Simply explained, the real deal behind blockchain
Hello dear reader,
If you want an easy explanation of what blockchain is and why it's such a big deal without being flooded with technicalities, this article is for you! I hope you enjoy it and find it as valuable as the person who encouraged me to share this here :)
Blockchain is a set of technologies allowing us to build a new kind of network infrastructure enabling... the transfer of value!
The network of Value (Blockchain) Vs. The network of Information (Internet)
I like using the expression network of value, in comparison to the Internet which is a network of information, built out of a set of technologies that allowed us to transfer information around the globe.
The difference here lies in the fact that a piece of “information” over the internet is shared, replicated, and possibly edited, whereas a piece of “value” over the blockchain is transacted irrevocably and can not be tampered with.
Example: Emails Vs. Letters
To illustrate this difference, we can consider emails as a basic example.
After sending an email, the sender will have a copy of it in his sent folder and the receiver will get a copy in his inbox folder. The receiver can also forward the email, possibly editing it without leaving any evidence of his act.
With blockchain, the email could be considered as a unique object, just like a physical letter.
Once the letter is sent, the sender no longer possesses it. It will be underway until it arrives in the hands of the receiver. The receiver can forward the letter to someone else but can not temper with its content. Or, the receiver can simply choose to show the letter, or parts of it, to someone else on the blockchain, to prove that he holds it or to unveil specific parts of it, as he would do with a physical document, but he will do so digitally!
Imagine this letter is an official document issued by an official authority. Let’s say it’s your higher education diploma or your digital identity document. It becomes much easier for you to prove your credentials digitally, online.
Imagine all the administrative burdens that would be eased, but also the new level of trust that we will witness in our increasingly digital world.
Because, beyond the authenticity of documents, the mechanics by which the blockchain provides trust in digital objects, open a vast field of applications, most of which are yet to be imagined.
Back in the 90s, could you have imagined Airbnb happening?
Our imagination of which revolutionary applications we would see emerge from our use of the Internet was quite limited, the same way our imagination today of what the Blockchain would bring is most probably still limited.
The World Wide Web was invented in 1990 and yet we wouldn’t have imagined the rise of eCommerce or the sharing economy in the late 90s, and even during the early years of the 21st century. It’s not until we got the smartphones (past 2007) that the internet became at our fingertips, more widely a part of our daily lives with social media platforms and the explosion of mobile apps.
The concept of Emergence…
This is explained by the composability of different technologies, and the concept of emergence, by which we observe that a system has properties its components do not have on their own.
This is a subject I could only talk about for so long so let’s go back to what’s blockchain, and I’ll tell you more about the evolution of digital technologies in another post.
The first public appearance
The most famous blockchain is bitcoin, a peer-to-peer electronic cash system. Widely recognized as the first blockchain, it was created in 2008, based on technologies dating back to the 80s and 90s.
Not yet a single definition
In a broad stroke, the term blockchain is widely used to designate a myriad of technology components and concepts of Distributed Ledger Technologies.
Due to the nascent nature of these technologies, standard definitions are lacking and the terminology related to these technologies is often contextual.
For example, if we look at the definition of blockchain in the Cambridge dictionary, we can still witness a great deal of confusion. This definition is largely inspired by the bitcoin blockchain, describing a system of record-keeping of cryptocurrency transactions. However, it’s not a general definition of a blockchain.
A Chain of Blocks
Technically speaking, we could define the blockchain as a chain of blocks as its name suggests. The blocks are appended to each other with a cryptographic link forming an unbreakable chain, and each block contains a set of verified data. This chain of blocks, the blockchain, represents a “Ledger”, a record-keeping book such as an accounting book. And this ledger is maintained by and shared across a decentralized network of agents, with the use of a consensus protocol.
A Network of Agents
In other terms, it’s a network of agents where each agent holds a copy of the blockchain (the ledger). Any agent can create new data (transactions) to be added to the ledger, and the validity of this data is verifiable by each agent.
At regular intervals, the verified data is added to the blockchain (the ledger), thanks to a consensus protocol used among the agents to allow them to agree on the true version of the blockchain (the ledger) and update the version they hold accordingly.
A Truth Machine
More broadly speaking, the blockchain is a distributed computing system organized as a peer-to-peer network of computers, using cryptography, and maintaining a distributed ledger, that represents an agreed-upon version of the truth.