What is blockchain?
What is the blockchain technology?
Blockchain as its own name says is a chain of blocks that contains information. It was first described in a paper released in 1991 but went almost unused prior to being adopted by Satoshi Nakamoto to create the Bitcoin blockchain.
A blockchain is a distributed ledger open to anyone that can be programmed to record not just financial transactions but virtually everything of value. The main selling points of a blockchain are its decetralized nature and its tamper resistant characteristics.
Once the blockchain ledger is distributed among hundreds and sometimes thousands of nodes it eliminates a single point of failure, meaning that even if one or more nodes are taken offline the network will keep operating without issues.
It’s tamper resistant charecristics come from the way blocks are created and linked together. Each contains at least 3 parts: data, the hash of the block and the hash of the previous block. The data varies from blockchain to blockchain, in Bitcoin for example there are transactions containing a sender address, receiver address and the amount of coins being transferred. The block hash is unique like a fingerprint. It identifies a block and its content, if something is changed inside a block its hash will also change invalidating the block and causing it to be rejected by the rest of the network. Finally the hash of the previous block is what actually creates the chain of blocks and what makes blockchain secure. Once each block is connected to the previous one any changes to a previous block will change its hash and require the recalculation of all blocks coming after it. However only adding the hash of the previous block is not enough to create a tamper proof network, with enough processing power one could be able to recreate the blocks making the chain “valid” again, that’s when proof-of-work comes to play. Proof-of-work slows down the creation of new blocks and more than that it requires that the person creating a new block to perform a series of mathematical puzzles in order generate a block that is accepted by the network.
Finally the distributed element of blockchains adds yet another layer of security. Even if someone tampers a block and recalculates all proof-of-work necessary to recreate the chain once this part broadcasts its version of the chain to the network it would be immediate rejected once this “new” version is different from the version held by all the other nodes.
Because of all characteristics described above a blockchain can used for many other things apart from digital money. More recently the creation of blockchains that support smart contracts only extends the applications that could be impacted by this technology. Storing notary records, medical records, identity management, distributed storage and voting systems are only a few of a much longer list of use cases.