What is Blockchain?
Blockchain is a network, connected by many nodes all across the globe. It aggregates a multitude of transactions into ‘blocks’ and these blocks are all in a ‘chain’ together. This ‘blockchain’ dates all the way back to the first ever transaction. It is a public, digital, decentralised, distributed ledger which records all transactions for a particular crypto currency and is immutable.
So what exactly is blockchain? Well, the easiest way to describe it is blockchain is a way to arrange data. Very much, it’s kind of almost boring. It’s like a database, but what’s interesting about blockchain is that allows for us to perceive information in a new way. And it all really started with Bitcoin.
Blockchain is the technology that powers or is kind of created by Bitcoin and the reason why it’s special and the reason why people are paying attention to blockchain is because it has one unique property. A property, which allows anyone in the world to join the network and start contributing information in the form of blocks.
Hence that’s where the name comes from actually. So what this means is that there’s no one who couldn’t control. It allows for decentralization because there’s no one who can control, who adds a block and doesn’t add a block. In fact, it’s completely open to the public and anyone can join and contribute their own blocks and a network.
And this process is called mining. So that’s really the essence of it. It’s really about allowing the public to add data and to form a data structure that’s compatible with decentralization. And this is where the opportunities come in, because there are so many different ways for us to create different types of.
A blockchain kind of like data structures. There has been various plays on this. For example, Ethereum is not just about transactional information. It’s also about computational information as well.
So you allow the formation of smart contracts that get added into a block. In addition, so does this. This is why all of a sudden there’s an explosion is because not only are you just talking one certain technology or one certain coin. However, you can create multiple different coins each with their own features, advantages and disadvantages.
All historical transactions are publicly available right back to the first ever Bitcoin transaction mined on 2009-01-03 18:15:05. Interestingly with the message “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. You can see for yourself here. You can look up any transactions, including your own at any time, there are a few websites out there which package this up nicely, we recommend www.blockchain.info
An interest effect with all transactions being made public and fully transparent actually provides more privacy for the user, below is a diagram in the original white paper:
Click below to learn the difference between public and private blockchains:
Decentralised & Distributed
There isn’t a golden source ledger. Instead, every single node that connects to the blockchain’s network has a full copy of all historical records. This attribute represents full transparency and is very powerful. Decentralization is vital to the immutability of the blockchain and also disruptive to the current 3rd Party Trust Intermediary transaction system. You no longer have to trust an institution or an individual with your transfer and funds. Because you have the ability to transfer and verify yourself directly.
Why are Blockchains not susceptible to attack?
Each block has a block header which is its hash – a unique stamp ensuring there have been no changes. Each block hash has a reference to the previous block hash forming a chain. The distributed ledger means everyone has a full copy of all historical records. This further ensures that all transaction records are irreversible.
For someone to attack the system. First, they would need to alter the records and rehash the block (which will take significant time and resources). Then they would have to alter each of the subsequent blocks. On top of that they’ll need to alter more than half the records held globally by different nodes. Hence this is computationally impossible.
Additionally, you cannot create coins out of thin air. At most an attacker would only be able to reverse their own previous transaction. To perform this would require significant CPU and hash power to overpower the network. If the attacker does have that level of resources, it would be more profitable for them to mine. They’ll have more coins than everyone else combined. Rather than attack the system and undermine the validity of his own wealth. This system provides incentives for nodes to remain honest and work together to protect the network.
The currency supply and supply rate are pre-determined, this gives it a gold-like characteristic and can be used to store value. Bitcoin for example, the max supply will be 21 million, new bitcoins will be created roughly every ten minutes with current circulation of around 18 million. We will be able to mine all Bitcoin by the year 2140.
To understand how new bitcoins and new blocks are created, what mining means and how mining works, see the section on Mining.
So this is why there’s such a huge opportunity here in the space, and also why everyone is interested. To find out more and learn more about this. We cover a lot of the advantages and disadvantages and concepts like public and private blockchains in this classroom as well. And I hope you can come to the future lessons and learn more.