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Blockchain is a distributed and immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.

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• Distributed: All network participants have access to the distributed ledger and its immutable record of transactions.
• Immutable: No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.
• Ledger: A book in which transactions are regularly recorded.

Each block contains information and chronologically connected. When a new information is added, or existing information is amended, a new block gets added.

Basics:

In order to deeply understand the Blockchain, we first need to understand the SHA256 and Blocks.

• SHA256 Hash: It's a fingerprint of some digital data. Every time you type exactly the same data, you get the same hash. They are created by putting data in "Hash Function". SHA256 is a Hush Function / Algorithm. ETH uses Keccak256 for hashing algorithm.

• Block: Its exactly like hash but data section is broken down. Instead of having the singular data, we will break down the data into multiple places like Block Number, Nonce and Data. Miners are trying to find Nonce which can solve the hashing algorithm.

• Blockchain: Simply put its a collection of Blocks but we also have Previous Hash of the last Block. First block in the Blockchain is called Genesis Block. So the next Block in the Blockchain uses Previous Hash also, in addition to Block Number, Nonce and Data.

  • If we change data in one of the Block, then we have to "remine" all the blocks ahead of this block which is computationally expensive. But if I'm the owner of this Blockchain, I'll be able to do that.

• **Distributed Blockchain:** The basic feature of Blockchain is that it's a decentralized ledger, meaning many people have the same copy of the ledger. These copies are called "Nodes" and people who have those copies are called "Node Providers". If one Node provider changes the data and remine it, it won't match with the copies of others and this Node provider will be kicked out of the network. Majority rules in the Blockchain!!

• Cryptographic Tokens: Tokens represent any form of economic value. Historically humans used Shells or Beads as form of token and later on gold / gold coins became tokens. Cryptographic tokens on Blockchain means either:

  1. Access to the right to some underlying economic value (property) or;
  2. A permission to access the property or service
  3. A right to vote

  For example Bitcoin is a public tokenized property (asset). This assets and/or access to right is managed by a computer network, a blockchain network.

• Coinbase: We can add a coinbase transaction to the blocks. It basically means that we will invent a token value and add it to some wallet. In tokenomics, we want to make sure that the person has balance before they initiate any transaction.

Both Token and Coinbase are concepts from the financial contexts mainly.

Consensus:

We can check if any particular node is in sync with rest of the Blockchain through consensus mechanism. This mechanism can be broken down into 2 pieces:

• Sybil Resistance Mechanism (SRM) - The mining process is called Proof of Work, and is part of SRM. It defines a way to figure out who is the block’s author i.e. which node did the mining. SRM is mechanism made by the blockchain to fend off somebody making pseudo anonymous nodes so they can get more and more reward. Two type of SRM:
  • Proof of Work (PoW)- Any node has to go through computationally expensive work of mining. Irrespective how many pseudo anonymous nodes someone makes, each one of them has to go through the mining process. Mining technical term is PoW which means miners proof that they have put lots of the work. BTC and ETH are PoW.
  • Proof of Stake (PoS)- Only validators who “stake” the coins can validate the block transaction. The owners offer their coins as collateral for the chance to validate blocks. Validators are then selected randomly to "mine," or validate the block. This system randomizes who gets to "mine" rather than using a competition-based mechanism like proof-of-work. The node owner deposit (stake) the funds to the blockchain. Stakers forge blocks, they don’t mine them. ETH currently locks up 32 Ether as collateral on a node to start staking.
• Chain Selection Algorithm - How do we know which Blockchain is the real Blockchain? One way to verify is that which node has the most chain / blocks in it. The more blocks any chain has, the more computationally expensive it is for that node. BTC and ETH uses “Nakamoto Consensus” which is combination of PoW and Longest Chain Rule.

Reward: