Digital Currency

A blockchain is a digital ledger of every transaction in a currency, organised as a chain of blocks linked by cryptographic hashes, with copies stored across many computers in a decentralised network.

Three big ideas in that definition:

1. A ledger: a record of who owns what and who sent what to whom.
2. A chain of blocks: transactions are grouped into "blocks" and each block links to the previous one through a hash, so the whole history is connected in order.
3. Distributed across many computers: no single computer holds "the" blockchain; many computers (nodes) keep copies and agree on the same version.

What is inside a block?

Each block typically contains four things:

What a hash is

A hash is the fixed-length cryptographic fingerprint of some data, produced by a one-way function. Even a tiny change in the data produces a completely different hash.

Two important properties of a hash:

• Deterministic: the same input always produces the same hash.
• Sensitive to change: changing even one character in the input produces an utterly different output. This is what makes hashes useful for spotting tampering.

How blocks form a chain

Each block stores the hash of the previous block in its own header. This is the "link" in the chain:

Block 0          Block 1          Block 2          Block 3
[ hash: H0 ]     [ hash: H1 ]     [ hash: H2 ]     [ hash: H3 ]
                 [ prev: H0 ]     [ prev: H1 ]     [ prev: H2 ]
[ data ]         [ data ]         [ data ]         [ data ]

The first block (block 0) is special and is called the genesis block; it has no previous block, so its prev field is zero or empty.

When a new block is added, the network calculates the hash of the latest block and stores it as the new block's prev. The chain grows one block at a time.