Blockchains… What are they?
I’ve been trading bitcoin and cryptocurrencies for about 3 years now and even though I have a small chunk of money invested, I never really had a grasp of what a blockchain is or how to explain it to friends!
Lets dig in.
Wikipedia defines Blockchain as;
A blockchain, originally block chain, is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data (generally represented as a Merkle tree).
By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been claimed with a blockchain.
Now let’s break it down a little more in a visual way.
HISTORY
The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to implement a system where document timestamps could not be tampered with. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.
The first blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way using a Hashcash-like method to timestamp blocks without requiring them to be signed by a trusted party and to reduce speed with which blocks are added to the chain. The design was implemented the following year by Nakamoto as a core component of the cryptocurrency bitcoin, where it serves as the public ledger for all transactions on the network.
Some main takeaways.
- Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data(users, amount, etc)
- Blockchain is decentralized. By storing data across its peer-to-peer network, risks are eliminated from storing data centrally.
- Once recorded, the data in any given block cannot be retroactively altered without alteration of all subsequent blocks which requires consensus of the network majority.
Not so main takeaways..but still interesting.
- The bitcoin blockchain file size which contains records of all transactions that have occurred on the network, reached 20 GB in 2014. As of 2017 it has grown to 100gb in size.
- Familiar companies that utilize blockchain; Facebook(libra), JPMorgan, Berkshire Hathaway, Alibaba, BOA, Crypto Kitties, SmartContracts.
I encourage everyone to continue their education in the world of blockchain and cryptocurrencies! It’s the future!
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