Blockchain

If you've been paying attention to the world of technology and innovation, chances are you've heard of blockchain. However, despite its popularity, many of us have a limited understanding of what it actually is and why it's so important. That's why I've written this article - to give you a clear, concise explanation of the key concepts behind the blockchain. By the end of it, you'll be able to hold your own in any conversation about this exciting technology and even start thinking about how you might use it yourself. So let's dive in and explore what blockchain is all about!

WHAT IS NOT BLOCKCHAIN

To begin with, we will make it clear what Blockchain is NOT, as many individuals often misconceive the terminologies and principles, resulting in common errors such as the ones below:

- Blockchain is NOT a cryptocurrency.

- Blockchain is NOT a programming language.

- Blockchain is NOT a cryptographic codification.

- Blockchain is NOT an IA or Machine Learning technology.

- Blockchain is NOT a Python library or framework.

Blockchain refers to a specific type of technology, so anything that does not fit the definition of blockchain would not be considered as blockchain.

For example, a traditional centralized database where a single entity controls all the data would not be considered a blockchain. Similarly, a standard record-keeping system that does not use cryptography or distributed ledgers would also not be considered a blockchain. It is important to understand the characteristics that define blockchain technology in order to distinguish it from other types of technology.

WHAT IS BLOCKCHAIN?

Blockchain is a novel technology that consists of a series of blocks or clusters of transactions that are linked together in a chain-like structure and dispersed across its users.

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” – Don & Alex Tapscott.

In the end, it works as?an immutable record of transactions that?do not require relying on an external authority?to validate the authenticity and integrity of the data. Transactions are typically economic, but?we can store any kind of information?in the blocks.

Although we refer to it as a "new technology," the concept of blockchain actually dates back to 1991 when Scott and Stornetta published "How to Time-Stamp a Digital Document" in the Journal of Cryptography. However, it's only in recent years, with the success of Bitcoin and other cryptocurrencies, that blockchain has gained widespread popularity.

HOW DOES BLOCKCHAIN WORK?

The distributed security of the system is what makes Blockchain technology valuable. As a result, there are several essential characteristics that must be present in the development or use of a Blockchain.

Here are the five fundamental concepts that form the basis of current Blockchain technology, according to the SuperDataScience course:

• Cryptographic Hash
• Immutable Ledger
• P2P Network
• Consensus Protocol
• Block Validation or ‘Mining’

CRYPTOGRAPHIC HASH: A Hash refers to a cryptographic technique that converts any given input data into a fixed-length numerical string. Each input of the hash function generates a unique output, and the result is predictable: using the same input will always produce the same output value.

A significant aspect of Hash functions is that they are irreversible: you cannot revert the function to generate the original input.

There are numerous algorithms that generate various Hash variations. The functioning of the SHA256 Hash algorithm can be examined. With each input, the algorithm produces a unique output, and it is impossible to forecast how modifications to the input will impact the output.

The Blockchain nodes use Hash functions?to create a unique identifier for any block of transactions. Every block includes the Hash value of the previous block.

IMMUTABLE LEDGER: This feature is tightly related to the previous one. Since every block of the chain contains the Hash of the previous one,?it is not possible to modify any block without changing the entire chain. Hence, the chain works as an immutable digital ledger.

If an anonymous attacker removes, adds, or modifies any transaction in the first block, HASH#1 will change: HASH#1 is included as a part of the contents in Block 2 because of that, HASH#2 will change too, and the error will propagate to every block of the chain after the block under attack. The user will then declare the chain invalid.

PEER-TO-PEER (P2P) NETWORK: The need for an external or internal trusted authority is eliminated in the Blockchain. This is due to the fact that the Blockchain data is shared among all users, with each user having their own copy of the hashed blocks and transactions. Whenever a new transaction occurs, it is broadcasted to the entire network, preventing any individual from modifying the information in the chain. This is because the information is not stored by any single entity, but instead by the entire network of node users.

After a block of transactions is verified, it is appended to the chain, and all users update their own records. Even if an intruder tries to modify your personal chain, the network will reject any block from the tampered blockchain.

CONSENSUS PROTOCOL: So, what is the real definition of Blockchain? In order to add new blocks, users must first come to a consensus on the validity of the chain. When a node adds a new block, a common protocol is used for all users to validate the block. Proof of Work or Proof of Stake methods is typically used to reach a consensus on the correctness of a new block. The nodes verify that the new block satisfies the Proof method requirements, including validation of all transactions within the block. If the block is deemed valid, it becomes part of the Blockchain and more blocks can be added.

In the event that different users have chains that appear valid but are different, they will discard the shorter one and select the longest chain as the primary Blockchain.

BLOCK VALIDATION OR ‘MINING’: This functionality is not strictly necessary for a Blockchain to operate, as demonstrated by platforms like CREDITS. However, it has become one of the most well-known aspects of Blockchain technology due to its association with Bitcoin.

Mining involves fulfilling the Proof of Work requirements in order to add a new block of pending transactions to the Blockchain. The method used for mining varies depending on the specific Blockchain being used.

In general, the Proof of Work method requires a user to create a block with restrictions on its Hash code. Since the Hash code is unpredictable, miners must test various combinations until they find one that meets the requirements. The difficulty of the network is defined by these restrictions.

Once a miner node finds a solution to the PoW problem, it can add a new block to the chain. Other nodes then validate the legitimacy of the PoW using their Consensus Protocol. If the block is deemed legitimate, it is added to their local copies of the Blockchain.