What is a Blockchain? (Animated Examples)

in this video we are going to explain what a blockchain is in very basic terms by the end of the video you'll be able to explain this life-changing technology to those you love saving them from the authoritative dictatorships that never cease to control your every move nevertheless we don't really discuss politics on this channel mostly just ideas so let's get into it what is a block in terms of cryptocurrency a block is just a bunch of data in fact the data could be almost anything but usually it's just a collection of records for the numero

uno crypto bitcoin this data is literally just a list of transactions for example it might look like this x pays y fifty dollars a pays b eighty dollars and why pays h fifteen dollars if we're dealing with ethereum it's usually just transactions but it can be a few other things like things called smart contracts which are really neat but we'll have time to explain them in another video for other alt coins they could be the usage of your wifi or files or documents nonetheless a block is just a collection of records for this example to

explain what a blockchain is i'm gonna stick with a record of transactions like in bitcoin specifically we call this record a ledger because it is a record of value exchanging hands now one thing you need to know is that blocks do have limits and they can only have so many transactions in them so we have to keep adding more blocks for our example bitcoin has an average of around 1 500 transactions in one block right now now this number changes but you don't really need to know why just know that these blocks do fill up

and then we have to do something with them well what do we do when these blocks are full we add them to the network now you might be asking how do we do that well we do something called mine them and since bitcoin is a proof of work model we have to prove that we mind them this brings us to something called a hash so the next big question is what is a hashing function a hashing function is a system where you can put something into it and it'll output a hash there's a ton of

math happening inside this magical black box but essentially you give it something and it gives you something in this case bitcoin uses the sha 256 hashing function shah stands for secure hashing algorithm and 256 refers to the amount of zeros and ones that it has in whatever it puts out so whether you put in your name or the entire dictionary it'll always output 256 zeros and ones now our computers are smart so they convert these zero to ones to letters and numbers and it is a complicated process and could be a video on its own

but essentially with hashing functions you need to know three main things number one you can't find the input of a hash you have to guess and check so if you give it a it will give you d then if you give it a a it'll give you j and then if you give it a a a it'll give you u imagine if you wanted to find out what gave you an f you'd have to just keep adding more a's until you found it the second thing you need to know about hashing functions is that changing

the input just a tiny bit changes the output a lot so basically if you do sha-256 of this subscribe to our channel you get this as the output however if you do please subscribe to our channel you get this see these are completely different even though we added one word and lastly the third thing you need to know is that calculating the hash takes some time now it might only take a few milliseconds for one tiny string of text but if you have an entire book that you're doing or if you want to check a

few million variations of it it starts to rack up time and computing power and so what bitcoin is doing whenever you mine it is we're trying to add random numbers to whatever the block is so that we get a special ending for example let's say we're trying to mine this x pays y fifty dollars a pays b fifty dollars and y pays h 15 you'll get this as the output now this is what bitcoin is doing we ask ourselves what number do we have to add to the end of that list to get a zero

at the end of the hash well if we start at zero and then we check it with one and then we check it with two and we use my little python program we figure out that it takes three different checks to get to the first one which is when you put a two at the end of it now let's make it a little harder let's try two zeros at the end of the hash after running my little python minor we figure out it takes 438 tries until you hit the first hash that ends with zero

zero and lastly just to drive the topic home that it takes a lot more time to find these hashes let's look at how many times we have to guess for it to get five zeros if we run the program we get a huge number so as we look for more zeros it takes a lot more time to check it and essentially bitcoin is looking for a lot of zeros and computers all around the world and mining farms are mining away to find the right number when they do we say that that block is solved and

verified but we'll get into that in a little bit the next thing to know about a blockchain is that it is decentralized now this doesn't have to be really confusing so think about it like this centralized means one person controls it for example your grades in high school only your teacher had access to add in your grades or change it they could flunk you if they didn't like you and nothing personal here but maybe you just didn't understand what they were teaching because they sucked at teaching anyways decentralized means that more than one person can

have access to look at and change your grades imagine if all of your classmates were allowed to look at the answers on the test and give you a grade based on your papers and your tests imagine if they could vote on what grade you got instead of just your teacher now this is essentially what decentralized means instead of one person having a list of all the bitcoin transactions literally anyone who wants to can have them and look at them and not only that because this is the important part anyone can mine and actually vote on

the blockchain this means they can say bill really did pay john 50 or they could make fake transactions and say john paid bill all of his money so you might be asking how do you make sure that someone doesn't make a fake transaction and spend all of my money well that's a problem that is solved by using asymmetric encryption with cryptocurrency wallets it's a little confusing and we just finished a few videos on it so you should go check those out after this video but bringing us back to what decentralized means that begs the question

why would a group of teenagers want to look at your papers and tests even more so why would they want to spend a lot of time looking at them and then grade the tests well in this analogy they would be paid to almost in every blockchain you get a reward for participating and putting in good votes for example for mining bitcoin you get paid in bitcoin i hope that analogy makes sense so far we've been over what a block is it's just a bunch of data what a hashing function is it's to make sure that

people actually put in work to participate in the blockchain and we've went over what decentralized means basically means that one person does not control it so if you're still with us after me explaining these interesting topics please consider clicking that like button it gives us fuzzy feelings inside and promotes our hard work next up let's learn why it's actually called a block chain with bitcoin there are two extra things you need to know about one whoever solves the block and finds the magical hash that has however many numbers of zeros we're looking for they add

why board crypto's account received two bitcoins for mining at the top of the block and this is their mining reward this is how more bitcoins are actually created although that number two changes and it gets smaller and smaller as time goes on secondly you need to know that they add the hash of the last block to it so the password of the last block gets added to this block and that hash is actually used to calculate this block's hash so this makes it a chain since each block refers to the last one now this is

where the magic of the blockchain works if you try to go back and edit an old block the newer ones all change because you've messed up that hash that it pointed to remember when we talked about the hashing function and sha 256 if you change it just a little bit it changes the entire thing well that's how we can make sure someone doesn't go back and add more money into their account in an old block in a sense whatever gets added to the blockchain is written down in history forever because it can't be changed now

this is actually really good for things like transactions but it's bad for things like copyrighted material or embarrassing things tis the nature of the internet though so in conclusion we have blocks that consist of data and in the case of cryptocurrency it's usually a list of transactions next after we have a block we have to find the password to that block or basically what is the hash that solves that block and miners do this by guessing and checking until they hit the jackpot and then after they find the solution of that block they make sure

that it's linked to the last block so each block actually has the history of every transaction on it because it refers to a previous block now since each block is connected to the last block this makes it a chain that's what a blockchain is i hope that we've made this confusing topic a little more helpful for you to understand thanks for watching this video and if you enjoyed it please give us a like to reward our hard work and think about subscribing for more amazing videos just like this one we hope to see you in

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