What Is the Blockchain?: The difference between a normal bank and blockchain
Conventional money transfers depend on third-party intermediaries, such as banks, to process and verify the transactions. If you want to transfer $1,000 to a friend, you ask your bank to deduct the amount from your account and add it to your friend’s account.
The blockchain does away with the need for a broker. It contains records of bitcoin transactions. Each blockchain participant maintains a current record of every other member’s account. If members want to transfer money to someone else, they let everybody in the blockchain network know, so each member can document the transaction on a digital sheet called a block.
However, if the third party that completes the transaction is corrupt or makes a mistake, or if the file with your account balance is destroyed, you will have little recourse to recover your money.
Once a block is full, the members will try to incorporate the block into the main record of accounts, called the blockchain. To do so, the block needs to be sealed.
In order to modify a historical page, [a person] would also have to change the contents and the sealing number of all the pages after that – to keep the chain consistent.
Sealing is a cryptographic mechanism to prevent any further changes to the block. All transactions the block contains will irrevocably become part of the blockchain memory, making it tamper-proof.
The mechanism of sealing makes use of a hash function. Think of it as a machine that takes an input (for example a list of transactions) and returns a unique output code, called a hash. A computer can calculate the hash for a specific input, but it’s impossible to calculate which input you need to enter into the magic box so that it returns a specific hash. The only way to find the right input is to try millions of different inputs and hope that you will chance upon the correct one.
What Is the Blockchain: How Bitcoins gained value
When enough people possess Bitcoins, they grow in value, making other people wanting Bitcoins; making Bitcoins grow in value even further; making even more people wanting Bitcoins; making them grow in value even further; and so on.
Generating sealing number for a block transaction
To generate the sealing number for a block of transactions, members of the blockchain network search for input which, if added to the content of the block and run through a hash function, will return a specific hash. Network members then start crunching numbers until they find one that returns the right hash, an activity called mining.
The correct sealing number then becomes the label of the block committed to the blockchain. By adding the sealing number to the list of completed transactions on the block, members will always be able to verify the integrity of archived records pages. To offer an incentive for all network members to participate in mining, the first member to find the correct number receives a reward in the form of virtual currency such as bitcoin.
As competition for the digital currency grows, members will continue to put in the work to mine for sealing numbers and thus keep the blockchain network going.