Blockchain is probably one of the most ingenious inventions of our time – the brainchild of a person or group of people known by the pseudonym, Satoshi Nakamoto. But since then, it has evolved into something greater, and the main question every single person is asking is: What is Blockchain?
By allowing digital information to be distributed but not copied, blockchain technology created the backbone of a new type of internet. Originally devised for Bitcoin, the tech community is now finding other potential uses for the technology.
Bitcoin has been called “digital gold,” and for a good reason. To date, the total value of the currency is estimated to hit $1.2 trillion US $. And blockchains can make other types of digital value. So what is all this? How does it work? In this post I’ll try my best to explain what the hype is all about
What is Blockchain Technology?
A distributed database
Imagine a spreadsheet that is distributed among a masstive network of computers. Then imagine everytime the spreadsheet changed, the network replicated this changes in each computer. Information held on a blockchain exists as a shared — and continually reconciled — database.
This has obvious advantages, since data isn’t stored in a single location, it is easy to verify information as records are public. Furthermore, as there is no centralised version of the database, a hacker can’t just corrupt, damage or delete data in a traditional way. In fact, it is almost utterly impossible to corrupt data that is shared and replicated among so many machines. This means that for the first time, we have a publically accessible database NO ONE controls.
Blockchain Durability and robustness
Blockchain technology is like the internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain cannot:
- Be controlled by any single entity.
- Has no single point of failure.
Bitcoin was invented in 2008. Since that time, the Bitcoin blockchain has operated without significant disruption (Well, to be honest, some problems have arisen, but they have been due more to bad intention and human errors rather than hacking). The internet itself has proven to be durable for almost 30 years. It’s a track record that bodes well for blockchain technology as it continues to be developed. The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”. Two important properties result from this:
- Transparency – Data is embedded within the network as a whole, by definition it is public.
- It cannot be corrupted – Altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network. Which makes it technically impossible to this day and easily detectable
In theory, this could be possible. In practice, it’s unlikely to happen. Taking control of the system to capture Bitcoins, for instance, would also have the effect of destroying their value.
So we suddenly have a fully distributed database that can do something, no one up to this date could do, give reliable and verifiable information.
The idea of decentralization
By design, the blockchain is a decentralized technology.
Anything that happens on it is a function of the network as a whole. Some important implications stem from this. By creating a new way to verify transactions aspects of traditional commerce could become unnecessary. Stock market trades become almost simultaneous on blockchain, for instance — or it could make types of record keeping, like a land registry, fully public. And decentralization is already a reality. This could be a godsend for banks and public administrations, or their doom if they don’t play their cards well.
A global network of computers uses blockchain technology to jointly manage the database that records Bitcoin transactions. That is, Bitcoin is managed by its network, and not any one central authority. Decentralization means the network operates on a user-to-user (or peer-to-peer) basis. The forms of mass collaboration this makes possible are just the tip of the iceberg of whats to come.
The Blockchain & Enhanced security
By storing data across its network, the blockchain eliminates the risks that come with data being held centrally.
Its network lacks centralized points of vulnerability that computer hackers can exploit. Today’s internet has security problems that are familiar to everyone. We all rely on the “username/password” system to protect our identity and assets online. Blockchain security methods use encryption technology.
The basis for this are the so-called public and private “keys”. A “public key” (a long, randomly-generated string of numbers) is a users’ address on the blockchain. Bitcoins sent across the network gets recorded as belonging to that address. The “private key” is like a password that gives its owner access to their Bitcoin or other digital assets. Store your data on the blockchain and it is incorruptible. Well, as long as you keep your private key secure. If you would like to know more about how private/public keys work (since they are virtually everywhere) with their mathematical explanation, you can check out this page.
Will Blockchain trigger a New Web?
The blockchain gives internet users the ability to create value and authenticates digital information. The image below shows some possible uses.
This article was adapted from: https://blockgeeks.com/guides/what-is-blockchain-technology/
We have just scratched the surface of everything that is possible with blockchain. What would you like to see? Drop me a line in the comments!