Blockchain is made up of two words: block and chain. The literal meaning of blockchain is a chain of blocks; when we talk about chains and blocks in blockchain, we are actually talking about a chain of digital information, and each block stores this information.
Normally, when it comes to recording and storing data on a large scale, minds turn to centralized databases. In databases, advanced hardware is placed next to each other and records, stores, and processes data at high speed. Databases are completely centralized; meaning that only one specific person or entity has access to them.
Until the advent of blockchain technology, no one imagined that there would be an alternative to this method of recording, storing, and processing information. Blockchain proposed a new idea for recording and storing data. Accordingly, instead of storing data in centralized databases, a copy of the data set is made available to network members; for this reason, the most important feature of blockchain is considered decentralization.
Consider a financial system. In the normal and traditional case, all data is available to banks. All transactions are carried out under the supervision of banks. Accordingly, everything is centrally controlled by the bank. In contrast, there are blockchain-based financial systems; in these systems, information is available to all members. In this way, practically no single person or entity has control over transactions.
“Distributing data on the blockchain network virtually eliminates the possibility of tampering with it”
Since the emergence of Bitcoin in 2009, the level of use of blockchain technology has grown significantly through the creation of various cryptocurrencies and their application in the field of DeFi, non-fungible tokens or NFTs and smart contracts.
Script
Blockchain consists of programs called scripts that perform common operations in a database. Which includes entering and accessing information and finally, recording and storing it. Blockchain, in the form of a distributed ledger, has multiple versions on computers around the world and these versions must match each other completely in order to be accurate and reliable.
Due to the decentralized nature of the blockchain, all its transactions are transparent and visible to everyone in full detail in the blockchain browser, and cryptocurrency transfers between different accounts can be tracked in real time. New generation blockchains and solutions designed based on them often consist of three main layers:
Layer 1: In fact, the network infrastructure includes the main content and performance settings of the blockchain. For example, Layer 1 of the Bitcoin blockchain includes the ledger of distribution and recording of transactions of this cryptocurrency, network nodes and the mechanism of block confirmation (consensus algorithm), i.e. proof of work. Simply put, Layer 1 of the Bitcoin blockchain is the main Bitcoin network and its capabilities as introduced in the project whitepaper in 2009.
Layer 2: Refers to the protocols and capabilities added on top of Layer 1 of the network. These capabilities generally include enhancing the network processing speed and reducing transaction fees. Most Layer 2 solutions such as Polygon, Arbitrome and . . . These technical limitations are overcome by processing transaction batches outside the main blockchain layer and finally passing completed transactions to the Layer 1 blockchain. Layer 2 protocols can be thought of as separate networks built on top of the main network and Layer 1 blockchain.
Layer 3: In a blockchain, this is known as the application layer. This layer is where decentralized applications and their execution protocols are implemented. While blockchains such as Ethereum and Solana support a diverse set of Layer 3 applications, the Bitcoin blockchain does not offer such capabilities.
How does a blockchain work?
A blockchain consists of multiple blocks that are linked together. For a block to be added to the blockchain, four things must happen:
1. Starting a transaction
Any transaction that occurs on the network results in the addition of a new block to the blockchain. For example, if you want to deposit some Ethereum to your friend’s wallet, this transaction is done by creating a new block in the Ethereum ecosystem.
2. Confirming the transaction
After registering your transfer request, the network miners will be responsible for confirming your transaction. First, the new information needs to be entered into the system. This is done by computers. The network is often made up of thousands of computers spread across the world.
3. Storing the transaction
Your transaction must be stored in a block. After the transaction is verified, the amount you requested to deposit and your digital signature are stored in a block.
4. Adding a block to the blockchain using a hash
After all the transactions in a block have been confirmed, a unique identifier called a hash must be assigned to the block. Once hashed, the block can be added to the blockchain.
