Blockchain in today’s world is gaining a huge traction, it is so popular so many people have come across it one way or another. But what is exactly a blockchain? What is it used for? And what issues and problems does it address. This article will discuss these points.
In 1991, a group of researchers created a technique where there are cells, or blocks, that contain a certain amount of information. It was intended to time stamp digital records of digital data in order to make said data tamper proof. However, until Satoshi Nakamoto adapted it in 2009 to create the digital currency Bitcoin, it remained largely unutilized in almost anything. Simply put, a blockchain is a decentralized ledger that is open to the public. It has a remarkable property: once data is recorded in a blockchain, changing or deleting it is extremely difficult. So how does a blockchain work? Well, let’s take a better look at a cell or a block in a blockchain, each block contains:
1. some data,
2. the hash of the block,
3. and the hash of the previous block.
The information that is kept stored inside a given block in a block chain varies depending on the type of blockchain; for example, the Bitcoin blockchain stores transaction details such as the sender, receiver, and number of coins transferred in the transaction.
A hash is a number that can be compared to a fingerprint in the way that it uniquely separates a certain block and all of its contents from other blocks, just like a fingerprint identifies us, humans, apart from each other. The hash of a block is calculated after it is created. The hash will change if something inside the block is changed. In other words, hashes act as identifiers of changes that happened to the blocks. If a block’s fingerprint changes, it’s no longer the same block. The hash of the previous, and sometimes the next, block is the third element in every and each block effectively creating a chain of blocks, and it is through this way that a blockchain’s security is ensured and tamper-proofed.
Let’s use an example to better understand block chains.
Imagine that we are working with a chain consisting of 3 blocks. As previously mentioned, each block has a hash of itself as well as the previous block’s hash. Simply put, the third block has a hash that points to the second block that itself has another hash that points to the first block. Now block number1 is special compared to other blocks, it does not point to any previous blocks naturally because it is the first block in the chain. This first block has a special name, it is called the genesis block. Let’s say someone wants to tamper with the second block, which will alter the block’s hash. As a result, block 3 and all subsequent blocks will be invalid because they will no longer store a valid hash of the previous block. As a result, modifying a single block invalidates all subsequent blocks. However, hashes alone are insufficient to avoid tampering. These days, computers are extremely powerful, capable of calculating hundreds of thousands of hashes per second. To make your blockchain valid again, you might tamper with a block and recalculate all the hashes of other blocks.
Proof of work is a feature of blockchains that helps to mitigate this issue. It’s a process that makes the formation of new blocks take longer. In the case of Bitcoin, calculating the necessary proof of work and adding a new block to the chain takes about 10 minutes. This mechanism makes it very hard to tamper with the blocks, because if you tamper with one block, you will need to recalculate the proof of work for all the following blocks. Therefore, the security of a blockchain comes from its creative use of hashing and the proof of work mechanism.
But there is one more way that blockchains secure themselves and that’s by being distributed instead of using a central entity to manage the chain, blockchains use a peer-to-peer network and anyone is allowed to join. When anyone joins this network, they receive a complete copy of the blockchain, which the node will use to ensure that all is still in working order. Now let us see what happens when someone creates a new block:
Everyone on the network receives the new block. The block is then checked by each node to ensure that it hasn’t been tampered with. Each node adds this block to their own blockchain if everything checks out.
All the nodes in this network create consensus, then they agree about what blocks are valid and which aren’t. Blocks that have been tampered with would be rejected by the network’s other nodes. To effectively tamper with a blockchain, you’ll need to tamper with all of the chain’s blocks, redo each block’s proof of work, and gain control of more than half of the peer-to-peer network. Then and only then will your tampered block be acknowledged by the rest of the world. This, however, is nearly impossible to do!
There are many advantages of Block Chains, namely 1. Accuracy of the Chain, where transactions are checked and approved my millions of computers, 2. Cost reductions, where a person is not required to pay banks fees for transactions, 3. Private and secure transactions, where it’s too hard for anyone to steal your money and everyone on the chain knows of every transaction. On the other hand, Block chains comes with a lot of disadvantages, including 1. The vast computational power a block chain needs to operate is far from free, 2. Speed inefficiency, where a proof of work for a single block chain needs 10 minutes to be calculated, 3. Illegal activity, where as the block chain is protected from hackers, it is constitutionally illegal to trade on a block chain, and finally, 4. The lack of regulations set upon block chains raises fear among people and governments.
Block chains are now in a constant state of evolution. The formation of smart contracts is one of the more recent innovations. These contracts are simple programs that can be used to automatically exchange coins based on certain conditions and are stored on the block chain. The invention of block chain technology piqued the attention of many people. Others soon realized the technology could be used for a variety of purposes, including keeping medical records, creating a digital notary, and even collecting taxes. With many practical applications for the technology already being applied and explored, block chain, at the age of twenty-seven, is gradually making a name for itself, thanks in no small part to bitcoin and cryptocurrencies. Block chain, a buzzword on the lips of every investor in the country, promises to make business and government operations more accurate, effective, safe, and affordable by cutting out the middlemen.