Blockchain: Everything you need to know
What is Blockchain?
Blockchain as a concept was developed in 1991, only to find its application in 2009. Blockchain is on to become the most sought technology of the century. Organizations find its feature increasingly secure, efficient, and malleable to their needs.
To keep up with the trend — I googled Blockchain and, I was overwhelmed with the sheer size of information thrown towards me. Undoubtedly, Blockchain is a large and complex concept to comprehend in a single thought — but so was Algebra the first time. In this article, I have taken a storytelling approach to clarify complicated architecture of Blockchain for non-techs.
I recommend reading all the articles of this series to not be left half-baked:
- Internal security functions of Blockchain.
- Blockchain applications: Bitcoin and CryptoArt explained.
What is Blockchain?
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.
Based on a peer-to-peer (P2P) network topology, blockchain is a distributed ledger technology (DLT) that allows data to be stored globally on thousands of distributed servers — while letting anyone on the network see everyone else’s entries in near real-time but not letting to edit it.
How can a blockchain be used to manage to share of personal records?
A blockchain is a growing list of records, called blocks, that are linked using a cryptographic hash. Each block containing the address of the previous one. By design, a blockchain is resistant to modification of its data. This is because once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks.
Companies are using blockchains to share legal contracts. The process allows transparency to all its participants and contract content cannot be edited without approval from the majority.
Similarly, one can share any file on the blockchain network. Blockchain is an open network that would allow anyone to read any file but will not allow editing it.
Blockchain Architecture: step by step guide
Simply put, imagine a powerful computer with high speed and processing power. This computer runs only one application called Blockchain.
Inside Blockchain, there are data blocks. Data blocks are like logical partitions inside a computer’s disk space. It is similar to logical partitions created in a computer’s hard disk to run multiple operating systems.
All data blocks are immutable and linearly arranged such that every data block points to its former data block.
A supercomputer illustration
Imagine this computer is in a decentralized, peer-to-peer (P2P) network of similar powerful computers. Random distribution of peers protects the network from becoming an easy physical target.
In a peer-to-peer type of network, all connected peers are equally privileged, equipotent participants in the application.
A peer to peer network illustrated
All the computers of this P2P network connect via the same blockchain application. They all have identical data block structures described above and share the same stored data; arranged in the same inherited order. It is a generic skeleton of Blockchain.
Illustration of Blockchain skelton
The customary function of Blockchain
A popular misconception about the customary function of Blockchain is that it stores data securely; this is only partially true. The data stored is highly selective and popularly used for verification.
The core value of Blockchain is to guarantee the integrity and authenticity of stored data.
Data once entered into the Blockchain is immutable, making it a relied source of truth.
Hosting a Blockchain application requires expensive hardware. Some companies host independent blockchain networks and provide them as a service.
Example: IBM hosts one of the most secured private Blockchain networks. Bank ANZ uses it to maintain high-value transaction records.
Assume any transaction of value $10000 or above adds to IBM’s Blockchain network by ANZ bank.
Blockchain networks are of two types — Private and Public. An example of public Blockchain is Bitcoin.
Illustration of transaction data getting added to a Data block
Before writing the transaction details ( Name of sender, recipient, Amount, etc.) into the data block — ANZ will use its private key (a unique combination of any number of integers known only to ANZ) to encrypt a copy of the transaction.
The encrypted transaction is now called a signature. It is a unique combination of integers. Depending on the input — the length of the signature will vary.
A request is passed on in the network to add this signature and transaction record to the data block. Peers in the network use the public key (a publicly known pair of ANZ’s private key) to verify the signature and transaction record. Once 50% of the peers in the Blockchain network successfully verified the request data. All the peers begin adding data to the block.
Added record is accessible to read by anyone but editing is not allowed.
The importance of Public and Private key in keeping Blockchain secure and resist mutation is better understood when in action. In the following video I have used visual aids to mimic behaviour of Blockchain components and Keys pair.