What is a Blockchain, Anyway?
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 . Surprisingly, the blockchain concept has been around since the 1990s, and was originally developed to make it more difficult to tamper with the timestamp of a document. Timestamps are extremely important for keeping records of when information is being exchanged, created, or deleted online.
So what IS it?
A blockchain is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block timestamp and transaction data.
Each block essentially consists of three parts:
- The fingerprint from the previous block in the chain
- This block’s unique fingerprint
- The encoded data
The data can have many different forms, sizes, and shapes. Each chain has to start somewhere, and the first block in the chain is called the genesis block. It’s a valid block, but without an originating fingerprint.
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. This is especially important in “mining Bitcoin” because 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.
Each time a new block needs to be added to a chain, the new block is presented to a miner (displayed above as the pickaxe) 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.
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 cryptocurrency industry.
- 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 Cryptology. 3 (2): 99–111. doi:10.1007/bf00196791. Retrieved 4 July 2017.