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7 Important Blockchain Concepts

Kristen Bouchrara

Apr 29, 2022

Want to learn more about blockchain? These 7 concepts will provide a foundation to understand blockchain technology



If you're new to blockchain, the sheer amount of jargon and concepts can be overwhelming. Here are seven important concepts that you need to know to understand how blockchain works:

1. Blocks

2. Cryptography

3. Distributed ledger

4. Smart contracts

5. Tokens

6. Network Nodes

7. Merkle Trees

These seven concepts are explained in more detail below:

1. Blocks: A block is a record of transactions that have taken place on the blockchain network. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (including the sender's public key, receiver's public key, and amount transferred).

2. Cryptography: Cryptography refers to the use of mathematical algorithms to encrypt and decrypt data, as well as to secure communication channels. A crucial element of blockchain technology, cryptography helps ensure that only authorized parties can access and modify data on the network.

3. Distributed ledger: Unlike traditional ledgers, which are typically stored in centralized databases managed by a single entity, distributed ledgers are maintained across a decentralized network of nodes. This allows transactions on the blockchain to be verified and recorded by multiple parties simultaneously, instead of relying on one central authority.

4. Smart contracts: Smart contracts are self-executing programs that automatically enforce the terms of an agreement between two or more parties. They run on top of a blockchain platform like Ethereum, where they can be used for a wide variety of purposes, including managing payments and contracts.

5. Tokens: Tokens are a digital currency that can be used to make payments on the blockchain network. Different blockchains support different types of tokens, with some based on popular cryptocurrencies like Bitcoin and Ethereum, while others are unique to their own platforms. By using tokens, users can send and receive goods or services without relying on any third-party intermediary like a bank or payment processor.

6. Network nodes: It's also important to understand the role of network nodes in maintaining and securing the blockchain. Every computer connected to a blockchain network acts as a node, and each node has access to a complete copy of the blockchain data. This distributed nature of blockchains makes them inherently resistant to attacks or failures, since there is no single point of failure. To successfully modify or alter data on the blockchain, an attacker would need to gain control of more than half of all active nodes simultaneously - a feat virtually impossible given today's computing power. As such, blockchains are often touted as among the most secure technologies available today.

7. Merkle trees Merkle trees are a fundamental data structure used in blockchain technology. Named after their inventor Ralph Merkle, they are used to verify the integrity of data stored on the blockchain. A Merkle tree is a type of binary tree, where each leaf node contains a hash of some data (typically a transaction), and each non-leaf node contains the hash of the child nodes. By storing data in this way, it's possible to verify the authenticity of any piece of data without needing to store the entire dataset. This makes Merkle trees particularly well-suited for distributed systems like blockchains, where large amounts of data need to be verified quickly and efficiently.

This is just a small sampling of the concepts and terms that you'll need to know to understand how blockchain works. However, by familiarizing yourself with these key concepts, you'll be well on your way to understanding this cutting-edge technology. ZetaZillions.com has dozens of short articles that break down the key concepts, so you can get familiar with blockchain, how it works, and its potential.


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