Blockchain... my thoughts

This is my take, as an amateur enthusiast who’s been learning and trying to understand the tech as a hobby… in short it won’t be perfect but I want to share with my network what I’ve learned. This is a basic understanding at best, but I hope in the months / years to come I can grow this.

What is it?

In a sentence:

“a database of transactions, distributed across a network of computers (nodes), which is cryptographically secured, ensuring a tamper proof source of truth for the transaction or the asset is undeniable and importantly visible to anyone.”

It is not inherently anonymous but by use of the addresses for account numbers (created by cryptographic key pairs) can be pseudonymous... meaning you can always work out the history of an account from the transactions in the chain (but not their actual identity).

I like to relate Blockchain to a simple ledger of transactions with each node having a full copy of the ledger. It does not require a 3rd party to maintain it (although blockchain tech can be done in a private network) who you’d call up to remove / amend your data or need to give GDPR permission to and therefore possibly need to pay directly or indirectly a fee to. Instead it is managed by the network of nodes, together which form the host for the ‘Blockchain’. If one node goes down or is corrupted, no big deal, the resilience is strength in numbers so the greater the number of nodes the more resilient the blockchain.

What it does - Block creation

These nodes continually validate new blocks, which are a collection of transactions posted to the networks (and hashes of transactions) and arrive at a consensus on the date time of every transaction as part of creating the block, this is where the use of genius level mathematic / cryptographic functions comes in, way too technical for me to describe in detail, but in essence they create a 'hash value' like a randomly generated alphanumeric output.

This process is creating a single source of truth and in cryptocurrency implementations prevent double spending in a new transaction as the hash value created by using the cryptographic key is a unique one time math puzzle (you can't create a duplicate with the same inputs) which is then locked into that newly created block. The blockchain uses the block hash as part of the input to create the next block, therefore creating a chain of blocks. Also meaning to change a historical block you’d need to undo every subsequent block because the nodes will always trust the chain with the longest history of blocks.

This way the ledger can be maintained across a range of geographic sites, jurisdictions and even across companies as part of an industry (or even Governments in a close economic area) sharing the same market data for example.

The Value Element

The value this brings is that we can trust the network to arrive at consensus on an exchange i.e. the transaction between party A and B - in a world of increasing mistrust this is valuable by reducing the need of another party to verify A and B, but it may not always be needed for example if the 3rd party is 24/7 available and has no issues with resilience or uptime.

The inherent resilience in the blockchain has value as any bad actor infiltrating the network will have to purchase enough CPU power to rewrite previous blocks to gain consensus through overpowering the computing power of the good nodes - the inefficiency in this kind of attack grows as the network does. In this way we achieve a trusted source of data without having to have a central party validate each transaction and this is tamper proof or immutable. You can’t cheat it as you’d be rejected by all the other nodes who wouldn’t sync up with your version of the truth, thus meaning no one party can manipulate the data. In some situations this has importance and a use case, however this doesn't mean every Tom, Dick and Harry goes about implementing blockchain for the sake of it.

Companies / industries can choose to make the hosting of these nodes that maintain the ledgers open to everybody, making the network even stronger. Or as some private implementations have done offer a company a solution they can host on trusted nodes / cloud providers. I can see the benefit of inter continental Government departments using private chains to share ID information for example. If any one Government is victim of an attack (recent years NHS incident could have spread for example) the other Governments nodes would still function to service the network.

The possibilities for auditors, content owners proving ownership, supply chains and records of publicly accessible data start to emerge along the thought train of possibilities (there are already some companies with real world solutions).

Bitcoin is just one application of blockchain (and possibly the most important), but it is also much more… however that discussion is for another day :)

#blockchain #DLT #bitcoin #crypto

Resources:

• How Bitcoin Works (easy version) watch here
• How Bitcoin Works (medium) watch here
• How Bitcoin Works (technical version) watch here
• Bitcoin whitepaper
• Block Geeks explain blockchain