Blockchain for Beginners

Submitted by editor on Sun, 05/13/2018 - 19:54

"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, authors Blockchain Revolution (2016)

A good way to understand how Blockchain works is the book analogy. You take a slim book with one page in it. That page represents the first block of information or data. The words on the page are the data. The page is the block. Now you have a million copies of that book distributed around the globe but all interconnected. With me so far? Like all brilliant ideas, the blockchain part is basically very simple. You add more pages of data to the book. So you now have a chain of pages, or a Pagechain. As each page is added, it is added to ALL copies of the book simultaneously. And all are connected so that any attempt to change the page of one book would be rejected because it does not 'fit' with the other pages of the other 999,999 books. Once the page is added you cannot change it. Take any book and you cannot move the pages around or change the book without defacing it and without it being rejected. So you can trust the data written on the page knowing it is not going to be changed or altered in any way. Once the book is created and the pages are added they cannot be changed. This is how a blockchain works.

A block of data is duplicated on millions of computers (called nodes) around the globe. As a block of data is added to the chain it is added to ALL the nodes at the same time. Once it is added it is then impossible to go back and change the data in any way. So it is a permanent record of data. This ingenious concept can be applied not just for recording money (as in Bitcoin) but for basically anything, public records, private records, financial transactions, you name it.

"As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of accountability. No more missed transactions, human or machine errors, or even an exchange that was not done with the consent of the parties involved. Above anything else, the most critical area where Blockchain helps is to guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism." Ian Khan Technology Futurist

A blockchain has no single point of failure and cannot be controlled by any single entity. It is self-checking and verifying that the transactions being recorded are reconciled every ten minutes. And every node must agree with every other node. This is called consensus. It is also transparent and cannot be corrupted as a result. So this is public, Every transaction or piece of data in a block can be seen and looked back on.

"Blockchain solves the problem of manipulation. When I speak about it in the West, people say they trust Google, Facebook, or their banks. But the rest of the world doesn't trust organizations and corporations that much, I mean Africa, India, the Eastern Europe, or Russia. It's not about the places where people are really rich. Blockchain's opportunities are the highest in the countries that haven't reached that level yet."
Vitalik Buterin, inventor of Ethereum

Every node (computer) that is connected to the blockchain network gets a copy of the blockchain automatically on joining the network.

The blocks are connected by a piece of code. In the page analogy it would be like the last word on a page connecting to the next word on the following page. This concept is called decentralised technology.

Centralised technology is where all data is sent to one location and kept there. Such as in Google or Facebook for example where all data is kept in their databanks, the data, all being in one location, possibly with one or two backups, is subject to change and manipulation. It is like having only one copy available of a book which everyone has to go to read and where the pages can be changed very simply as there is no way to prevent that.

So a decentralised system like Blockchain is:

1. Safer and more secure
2. More trustworthy as the data, once entered, cannot be changed
3. Impossible to manipulate, delete or change the data in a block once it is created.

The possibilities of this system are endless. The recording of transactions on the stock market, the recording of legal documents, Trade activities can all be entered in a block on a blockchain. Even announcements, memos and emails, verification of diamonds, gold and other valuables can be entered in a blockchain.

"2017 will be a pivotal year for blockchain tech. Many of the startups in the space will either begin generating revenue, via providing products the market demands/values, or vaporize due to running out of cash. In other words, 2017 should be the year where there is more implementation of products utilizing blockchain tech, and less talk about blockchain tech being the magical pixie dust that can just be sprinkled atop everything. Of course, from a customer's viewpoint, this will not be obvious as blockchain tech should dominantly be invisible, even as its features and functionality improve peoples' and business' lives. I personally am familiar with a number of large-scale blockchain tech use cases that are launching soon/2017. This implementation stage, which 2017 should represent, is a crucial step in the larger adoption of blockchain tech, as it will allow skeptics to see the functionality, rather than just hear of its promise."
George Howard, Associate Professor Brown University, Berkley College of Music and Founder of George Howard Strategic

Blockchain is here to stay. It is being used in more and ways to record and keep more and more data each day. Bitcoin, for which it was originally designed, was the impetus that brought blockchain to everyone's attention and opened the possibilities to a new world of trust in record keeping.

This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor.