Blockchain Basics

Overview

• The page is what we call a Block.
• Date time provided on screen B is what we call the timestamp of the block.
• Number X is known as a nonce. It is the number that the nodes of the blockchain network try to find to reach the output number that respects the rule given by the wall.
• The process of finding number X is called mining.
• The rule given by the wall is called a hash function.
• We will see what the reference number is, in later sections.

Hash Function

A hash function is a mathematical function that transforms any chain of characters or numbers into a fixed-length chain of characters. It turns data into a digital fingerprint called a hash.

SHA stands for Secure Hash Algorithm and is a set of cryptographic hash functions designed by the US National Security Agency. SHA-256 means that it is a hash function producing a 256-bit-long output.

Why Work?

Now, why should every villager try to find number X since somebody is going to find it anyway and tell everyone else? Why should a villager spend time and effort to have his/her page validated and displayed on the wall?

We introduce here the incentive mechanism, an economic payoff for the community to play fair. Because the pages should keep being sealed to keep the transactions accurate, the community should continuously work on solving the mathematical problem. In this manner, a reward is given to the villager who finds number X, that is, the first villager to find the correct hash of the page.

This incentive mechanism ensures that everyone keeps interested in working for the common good.

Reference Number

So, what is the reference number? Remember that, on page #1, the reference number was 0?

For page #2, it will be 0031993. Exactly! The reference number of page #2 is the output number found for the previous page. In technical terms, we call it the previous hash or the hash value of the previous block. This allows the pages to be linked with one another, or to be chained to one another.