What is blockchain?

A blockchain is a data structure used to create a decentralized ledger. A blockchain is composed of blocks in a serialized manner. A block contains a set of transactions, a hash of the previous block, timestamp (indicating when the block was created), block reward, block number, and so on. Every block contains a hash of the previous block, thus creating a chain of blocks linked with each other. Every node in the network holds a copy of the blockchain.

Proof-of-work, proof-of-stake, and so on are various consensus protocols used to keep the blockchain secure. Depending on the consensus protocol, the blocks are created and added to the blockchain differently. In proof-of-work, blocks are created by a procedure called mining, which keeps the blockchain safe. In the proof-of-work protocol, mining involves solving complex puzzles. We will learn more about blockchain and its consensus protocols later in this book.

The blockchain in the Bitcoin network holds Bitcoin transactions. Bitcoins are supplied to the network by rewarding new Bitcoins to the nodes that successfully mine blocks.

The major advantage of blockchain data structure is that it automates auditing and makes an application transparent yet secure. It can prevent fraud and corruption. It can be used to solve many other problems depending on how you implement and use it.