How does blockchain work? Simple and easy explanation

 The topic of how the blockchain works, the second part of the previous topic, “ A simple and easy explanation from scratch of the blockchain, ” in which we talked about an agreement or an agreement, it is necessary to understand what the agreement is ( read the previous topic well ) to make it easier for you to understand the blockchain easily in the correct theoretical sense. In the previous topic, we wrote about how certain types of agreements are fundamental to the functioning of societies. But what is the relationship of blockchain to societies and agreements?

How does blockchain work? Simple and easy explanation

How does blockchain work? Blockchain technology is basically just a new way to preserve agreements. The big difference between blockchain technology and traditional existing methods, is that the blockchain agreement is not maintained centrally by a single authority.

To illustrate the difference, let's take a closer look at the money ownership agreement. We will claim that the banks maintain the agreement about who owns something on one document, and the document consists of a list of all clients and their accounts and balances, and this is agreed upon between the bank and the customers. Every time the customer wants to send some currency to another person, the bank receives a notification, the bank updates the agreement by subtracting any - from the sender and plus + to the recipient, and the process takes place centrally, i.e. via the bank.

One day, the community decides that they do not want the bank to be responsible for maintaining the agreement again, meaning that they want to dispense with the bank in managing their money and accounts. In fact, they don't want any authority to control, manage and maintain their accounts. And they decided that anyone could participate in preserving the agreement if they wished to do so. Many people in that community accept this role. Let's call the people who are involved in keeping the agreement peers.

Whenever there is a change in the agreement, that is, every time a transaction is made, all peers in the community will have to update the agreement they have as the agreement should not differ between the peers of course. In order to ensure that all of their peers have the same agreement documented before and after the transaction, they need to fulfill the update, agree to update, update the agreement, and then sign the unified document for all peers.

For other types of agreements, this manual update process may be fine, especially if the agreement in question does not change, or the composition of the nature of the agreement changes once every 10 years. But what about the agreements that happen every day, every hour, or every second, .. What was mentioned in the previous paragraph, it could be in a small community made up of a few individuals, from those individuals in the community there are those who document these agreements and they are peers and Each one of those peers has similar agreements, in which all operations, transfers, accounts, balances, or anything of the nature of an agreement... which the community agrees to be in the agreement, every time a party from the community wants to change something of what it owns in the agreement or transfer it To someone else, the peers meet to document the process on all of the peer agreements in the community.

Blockchain technology enables peers to maintain the efficiency of the agreement, making it talk automatically, every second. Once you start asking how blockchain technology does this, here you are asking a deep and technical question, which can be called software magic.

Using the magic analogy, a public blockchain can be imagined as follows:

• A similar agreement is written on a set of mathematically and programmatically enchanted documents.
• Anyone can participate in maintaining this agreement by owning one of these public and open source documents.
• Rules describe the changes you are allowed to make in a document
• Any valid change is made to one document automatically, and to all other documents participating in the blockchain

These magic properties ensure that all peers have an identical and updated copy of the agreement. There is no central authority controlling the agreements, and all the peers have an identical duplicate every second. Transactions are permitted and confirmed by the peers. Which is the reason why blockchain is decentralized, there is no centralized control unit in a true deal.

Let's talk about agreements about currency ownership. The magic rules applied to these documents are:

• Each enchanted document contains a list of all the accounts and their corresponding balances.
• People own their accounts, and they can send the balance from their own accounts to other accounts.

In essence, it is these rules that create the cryptocurrency , the most prominent example being Bitcoin . Unlike Bitcoin, the communities in our example suddenly agreed that their calculations would be documented in this new way. Currency ownership will be identified as balances next to the agreement accounts.

In the real world, there is no society that maintains its currency this way. For the deal called Bitcoin, the balance in each account is only a number. There is no explicit agreement that this number should be important, unlike local ordinary currencies in all modern societies that legally require its members to accept it as a method of payment.

But as of writing this article, Bitcoin is increasing in value every day, reaching $ 5,000, which means that many societies agree to this currency and deal with it ...

Bitcoin has value because people, you, he, she, they, me, are willing to trade our money in exchange for bitcoin. Thus, we aspire to trade in Bitcoin to create an agreement that it has value and can increase the value of our financial assets. Just like traditional currencies, the only real reason Bitcoin has value is because people believe so in the future.

The Bitcoin agreement started in 2009, and the software behind the Bitcoin protocol is 100% open source, which allows anyone to see how the magic of the blockchain works. This allowed people to make changes and create copies of the original. In terms of measures of enchantment as we called it, the new derivative blockchain is like other sets of enchanted documents. These new sets of documents could follow different rules for how to update the agreement.

Although the rules of other blockchains differ, they still share ownership of having a list of accounts and balances at its core, as each blockchain has its own currency known as cryptocurrencies. Every public blockchain needs a cryptocurrency, in order to be able to reward peers who maintain, document, and confirm the agreement.

Think of Bitcoin, and other cryptocurrencies as a digital version of a tangible currency. However, moving and transferring money from one person to another is not physical. That is, whenever you send someone Bitcoin, Bitcoin does not transfer like $ 10. But Bitcoin is nothing but a digital value in the agreement, so that when you send bitcoin the distributed agreement about Bitcoin ownership is updated among peers participating in the Bitcoin blockchain network or any other currency. By this, a minus is made - from your account Bitcoin balance, and a plus + is made for the received Bitcoin balance.

One of the first imagined alternative uses of blockchain was to preserve ownership of the site. So that instead of being managed centrally, the rules governing ownership of sites on the blockchain can be preserved, documented, and verified with the blockchain.

In addition to creating a blockchain for the agreement about digital assets like digital cash or websites, you can also represent physical assets on the blockchain. A blockchain agreement can describe who owns commodities, real estate, financial instruments, and even existing currencies. The blockchain itself does not have any power outside of its own agreement, it cannot blame someone if it does not represent the physical value of gold on the blockchain. But blockchain can still be used as a way to preserve these agreements if the agreement is given legal precedence or a trusted third party as a supporter.

The blockchain agreement is not limited to describing ownership of different types of assets, but the rules of the blockchain also define how this ownership is managed.

• With regard to website ownership, these rules will determine how websites are acquired for the first time through auctions, how ownership is transferred, and rules to prevent people from misappropriation or deception in the course of transferring ownership of the sites.
• Blockchain can also be made to retain ownership of company shares, as it can define rules for how dividends are distributed to shareholders, how those owners vote, and how ownership is transferred.
• A blockchain can define payment rules if certain conditions are met. Or if you have stored some data for a while and you are installing it on the blockchain, the blockchain can make the payment automatically to store the data.

All of the examples above describe blockchains with different rules for how to update the agreement. These rules can also be considered agreements, and more specifically, they are pre-defined agreements on how to update the agreement.

These agreements on how to update the blockchain agreement are known as smart contracts or Smart Contrats, and this last concept is the focus of our next topic, so that you have a clear idea of ​​the blockchain without any cultural complications!

So far, we hope that you have clarified something about the concept of the blockchain and how it works. Read the next topic on smart contracts.

We hope to find your comments and opinions on the subject. Any ambiguities in this or previous topic, leave us your questions and inquiries.