The Blockchain Basic

The Basic to Blockchain Basic

For most of us living in the technologically driven world in an age of wayward piracy, torrents have been a source of unapologetic pleasure. Torrents however, provide a stepping stone to understanding Blockchain Technology, in other words Distributed Ledger Technology (DTL), for the secular.

Blockchain is similar to any torrent website that provides access to movies across the world wide web using multiple sources with equal access to anyone joining the torrent network. It is a decentralised network that provides equal administrator rights to every user and leads to real time data availability to every user. For example, every person downloading a movie is called a leech but the same user is also called a seed. This happens because the movie is being both downloaded and uploaded by the user, thus enabling another user to also downloaded and upload the movie simultaneously. This makes everyone equal owners of movie prints.  

 Example for the Secular

If a car is owned by John, then he can restrict the access to the said car as the ownership lies with John. If Jane wants to use the car, then she first needs John’s approval and make necessary payments. While John and Jane are under discussion, the negotiations for car will be restricted to them and no third party can partake in the said negotiation. Further, no third party has the access to the details of the transactions taking place. Now imagine John owns a fleet of cars, but the cars are actually shares or commodities, and John is a bank or an Exchange. In this case each transaction is centrally managed by John alone and the record of all transactions is maintained in a central database by a single entity. This is what we refer to as a centrally managed database.

In a similar situation, if everyone has equal ownership of a bus then everyone has equal access to the bus. If everyone has equal rights to administration of the bus then all records w.r.t. the bus are completely transparent and accessible to everyone in the form of Government records. Now imagine the Bus as a Bitcoin. There is no intermediary such as John involved and a permanent record of all transactions is maintained, which is accessible to everyone in a completely transparent manner. The said record is in the form of a chain, in which every transaction is recorded one after the other using a timestamp. This is what we call a Blockchain or Distributed Ledger Technology (DTL). 

A typical example is the use of rapidly emerging use of Blockchain technology in cryptocurrencies such as Bitcoins, Ethereum, and Neo. The cryptocurrencies are not regulated by any central authority and the users validate the transactions, thus eliminating the need for a third party such as a centralized stock exchange. The transactions are publicly recorded into blocks to create a permanent record that cannot be deleted. A Blockchain is formed when multiple blocks are joined in a chronological order. This chain is verified by the users and available to every user in a completely transparent ecosystem. A new block is added every 10 minutes in case of Bitcoin. This decentralized database is essentially a chain of nodes (computers) that approve the transactions before they are verified and recorded. Because the details of every transaction are transparent – location & time stamp along with user details, no single Bitcoin can be spent more than once.

The Real Blockchain Basic

Simply put, Blockchain is a shared database (ledger) that is distributed among all the users but cannot be copied. There is no central database that can be hacked, as all data (every transaction) is accessible to and maintained by everyone over the internet. In a Blockchain, every transaction is recorded in a shared ledger with a location and time stamp. These transactions are not approved by any central authority such as a bank, BSE or NASDAQ. Each transaction or a group of transactions called 'block' are automatically reconciled by the system within a defined timeline and then gets added to the previous blocks of transactions in a linear manner, thus creating a Blockchain and linking it to the genus (first) block.

The bulk of Blockchain and the widely distributed network of transactions make it extremely difficult for hackers to tamper or corrupt the data. This ensures that no one person can control the Blockchain and the data cannot be pawned by cyber criminals. Further, no transaction can be deleted by anyone once added to the Blockchain. It is a permanent record of data which adds to the viability of Blockchain use in other areas such as maintaining government records and organizational data in privately managed Blockchains.

Conclusion

Blockchain is a growing chain of permanent records called blocks, which have a timestamp and a link to the previous block. DLT has a self-auditing system and every transaction/ group of transactions (block) is automatically reconciled and added to the chain. The blocks are added through cryptography to ensure complete security, and the data can be distributed but not copied. Each time a block gets completed, a new block is generated. There are innumerable such blocks in the Blockchain that are connected to each other in proper chronological order. 

It is true that the application and implementation of Blockchain is much more complicated, but the path to realization of the technology’s benefits is simplistic. Much like the an ERP system’s Graphical User Interface (GUI) which allows the users to utilize the benefits of a sophisticated platform without the initial implementation knowledge.