blockchains immutable, that is, data (such as your Bitcoin or Ethereum balance) can’t be deleted, tampered with or changed once it is locked into the chain.
Hashes are created through a cryptographic process (known as hashing) that takes a given set of information and converts it into a unique code (which is basically a long string of characters). For example, the word “fox” could be hashed as DFTY786DCFJ894SUSH865AAHJAI978 and the sentence “the quick brown fox jumps over the lazy dog” could be hashed as SOIAUYA7865ASLUAN098A5489USYAN. There are three important things to note about hashes:
Virtually anything can be hashed (i.e. you can hash a word, a sentence or the entirety of War and Peace)
Hashes are always unique (i.e. if you changed a single letter in War and Peace you would get a completely different hash)
It’s impossible to guess the original data from looking at the hash (i.e. you wouldn’t know that DFTY786DCFJ894SUSH865AAHJAI9785 was “fox”)
Because all new blocks are required to store the hash of the previous block, it’s easy to see if the blockchain has been tampered with. If the hash contained in the new block matches the old, you know that the data is secure. If they are different, everyone will know that the block has been tampered with.
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