What is Blockchain?
A blockchain is a list of records, known as blocks, linked sequentially using cryptography.
In computer science, cryptography is secure information and communication methods based on mathematical concepts and a set of rule-based calculations (algorithms). These methods transform messages in ways that are very hard to decipher without a key.
Parts of a Block
Each block in a blockchain is comprised of three things. First, it has transactions.
Second, it has a cryptographic hash. This hash essentially forms a unique digital fingerprint that links the current transaction with the previous one (hence the chain).
Third, the block has a timestamp (the date and time that the transaction occurred). The timestamp helps verify that the transaction data existed when the block was published to get into its hash.
As each block contains information about the previous block, they form a chain. Each additional block reinforces the ones before it. In this way, blockchains are resistant to data modification. Once recorded, a block’s data can’t be altered retroactively without changing all subsequent blocks.
As forks are possible, blockchain records are not entirely unalterable.
Network Manages Blockchain
Typically, a peer-to-peer network manages blockchains. This network serves as a publicly distributed ledger. Nodes in the network collectively follow a protocol to communicate and validate blocks.
Overall, blockchains can be considered secure by design, and they embody a distributed computing system with high Byzantine fault tolerance. Byzantine Fault Tolerance(BFT) is the ability of a distributed network to agree on the same value despite some of the network nodes failing to respond or responding with incorrect information.
Blockchain Innovation
The blockchain concept goes back to the early 80s.
However, the bitcoin blockchain was invented in 2008 by a person (or group) using the name Satoshi Nakamoto. It provides the public transaction ledger of Bitcoin cryptocurrency. The identity of Satoshi Nakamoto remains unknown.
The invention of Bitcoin’s blockchain made Bitcoin the first digital currency to solve the double-spending problem without a central server or a trusted authority.
Cash, unlike a digital currency, does not suffer from the double-spending problem because when a person buys a product with a $10 bill, for example, and gives cash to the product’s seller, the person can’t again spend the same $10 bill, because the seller now has $10 bill.
On the other hand, a digital currency without transaction authentication and validation safeguards would allow someone to spend the same $10 more than once. Bitcoin was the first digital currency to prevent double-spending without a centralized server or authority. So a transaction cannot occur more than once.
The bitcoin blockchain design has inspired other blockchains that additional cryptocurrencies widely use. The bitcoin blockchain is also the basis for numerous applications.
Besides being used for cryptocurrency, blockchains can track assets, including the intangible (patents, copyrights, branding, intellectual property) and tangible (land, cars, houses, or cash). Almost anything of value can be tracked and traded on a blockchain network. Using blockchains for tracking and trading assets is intended to reduce risk and cut costs for all involved.
Distributed Ledger
All blockchain network participants have access to the same distributed ledger and its immutable record of transactions. Since everyone has access to the same ledger, the truth of a transaction has a single source, the public ledger.
Tamper Resistance
If you wanted to alter or tamper with any of the transactions that occurred, the one hash for that transaction would change. Therefore, the previous hash of the next block would now be incorrect.
So, to fix the one transaction, you would have to tamper with every single block in the chain that occurs afterward. So, in this way, blockchains are immutable and very tamper-resistant.
Permissionless Blockchains
Most blockchains like those in common cryptocurrency are public and permissionless. Therefore, anyone can see all of the transactions that have ever occurred.
Identities are not revealed in the process. Only the addresses that people have are shown. All the transactions are public. Also, anyone can register themselves to be one of the nodes in the network.
Anytime a new transaction is made, the ledger is updated with a new block. The network nodes reach a consensus on which transaction is in the next block using a consensus algorithm.
First, a client submits a transaction, and this transaction will join a list of other transactions that have been made on the network. Then, the node starts picking up those transactions in the list. The node will validate each transaction by looking through all of the valid transactions that have happened in the blockchain so far.
The node will then start a proof-of-work algorithm. Proof of work is the consensus algorithm that public, permissionless blockchains use to come to a consensus about which block should be next.
All the nodes start working together to solve a complex, cryptographic hash puzzle.
When one of the nodes solves it, they have essentially unlocked the position of the next block. That node will broadcast that position of the next block to all of the other nodes in the network and add it into their own blockchain.
Proof of stake is another consensus algorithm, however it is only used with permission blockchains. (See my previous article).
References
“Blockchain” (2021, August 14) In Wikipedia. https://en.wikipedia.org/wiki/Blockchain
“practical Byzantine Fault Tolerance(pBFT)” (2019, December 12). In geeksforgeeks.org. Retrieved (2021, August 14). https://www.geeksforgeeks.org/practical-byzantine-fault-tolerancepbft/
Vennam, S. (2019, July 31). Video — Blockchain Explained. In ibm.com/cloud/blog. https://www.ibm.com/topics/what-is-blockchain
