What is a blockchain?
Distributed ledger technologies are based on a concept known as blockchain. The term “blockchain” refers to the basic structure that is a chain of blocks. The “block” in a blockchain is where transaction records or various pieces of information are kept. Blocks are “chained” together using cryptography & decentralized consensus mechanisms such as PoW (Proof of Work), PoS (Proof of Stake), or hybrid PoW/PoS.
What are blocks?
Blocks are essentially files where transactions or information are recorded. They serve as the universal ledger for all users transacting on the network. In the case of the Bitcoin blockchain, new blocks are initiated every 10 minutes, a concept referred to as “block time.” As users across the network transact, the current block fills up with transactions. Blocks have a limit to the amount of transactions they can contain, as defined by the block size. Bitcoin’s block size is 1mb while individual transactions are approximately 250 bytes in size.
This combination of block time and block size creates a rate-limiting mechanism on the performance of the network. Users must pay fees in order to be included in the next block if they want transactions to be accepted and confirmed by the network. If network usage is high, then they can also expect demand for block space to follow. As often experienced on the Bitcoin blockchain, transaction fees see sharp increases during high demand periods as users bid to have their transactions included for processing. This market for block space is referred to as the “mempool.”
What is a block header?
Each block contains a set of metadata that creates a unique identifier for itself. This metadata is contained within the block header. Metadata included in a block header can differ across implementations. On the Bitcoin blockchain, the block header contains the Bitcoin version number, previous block hash, Merkle root, block timestamp, target block difficulty, and a nonce value used by miners.
How are blocks “chained” together?
By chaining blocks together using cryptography, a blockchain is created. Block header commitments provide binding agreements to key pieces of information using cryptography. The particular piece of metadata that chains a block to another is the hash of the previous block that is lower in block height. Security of the previous block’s hash is guaranteed by the collective hash rate of the network. Therefore, by linking the previous block to the current block using a cryptographic commitment on the block hash itself, animmutable, tamperproof link between the blocks is created, resulting in a blockchain.