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Blockchain 101: What IS a Blockchain Anyway

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Where Blockchain Came From

Everyone’s been talking about cryptocurrencies and new, innovative data structures. In 2008, Satoshi Nakamoto invented Bitcoin and with it a whole new way of storing data.1 But actually, the concept that blockchain was derived from has been around since the 1990s.2 That technology concept was originally developed to make it more difficult to tamper with the timestamp of a document.

 

An animation showing a blockchain being mined and constructed

A blockchain is exactly like it sounds: a series of data blocks which are chained together.

The Blocks

Each block essentially consists of three parts: the fingerprint from the previous block in the chain (shown on the left in the figure above), this block’s unique fingerprint (the upper-right section), and the encoded data (the bottom section). The data can have many different forms, sizes, and shapes.

Of course, each chain has to start somewhere. The first block in the chain is called the genesis block. It’s a valid block, but without an originating fingerprint.

Miners

This process by which a new block is added to a blockchain is dependent upon a network of computers set up to validate or “mine” the data. This is called the “Proof-of-Work” system. In Bitcoin, the miner gets a small cut of each transaction. As you can imagine, this leads to a lot of competition to have the largest pool of miners. The larger your pool, the better your chances of mining transactions.

Adding Blocks

Each time a new block needs to be added to a chain, the new block is presented to a miner (shown as a pick axe) to validate. The miner’s job is to look at the chain, make sure previous fingerprints match, and that nothing looks fishy. Once the miner signs off on the transaction, the new block is added to this chain and subsequently all copies/versions of the chain.

Peer-to-Peer Networks

The biggest advantage of storing information in a blockchain instead of a database is that every participant in these transactions has a secured copy of the chain, which means that the information doesn’t have just one place it exists. This is called “decentralization”. If blocks on a copy of the chain become corrupted or insecure, the remaining valid chains will reject those blocks.

Small transactions like a ledger balance are perfect for such a technology, which is why you see different forms and variations of blockchains used so frequently in the crytocurrency industry.

Keep reading our blockchain series to learn more about what makes blockchain so different, some pros, and some cons of this technology.

  1. S., L. (2 November 2015). “Who is Satoshi Nakamoto?”The Economist. The Economist Newspaper Limited. Archived from the original on 21 August 2016. Retrieved 23 September 2016.
  2. Haber, Stuart; Stornetta, W. Scott (January 1991). “How to time-stamp a digital document”Journal of Cryptology3 (2): 99–111. doi:10.1007/bf00196791. Retrieved 4 July 2017.

 

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