So, what is Blockchain?
There’s no doubt you have heard of cryptocurrency. After all, that is likely why you are here. Blockchain is the technology that makes cryptocurrency possible, so let’s start by breaking it down.
Blockchain sounds complicated, but at its core it is quite a straightforward concept. In essence, Blockchain is simply a record of information that is organised in chronological “blocks” that are linked together just like a chain.
Hence, Blockchain.
What Makes Blockchain Special?
As a store of information, you may be wondering how Blockchain is different from other information records, like spreadsheets and databases.
Most databases have a central store house of data that is accessed when you need to create, read, update, or delete something from that database. These centralised store houses are structured using tables to separate the different types of information being captured, with a header for each column and the data neatly set out in rows underneath.
Spreadsheets work in the same way. One file, with data set out in columns and rows, that can be accessed by a group. It is convenient for smaller teams or data that does not update frequently. However, if the data is corrupted or the file is deleted, without a very recent backup, the information is lost.
Or worse… if someone intentionally changes the data, it can be difficult to find, difficult to prove, and difficult to return to its correct state.
Over time, spreadsheets and databases can become unwieldy and slow as they become larger and larger with more and more data being added. Blockchain works a different way.
Blockchain collects information, usually a list of transactions. When the list gets to a certain size it is grouped together and locked off as a “block”. This block is then linked to the previous block of information to form a chain of blocks. Each block relates to a specific time period, and since it is locked off, no one can edit, change, or overwrite the data housed in each block.
You want an example?
Imagine a train with passengers climbing on board.
The train starts off with just one carriage. As it fills up with passengers, it closes the door on the first carriage and adds a second. Each time the carriage reaches capacity, the time is recorded, the doors are locked, and a new carriage is added. Since the doors are locked, no one else can get on any of the full carriages, and no one can leave. Each carriage is a block. Each person is an entry in that block.
Pillars of Blockchain
To prevent any intentional, or unintentional, change to the data, Blockchain stores it in a different way. Instead of storing the information in each block in a centralised store house like a database, it is spread out and kept by every computer contributing to the record.
This is decentralisation.
The heart of Blockchain is what is called “distributed ledger technology” (DLT). Decentralisation allows the record of transactions, or “ledger”, to be distributed across the whole network. Each member of the network is constantly verifying the transactions that are recorded in every block against the others to ensure there has been no variation. This keeps the data secure and prevents any attempt at manipulation. If a change is detected, everyone sees it, and the link to that member will be broken.
This level of security makes Blockchain virtually impossible to hack. It is generally referred to as immutable.
The third key pillar of Blockchain is transparency.
Since all information is distributed to every member in the decentralised network, every member can see every transaction. If they couldn’t, they would not be able to verify the accuracy of previous blocks in the chain or the current block being written.
Now you understand the basics of Blockchain, you are probably wondering how it applies to cryptocurrency.
Well, the best example of Blockchain and its decentralised, immutable, and transparent nature is Bitcoin.
The grandfather of all cryptocurrency, Bitcoin set the stage for the development and potential of Blockchain. This extends way beyond just cryptocurrency… but for now, let’s keep it simple.
To find out more about cryptocurrency, head to the next lesson here.