WHAT IS BLOCKCHAIN?
In 1991, as the world was becoming increasingly digital, concerns were raised about the accuracy, security and modifiability of digital records. At that time, third party time stamps were used to tackle those concerns, however this method was highly susceptible to bribes or security breaches. Blockchain was used to securely store larger sets of digital records. Later in 2008, an anonymous group of persons called “Satoshi Nakamoto '' would be the first to ever use the distributed Blockchain as the underlying technology for Bitcoin. But before we go into technical terms, what exactly is Blockchain?
According to the general definition, “Blockchain is a distributed database that stores information electronically in digital format”. In other words, Blockchain is a secure database that stores information, except in this case the information is stored in blocks, and the link between these blocks of information is called a chain. Let's imagine a list of transactions as a block, each block is being recorded on a public ledger, as blocks of transactions are recorded on a ledger, it creates a chain of blocks. Thus, Blockchain.
HOW IS IT BEING USED?
There are different types of information that can be stored on a Blockchain but the most common has been transactions. Blockchain facilitates the secure and private transfer of the digital currency called Bitcoin and posts it to a public ledger to maintain integrity without the use of a third party like Mastercard, Visa or other financial institutions. Instead, it uses a time stamped unmodifiable record using computers, mathematical algorithms and cryptology to perform these functions which allows a direct connection between Bitcoin users. Note that Blockchain is not the same as Bitcoin.
Here’s a little description on how it works:
A new transaction is entered.
The transaction is then transmitted to a network of peer to peer computers scattered across the world.
The network of computers solves equations to confirm the validity of the transaction.
The transaction is complete.
These blocks are then chained together creating a long history of all transactions that are permanent.
Once confirmed to be legitimate they are clustered together into blocks.
Here’s how it gets interesting, Blockchain uses a decentralized system. What this means is that all the records or information are not stored in just one place. It distributes data along several network nodes at various locations. A node refers to each computer that participates in the blockchain network. This computer is connected to other computers that have the processing software via an online network. This is where the word “decentralized'' comes into play, every transaction is saved on every network or computer or node with the software.
Therefore, if you have a computer or a node that is connected to the internet and the bitcoin network, you have all the transactions saved on your computer. However, if your computer breaks, it will not affect the records because those records are distributed across several hundred computers on the network around the world.
HOW SECURE IS BLOCKCHAIN?
Transparency is achieved in a number of ways, transactions are viewed by either having a personal node that allows anyone to see transactions occurring live which means that if you wanted, you could track Bitcoin wherever it goes, and if it got stolen it would be known. New blocks are always stored linearly and chronologically. In other words, they are always added to the end of the block chain. Each block contains its own Hash.
Hash codes are created by a mathematical function that turns digital information into a string of numbers and letters. If that information is changed in any way, the hash code changes as well. Once a block has been added it is extremely hard to change its contents. Unless a majority of the network (51%) has reached an agreement to do so.
In the structure of a blockchain it is much harder for a hacker to alter a blockchain and steal cryptocurrency from everyone else on the network, a block contains three pieces of information, the data within the block itself, it’s hash and the hash of the previous block. The hacker would have to recalculate both the hash of that particular block as well as the hash of all succeeding blocks, he would also need at least 51% of all the connected nodes to agree with this change. Such an attack would require an immense amount of money and resources, as they would need to redo all of the blocks because they would now have different timestamps and hash codes.
Due to the size of many cryptocurrency networks and how fast they are growing, this feat would not only be extremely expensive but also fruitless. It is built this way so that taking part in the network is far more economically beneficial than attacking it.
“Let’s imagine a group of friends contributing a certain amount of money towards a common goal, everyone can see what the other person has contributed and there's a secret code used to lock the record of every transaction. If someone wants to alter the amount of their contribution, the person would have to crack this secret code (The secret code being the hash of each block) and get approval from 51% of the contributors.”
In conclusion, Blockchain is a secure database that stores information on a public server in blocks and the blocks are linked by a chain. The blocks that store information are encrypted using cryptography to create hash codes, every block has its own Hash and once the information stored in a block is changed then the hash code changes as well. This reduces the risk of corrupting any information stored in the Blockchain.
this honestly broke things down into very easy to understand bite-sized illustrations. i loved that part about friends contributing a certain sum together, that really drove the point home.
brilliantly written article! 🎉