Welcome back to the crypto classroom today we’re going to answer the question What is blockchain?
Blockchain is a network with a connection 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 a widely popular technology that has been used in a wide variety of sectors today. Many of you reading this may think it is an extremely complicated concept but allow me to dissect it for you. You can understand Blockchain by just blocks being stranded together via a chain. The blocks serve a special purpose on the network as they store information. A single block on the blockchain can actually store up to 1 mb of data.
Information is the main component that we store in the blocks. These information usually include details regarding transactions which include: date, time, and the cost of the latest transaction.
The participants of the transaction will also be recorded on the block, however, participants will be given a unique identifier/username to provide anonymity.
The last thing that we store on the blocks is the “hash”, A unique code used to identify one block from another. You can think of this being a “name” for a block so that it can be more easily identified.
How does the Blockchain work?
To better understand how the Blockchain system works, let’s look at an example. You first make a purchase, this is then recorded with hundreds or thousands of other transactions. These transactions are then verified by a network of computers to make sure that the transactions actually happened. Later, the transactions will be stored on a block and given its “Hash”.
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:
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 in combination. 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. So we will be able to mine all Bitcoin by the year 2140.
To understand how to create new bitcoins and new blocks, what mining means and how mining works, see the section on Mining.
The Future of Blockchain:
Blockchain has many benefits that it brings to the table. With the Blockchain technology, we are able to more transparently, privately, efficiently, and less-costly store information. Especially in our current world where digital information has proven to be an essential part of our daily lives, it has been even more important to keep our information safe. Therefore Blockchain technology is seeing wide adoption by industries like healthcare, banking, real estate and more. It will not be a surprise to one day see the technology being adopted by a wider range of industries and utilizing it to store information.
So this is why there’s such a huge opportunity here in the space, and also why everyone has an interest in it. 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.