Introduction to Blockchain

The purpose of this series is to demystify the language and technologies of Web3 so whether you’re a seasoned developer or recruiter, by the end of this post I want you to have a basic understanding of what a blockchain is and how it works. I'll also add some further reading to scratch that tech itch for the more technical folk.

What is a Blockchain?

Imagine I gave you a notepad, and asked you to write your name.??

I then gave that notepad to someone else and asked them to write their name, and so on.??

Now, imagine 8000 people around the globe with a magical notepad in their hand.??Every time someone writes a name, the notepad is updated.? Names are only added to the notepad, they can't be removed or changed.

A shared, global, trusted record that could be used to track money, ethical supply chains,? the ownership of goods, artist royalties, etc, etc.

Congratulations, you now understand Blockchain technology.

A Blockchain is a decentralised, immutable (can't be changed), digital ledger.

You're reading this post on LinkedIn. The content is owned by and hosted by servers provided (and paid for) by LinkedIn, it's a centralised system.??

I’m going to assume you’ve heard of torrents and Napster. Peer-2-Peer file sharing enabled the promiscuous sharing of music and video despite the efforts to shut it down.

Having the ledger (the notebook) distributed across multiple computers (nodes) makes it resilient, resistant to tampering and censorship (it's a lot harder to block 8000 sources than one!)

Whilst companies can have their own private blockchains, the real power of a blockchain comes from a digital ledger being publicly available to anyone on the planet.? One of the most advanced technologies on the planet has no owner, no regulator and no single person paying the bill.

It’s worth noting at this point.? There isn’t just one Blockchain.? Just as the banking?system underpins multiple currencies. Blockchain technology underpins multiple cryptocurrencies such Bitcoin, Ethereum and various alternative coins, altcoins.

Not only are there different cryptocurrencies of Blockchain there are different layers of Blockchains. Every write to a Blockchain costs money, this is called a “gas” fee (pay-as-you-use as opposed to a single entity footing the bill)??

• Layer 1 blockchains provide the foundation, they are highly secure but also have the highest gas fees. To date, no Layer 1 blockchain has been compromised. The negative headlines of $100s millions breached are a result of bugs in code running on Layers 2 and 3 not vulnerabilities in Layer 1.
• Layer 2 blockchains eventually write to Layer 1 but as an intermediate they provide additional benefits such as being faster or cheaper.
• Layer 3 adds distributed applications; these are your Twitter, Facebook and Google equivalents.
• Layer 4 adds the human interface into web3.

How does a Blockchain work?

Imagine a safety deposit box. The box prints out a number on a ticket unique to the contents in the box.

You stuff a cuddly toy in the box and like a ticket machine in an arcade, it spits out a ticket “0034.”???

You also throw a pen into the box. So you now have a cuddly toy and a pen.? Out pops a ticket “0720.”

Trying to trick it, you take out the pen and slam the door shut again.? It prints out “ticket 0034.”? The same number as before with just the cuddly toy.

Now imagine you have two safety deposit boxes.? You stuff a cuddly toy in this one but also the ticket from your last box, “0034”.? It reliably churns out a ticket “1432.”??

By combining the ticket from your previous box you've effectively created a chain.

If you now throw a paperclip in your first box, you’ll get a new unique ticket but this won’t match the “0034”? ticket you put in your second box.? You now have a system that knows if the chain has been tampered with.

The process of adding additional safety deposit boxes is called mining. You may have heard of Bitcoin miners with farms of graphics cards.? Mining is the process in which blocks are validated and added to the chain.? The stack of graphics cards are needed to solve a mathematical puzzle, the first miner to solve the puzzle wins the mining reward.? This is called Proof of Work.??

An alternative mechanism of adding blocks to the chain is Proof of Stake.? Here, a random miner is chosen.? Just like a hand in cards, a miner stakes an amount, the more the miner holds the more likely they are to be chosen.??Proof of Stake skips the problem-solving and the need for farms of graphics cards, saving 99% of the energy consumption.

To recap then:

• A hash is a unique digital footprint for data (the ticket.)?
• A block is a processed block of data containing a hash (the safety deposit box.)??
• A blockchain is a block processed including the hash of the previous block (multiple deposit boxes.)

For the technical audience:

• This brilliant video by Anders Bronworth helped everything click for me. And here's the link to his amazing interactive demo.? You can’t add cuddly toys but you can add text.
• Eth.Build is also an incredible sandbox to work through these concepts.
• Austin Griffith covers “What is a hash?” in this video.

Let me know in the comments if this was useful. Other articles in the series What is Web? and Principles of Web3.