What Is A Blockchain?
From a bird’s eye view, blockchain technology might not look that much different from things you are already familiar with. So, what is a blockchain? With a blockchain, people are able to write entries into a record of information, and users can control how the record of information is updated and amended. Like Wikipedia, entries are not the product of one single publisher. In fact, no one person controls the information that is published. However, as you approach ground level, the differences that make blockchain technology so unique and special become more clear. Even though both run on distributed networks, Wikipedia is built into the World Wide Web by using a client-server network model. A user – otherwise referred to as a client – with permissions associated with its account is eligible to change Wikipedia entries that are stored on a centralized server. Whenever a client accesses the Wikipedia page, they will be alerted with the updated version of the ‘master copy’ of the Wikipedia entry. As for the control of the database, this remains with Wikipedia administrators. Source: coindesk.com The digital backbone of Wikipedia is very similar to the highly protected and centralized databases that banks and governments keep today. Centralized databases are controlled by their owners, which includes managing updates and protecting the database from cyber-threats. On the other side of the equation, the distributed database that is created by blockchain technology has a completely different digital backbone. Not only that, but this is the most important feature that makes blockchain technology stand out. This “distributed database” does not rely on a singular server to approve its transactions but all of the data on the blockchain is validated and updated by every computer that runs this ledger. These computers are called nodes and they are responsible for validating each transaction, maintaining the overall consensus rules but not all nodes actually process the transactions and create blocks of data. That’s where mining computers come into play, every ten minutes or so the miners collect a few hundred pending transactions and turn them into a mathematical puzzle. The reward to figure out the cryptographic equation is what entices others to maintain the blockchain. Whichever mining node computes the equation the quickest, is the one who receives the reward and gets to add the new “block” to the blockchain. Once the transaction is approved by all the nodes on the network and updated individually, it cannot be undone. Let me try to simplify it a bit more using an example of a simple Bitcoin transaction. Let’s say Bob wants to send Alice two bitcoins, Bob broadcasts the request of sending two Bitcoin’s to Alice to all of the nodes of the Bitcoin blockchain peer-to-peer network. These computers then verify the new block with the previous block, basically checking to see if Bob has enough “bitcoin” in his wallet and all the computers then begin competing to compute the difficult cryptographic puzzle. After the first computer solves the equation, the computer broadcasts it to the entire network for checking and when it’s confirmed the computers update their systems with the new information and begin working with that new block formed. Alice receives her Bitcoin in her wallet and the Bitcoin Bob sent is removed from his wallet. Every computer on the blockchain network now has this data stored on its own individual database. Wikipedia’s ‘master copy’ is edited on a singular server, and with this, all users are able to see the new updated version. In regards to a blockchain, every node in the network is coming to the same conclusion, each updating the record on their own, with the most popular and recent record transforming into the de-facto official record in lieu of there being a master copy. Source: coindesk.com This is the difference that makes blockchain technology so useful – It represents new ideas in information registration and distribution that gets rid of the need for a trusted third-party to facilitate digital relations. And the result? A system for digital interactions that do not need a trusted party watching over the relationships. The work of securing digital relationships is strictly implicit. Digital Trust? Trust is a risk judgment between separate parties. As for the digital world, determining trust tends to boil down to proving authentication and proving authorization. To simplify, people want to know, “Are you who you say you are?” and “Should you be authorized to do what you are trying to do?” In regards to blockchain technology, private key cryptography helps to provide a powerful ownership tool that meets authentication requirements. As mentioned earlier in the Bob and Alice transaction, a cryptocurrency wallet holds your digital “currency” but really it only holds two separate keys. Your private key, which shows ownership of whatever you own and the public key which is stored on the blockchain network. Together combined, they complete a digital signature and which also spares a person from having to share more personal information than they would like. In order for a transaction to take place, both of these keys need to match. With that said, authentication is not enough. Authorization is something that needs a distributed, peer-to-peer network. Why? Because a distributed network reduces the chance of centralized failure or corruption of data. If there are hundreds of nodes on the network verifying if a transaction is true, it would take a ridiculous amount of computing power and money in order to actually change and corrupt the data. Further, this distributed network has to be committed to the transaction network’s recordkeeping and security. If a transaction has been authorized, this means the entire network has applied the rules upon which it was designed. Essentially, when authentication and authorization are supplied this way, interactions in the digital world do not have to rely on moral trust. To learn more about blockchain check out this infographic! Featured Image: twitter