Transactions are grouped into blocks and the system works to make the block's hash contain a certain number of leading zero bits. Once a proof-of-work is completed, a block cannot be changed unless the work is redone. As more blocks are added to the chain, changing the block would require redoing the work for all the following blocks too. A result of this system is that the network accepts the longest chain as the legitimate chain.

Proof-of-Work

In a Bitcoin transaction, the current owner transfers the coin to the next owner by signing the hash of the previous owner and the next owner's public key. In addition, all transactions are publicly announced, avoiding a third-party to verify transactions. To avoid double-spending, only the earliest transaction counts.

Bitcoin Transactions

A timestamp server, as the name implies, provides a record of the time each Bitcoin transaction took place. It does this by taking a hash of a block and publicly publishing the hash. This provides a "proof-of-existence" for whether or not data existed previously.

Timestamp Server

Cryptographic Hashes are computational algorithms that ensure any alteration to a transaction input, which result in a different hash value being computed. This process guarantees that changes to the ledger must once again be reviewed by all miners and go through the consensus process.

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- Blocks and blockchain networks
- Distributed ledgers
- Participants
- Assets, transactions, and channels
- Consensus
- Smart contracts and chaincode
- Peer-to-peer replication
- Digital signatures
- Cryptographic hashes
- Wallet

Blockchain Key Terms

IBM Developer Staff. (2020). Get started with blockchain. IBM Developer. https://developer.ibm.com/learningpaths/get-started-blockchain/

Groopman, J. (2021, June 1). Permissioned vs. permissionless blockchains: Key differences. SearchCIO. Retrieved February 9, 2022, from https://www.techtarget.com/searchcio/tip/Permissioned-vs-permissionless-blockchains-Key-differences#:~:text=Permissionless%20blockchains%2C%20also%20known%20as,fully%20decentralized%20across%20unknown%20parties. 

Frankenfield, J. (2022, February 8). Smart contracts: What you need to know. Investopedia. Retrieved February 9, 2022, from https://www.investopedia.com/terms/s/smart-contracts.asp 

Get started with blockchain: Explore the basics of blockchain and get started building a solid foundation

There are two types of blockchain networks: 
- Permissionless networks are open networks that are available to anyone
- Permissioned networks are closed, private networks 

Blockchain networks

Every participant on blockchain acts as a publisher and subscriber. Each node
can receive or send transactions to other nodes, and the data is synchronized across the network as it is transferred.

Peer-to-peer replication

Smart contracts are self-executing programs that are coded with the terms of agreement between a buyer and a seller. They run when predetermined conditions are fulfilled. Smart contracts automate transactions to meet two main goals: reducing time loss and participant involvement. 


Smart contracts

Written in Go, the chaincode defines the terms of the smart contract. When a transaction occurs, chaincode functions read and write the appropriate values into the ledger.


Chaincode

Blocks are files that store data on the blockchain by recording the updated data of transactions and storing that data on a digital ledger. Blocks hold encrypted data, and in order to identity a particular block the information from previous blocks as well as data from transactions are used. 

Blocks

Consensus is what ensures that the shared blockchain ledgers are exact copies of each other. Consensus is defined as 50% + 1 of the mining community which is comprised of enough members that it is extremely difficult to create fraudulent transactions.

Consensus

Distributed Ledgers (also known as DLTs) are databases that are shared and collaborated across websites, firms, institutions and so on. Distributed Ledgers utilize the technology that Bitcoin uses, which is blockchain. Distributed Ledgers exist in several locations and can be accessed by various individuals. 

Distributed Ledgers

Cryptographic Hashes

Digital signatures are unique keys to each blockchain user that ensures transactions originated from the correct senders. Digital signatures function to  mitigate the risk of fraud by serving as an additional layer of security.

Digital Signatures

Software that stores one's private key, public key, and blockchain address. It is used to communicate with the blockchain network. One can use the wallet to send and receive tokens.

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