Before we get into what blockchain is, we should start with how blockchain started. Blockchain was first conceptualized by Satoshi Nakamota, the creator of Bitcoin. This is not to say that he invented blockchain, in fact, some cryptographer named David Chaum proposed blockchain in a computer science paper in 1982. Nakamota utilized the decentralized aspects of blockchain to create a shared and secure database used to run Bitcoin.
The original Blockchain used to run Bitcoin was a self-regulating collection of secure data stored on a network of computers. Today blockchain is something much bigger. Of course, the cryptography and cryptovalues still exist, but so does cloud based computing and Non-Fungible Tokens.
There are so many awesome analogies for blockchain, but here it goes: Blockchain is like a library with obsessive librarians that love to keep track of things. Baked into the library are ton of complicated rules related to how one can take out and return a book. The rules ensure that if a blockchain user dares to take out a book, there is written record of every person to have ever taken out that book before and all pertinent information related to that book. Unlike fight club, the golden rule amongst the members of the library is to never stop talking about the library. Obviously, this is mostly jest, but blockchain is a product of our neurotic tendencies and failed systems.
At its core, blockchain allows for you to agree about data anonymously with strangers on the web. Public blockchains store information that isn’t controlled by any single person or entity but is the responsibility of everyone on the blockchain. A block is a store of data, at a minimum, record of valid transactions on the blockchain which forms a permanent receipt. The chain forms when multiple blocks, which point back to each other, are stored on the blockchain. Honestly, there is so much more to blockchains than what I just stated, but, like blockchain, which is in its infancy, we must start somewhere.
Blockchain is not just about Bitcoin, in fact, it’s so much more than Bitcoin. Anyone or thing can make a blockchain to keep track of anything, we aren’t talking just about finance. I for one, am convinced that blockchain is going to revolutionize everything, but it’s also possible that blockchain is just the product of obsessive human tendencies.
Blockchains start as an empty ledger until the creators implement the genesis block, which is the first block. Then pursuant to the rules of the blockchain, people and entities can add other blocks and form a blockchain if they are complying with the rules of the blockchain. If we are talking about cryptocurrency, then it is likely the next block will be a transaction. If we are talking a about tracking weather patterns the next block might be a weather event.
When information enters the blockchain, software nodes set up by the creators of the blockchain check to verify the information is being sent by a valid user. For example, in terms of cryptocurrency, one user may transfer the currency to another user and it is the job of the software nodes to verify that the transaction is what each party says it is. In this example, and depending on the blockchain project, the transaction won’t necessarily go through immediately, there exists a process where individuals known as miners compete to create the block. This process is known as mining, and it differs per blockchain.
Blockchain might seem easy to manipulate or ripe for error, but there are multiple safeguards to create transparency and prevent tampering. Blockchain provides a way to verify that the date you’re viewing hasn’t been altered. Hashing is a computing concept from the 1950s that is utilized by blockchain to prevent tampering by applying a unique tag to every aspect of the blockchain. This includes transactions and individual blocks. Hashing allows a user to utilize a string of characters (hash) to represent a unique piece of data, with each block storing the hash of the block before it. Hashes will always be the same so long as the data they represent stays the same. Similarly, if the data represented by a specific hash changes, the hash will change as well. Hashes create a perfect union of brevity, considering it is easy to find out that a piece of data on the blockchain came from a specific hash, and anonymity because it is almost impossible, without luck or outside knowledge, to tell what data is represented by the previous hash. The “crypto” part of cryptocurrency comes from the use of cryptographic hashes.
Now that we have established that blockchain is essentially bulletproofed via encryption, we need to address how it all comes to fruition for a human being. Each blockchain has something called a consensus algorithm. The consensus algorithm differs per blockchain but ultimately ensures that if a nefarious actor were to attempt to alter the ledger, they would need to recompute the genius block and every block that came after.
Blockchain isn’t for everyone (yet). Spaces benefitting from decentralization or record keeping would likely benefit from blockchain, but there is no reason to force it. To the contrary, some entities, even those that would benefit from decentralization and record keeping already have bulletproof databases.