Who makes blockchain work? #WCA

Welcome to our second blog of the segment Wayru Crypto Academy #WCA: the place where you’ll learn all about the amazing crypto world.

Let’s take a look at how blockchain works: there’s a block of information that has three key elements. First, any data, like a transaction detail; second, a specific verification code that is unique and unchangeable, which is called hash; and third, the hash of a previous block. This chained structure is almost impossible to hack without making it obvious: if someone tries to modify block B, block C will have to change too, and so on. Right? So, getting to a higher level: how come block A, B or C are correct? How can we trust that information? But most importantly, who is going to make that work while at the same time the system is meant to be decentralized? This is the part where things get interesting.

To have a block added to the chain, it’s necessary to verify it is correct. That means, talking about blockchain used in a financial system, that the account has enough money. That’s the easy part, since all the registration of movements is known by all the participants, so it’s not a big deal to accept a transaction. The problem is that there are a lot of people making transactions at the same time and all of them need to be verified so they can become part of the chain. Also, it’s necessary to make the blockchain trustable.

The solution proposed by Satoshi Nakamoto is proof of work. What is it about? A certain work someone has to do to add a block to the chain. With that, no one will easily add incorrect information that will lead to fraud. The first thing you need to know is that the block contains several numbers of transactions and that the hash is not given randomly. This person, called a miner, has to find the solution of a validated hash through a calculation that solves a cryptographic puzzle. For example, finding a hash that starts with a certain number of zeros. As a reward, miners get some coins for adding a block. This work takes time, and time is what keeps the blockchain safe.

Once the puzzle is solved, it has to be validated by other people. Proof of work is a way to create consensus among the users, who agree about how their coins were spent. Is like there are a lot of eyes revising the work of the miners. There’s no chance that one person will make a chain full of on-purpose mistakes because while this user is making up valid blocks, a lot of people are validating the correct ones a lot faster. Nakamoto explains that the longer chain is the valid one.

The chain? Is there more than one chain? A lot of people are making transactions and a lot of people are working as miners too. You may imagine that it can also happen two or more people find the correct hash at the same time. Then, what is expected, is that the next block added to one of those chains will make it longer as well as valid.

But, what if a considerable group of miners has the power? What’s the solution to keep the technology decentralized? What other uses can surge from the blockchain besides a financial system? Stay tuned to Wayru Crypto Academy.

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