Blockchain - Decluttered

Blockchain is neither a new concept nor a new technology. It has been around at least since 90’s. But, thanks to its association with Bitcoin, Cryptocurrency, it has gained and retained lot of traction, so much so that many people consider both synonymous. However, Blockchain is only an underlying technology which has different use cases or applications/implementations be it in field Cryptocurrency, NFTs, Smart Contracts, Shared Ledgers, Decentralized Finance (DeFi) or the likes.

What is Blockchain

Simply put Blockchain is shared ledger with set of security mechanisms that allows data to be updated and retained with multiple entities instead of any central agency or authority. Yet, it keeps data reliable & dependable. How it achieves, is by making it very tough or difficult to manipulate or change such data once it is committed. Though, theoretically, Blockchain data can be changed or manipulated but amount of effort, resources and time required is so extremely high, challenging, and involves such large number of participants, that it is almost impossible.

Technically put Blockchain is an amalgamation of age old concepts of Link Lists, Hashing & Peer 2 Peer networking albeit with modifications.

Link List

Link list is one of the means of keeping records in predetermined sized chuncks stored randomly rather than single continuous set of records.

Hashing

Hashing is means of creating a unique identifier for any specified data. The purpose could be for indexing, security etc. This is usually achieved by running some predetermined operations or algorithms on the data itself that lead to some unique key generation also called signature. As key is generated by performing certain predetermined operations on data itself any change in data will generate a different key or signature. Thus by comparing keys one can know if data has changed or not.

Peer to Peer Network

Peer to Peer network means that the records are not stored in single place or resource but are distributed and available over multiple resources or computers etc. It allows for copy of same set of records to be available on multiple different sources and provides means to recreate exact copy without worrying as to from what source what part of record was taken.

Why Blockchain is considered secure

Amalgamating technologies by itself is not enough. The way Block Chain aims to be more secured is also intriguing.

(i)???????????????Firstly, it requires that at least some main participant sometimes called ‘Full Node’ that must have the complete copy of records thus, giving rise to another concept of open and closed Blockchains. ‘Open Blockchains’ permit or allow anyone to be participant or become Full Node while ‘Closed Blockchains’ only allow certain participants to be Full Nodes. The Open Blockchain may not be confused with ‘Open Sourced’ as the later term is used for collaborative development where when source code of implementation, license to use is made available to public.

(ii)?????????????Secondly, Blockchains smartly use the hash key or signature of block to add further extra layer of security. This is done by making hash or signature of previous record as part of data of next record. By doing so it ensures that if someone changes any record then all subsequent records will automatically become invalid because hash for not only the record changed but also all subsequent records will change.

(iii)????????????Thirdly, hash or signature generation is made a complex time consuming process by enforcing that some predetermined string must be part of such hash or signature generated. Basically it makes it a very tedious and time consuming process making it next to impossible for individuals or some group of entities to make changes to block chains however, there are means to overcome, but let’s not deviate. Also pertinent to mention is that this is not only mechanism and it is a much more complex process.

(iv)????????????Fourthly, even Peer to Peer network implementation has been modified to accept changes only after verifying such change or ensuring certain criteria is met. This criteria called a ‘Consensus Mechanism’ and varies Blockchain implementation to implementation. A Consensus mechanism can be that more than 50% participants must agree with such change while Blockchains relating Crypto currency, DeFi etc. deploy more fool proof change mechanisms like Proof of Work, Proof of Stake with slashing, Proof of Authority etc.

Uses & examples

People in general mostly associate Blockchains with cryptocurrencies especially Bitcoin etc. however, the technology has vast and varied uses. In fact cryptocurrency is part of Blockchain as reward mechanism for public participation.

Blockchains are being used in Supply Chains, Payment processing & money transfers, Copyright & Royalty Protection, Real estate & Land Titles, Managing Internet of Things, Smart Contracts, Non Fungible Tokens, Financial Transactions & Services. The list of use case is long.

Different Implementations

As already mentioned there are numerous implementations of Blockchains serving different purposes.

To start with, Bitcoin, is an open source Blockchain that used Proof of Work Consensus mechanism and allows anyone to participate as Full Node implying anyone can install full node on its computer and all the Bitcoin database is transferred and then thereafter such node participates in all future transactions as one of the peer network.

Ethereum which is supported by Ethereum Enterprise Alliance on the other hand seems to be shifting to Proof of Stakes and has 250+ members including some Fortune 500, start-ups, Tech vendors etc.

Hyperledger is collection of 185+ collaborating enterprises from finance, banking, Internet of Things, supply chain, manufacturing and technology. Perhaps it will be more apt to state that there are different Hyperledger projects catering to different use cases e.g Fabric, Sawtooth, Burrow, Indy, Iroha, Quilt etc.

IBM Blockchain is a private, decentralized, ‘Permissioned’ blockchain network implying that all participants are identified to a degree, and based on Hyperledger Fabric that has been aimed at enterprises that are less risk-averse and prefer identified participants who have a common goal, but do not have faith on each other, especially in financial services, banking, as well as supply chain.?

Again, the list is very long but, hope you get the idea.

Conclusion

Blockchain is actually a distributed ledger technology based on basic concepts like linked lists, Hashing and peer to peer networks albeit with tons of advancements, over which different solutions have been implemented be it Cryptocurrencies like Bitcoin, Ether etc., or Smart Contracts, NFTs, DeFi and the likes.

Different implementations of Blockchain use different Consensus Mechanisms like Proof of Work, Proof of Stake, Proof of Authority etc. to add authenticated new Blocks. There are also different forms be it in terms of being Open, Closed or Permissioned blockchains.

Blockchains are quit reliable but not absolutely fool proof and not every blockchain is fully public. It is not the fact that all entities using blockchains have to be active participants and depending on implementation, usually certain participants maintain such complete blockchains. However, such list of participants is usually large and thus Blockchains are considered distributed or decentralized.

Blockchains are also not only used for Cryptocurrency and have various other uses, as covered.

Hope we have been able to add value to your understanding of Blockchains, clarify some of your doubts and you enjoyed reading this article. Stay tuned for more.