How Blockchain Works

In a centralized organization, the entity controlling the network is supposed to make decisions on behalf of members in the network. In a decentralized blockchain system, this is more difficult to accomplish because there’s no focal point of control. However, a decentralized blockchain system still needs a method of agreement among participants, to make sure that everyone follows the rules and that each node on the network agrees on the content of each block of data. The nodes need to reach an agreement about which block gets processed next; this is called consensus for blocks. They also must agree on what transactions have taken place; this is called consensus for transactions.

In this set of notes, you will learn how blockchain work. You will start by understanding the Byzantine generals’ problem, which is used to highlight the need for a consensus mechanism. Blockchain technology uses many different ways to achieve this agreement among participants, including mining and the Proof of Work protocol. After learning about mining, you will explore why Proof of Stake is more effective at reaching consensus than Proof of Work. Lastly, you will explore how blockchain interoperability is made possible thanks in large part to Blockchain-as-a-Service offerings from enterprises like IBM.