Blockchain technology has been around for a while now. You may have some doubts regarding this whole contraption or how it works. In this article, I’ll try to tackle the whole blockchain technology thing, and we’re going to try and understand how it looks down to the tiniest detail. I’ll be as simple as possible.
What Is Blockchain Technology
Blockchain is a decentralized distributed public Ledger’s system. To understand what it means to be decentralized and distributed, let’s start with the status quo.
Any organization of network where a chosen group makes decisions regarding the organizations of people in the centralized system. Presently we are surrounded by a massive centralized system that we use every day. If you want to order food from some delivery and logistics system like Zomato or Book a cab through Uber, you’re going through a third party. This third party has absolute power over the system’s rules and regulations even though these guys have a majority of the power. They must rely on your charge to stay functional.
For example, I’m sure you keep your money in the bank instead of just doing it away under your bed at home because you trust the bank more than your next-door neighbor.
A decentralized system is exactly the opposite of a centralized system. When no single governing authority rules a service, you are using a decentralized system right now that is the internet nobody owns the internet. Nobody is supervising what websites can or cannot do, so that was pretty easy to understand.
So do you understand what a distributed system is? Let’s look back and analyze what has been the common reason for a majority of the data breaches of the past:
- In 2013, Yahoo faced a massive data breach that affected around 3 billion users.
- In 2014, eBay faced a cyber attack that compromised the user information for our 145 million profiles.
- In 2016, Adult Friend Finder, which is also a site, was also attacked. Hackers collected around 20 years of data on six databases that impure names, email addresses, and passwords.
These attacks were successful because they chose to keep all their data in one basket or, if I may say, one server, making it very easy for a hacker to creep in and do creepy stuff by distributing everything everywhere. The hacker would need to change the data in all the places at once.
Blockchain is distributed and decentralized. This means that whatever is stored on a blockchain is distributed, and no single governing body owns the blockchain in itself by distributing everything everywhere. A bad actor would need to change the data in all places at once to do their sneaky things. It feels weird, but by opening up and giving the data to everyone, you protect it.
We see from breaking down the definition so far that blockchain is a system owned by nobody and has no single point of functionality and instead is distributed in nature.
Let’s look at the other half of the definition, which states that blockchain is a public ledger system, so first of all, let’s get our heads around this whole ledger system.
A ledger is a list of anything. The term ledger originates from banking as it was first going to denote a list or a book containing financial transactions. Now about blockchain technology, what exactly is a ledger? Well, it’s all the transactions committed on the network to understand what I mean.
The Genesis Of Blockchain Technology
The birth of blockchain technology date sparked in 2009. The timing was impeccable while the world was facing one of the most challenging economic crises. A group or person under the pseudonym of Satoshi Nakamoto introduced to the public Bitcoin. A digital currency is not owned by the government but, in essence, very much like fiat currency or what some of you would call cash. So in a sense, it could be spent anonymously. It could be hard to track, and it is easily trusted.
Now the underlying tech that powered Bitcoin was blockchain. Any transaction made using Bitcoin as a currency was registered on Ledger. This ledger was then distributed to all the members who had agreed to participate in the network. Everybody could essentially keep tabs on each other’s transactions, and anybody trying to tamper with records would be easily identified due to the system’s distributed nature.
Since the meteoric increase in both value and fame of Bitcoin, other such networks have come up with each Network ranked decentralized some service or the other, but the network fundamentals remain the same.
What Does It Mean To Be Public?
So it is hard to fathom the power of the public when it comes to blockchain. It’s the participants or the public, whatever I call him, responsible for the most integral part of the system, that is validation.
Let’s take a scenario where a blockchain network has only four participants, namely A, B, C, and D. Every time one of them spent some money in Bitcoin. They broadcast the transaction down to the last detail onto the network.
But how are the remaining members supposed to know what a is saying indeed is valid or not? This is handled by blockchain’s unique method of validation called consensus. This means that every participating member must agree or come to a consensus regarding the transaction’s validity.
Every network has its unique way of achieving consensus, and the bitcoin protocol uses a method called proof of work.
Let’s go back to the little scenario I had just discussed. Here broadcasts a transaction to the rest of the network. Let’s also assume that this is not the first transaction of the network. This particular transaction is an addition to an already ongoing list of transactions that have already been piloted.
Every time a new transaction is committed to the network, a new block is created, and all these transactions are first hashed.
What Is Hashing?
Hashing is a process of converting a long string into a unique string generally of much shorter and fixed-length. The generated hash depends completely on the input. Even a slight change in the input will change the output hash completely.
Secondly, in blockchain, a unique kind of hashing is used, and this is called cryptographic hashing because they cannot be practically reverse engineered. The transaction list is taken together and hashed, so the output hash or the digest is called the block hash and stands as a unique identifier of that certain block.
Suppose he was to sneakily try and change the history of transactions in a particular block, the output block hash would be changed drastically, which would easily denote that something has been tampered with so right.
Proof Of Work
Our focus is to see how a function can prove that a particular list of transactions is truthful. Imagine someone shows you a list of transactions. They say, hey, I found a unique number so that when you put that number at the end of the list of transactions and apply SHA-256 to the entire thing, the first 30 bits of that output are all zeros. How tough do you think it would be to figure out that number? Let’s bring in some math here.
Let’s say the hash is only made up of ones and zeroes. It’s 256 characters long. In such a case, the probability of brutal happening starts thirty consecutive zeros around 1/2 raised to 30, about one in a billion. Because SHA-256 is a cryptographic hash function, the only way to find the unique number is just by guessing and checking.
So the person trying to check the validity of the block almost certainly had to go through about a billion different numbers before finding the special one. Once you know the number, it’s really quick to verify. You just run the hash and see that there are thirty zeros.
In other words, you can verify that they went through a large amount of work but without having to go through the same effort yourself. This is called proof of work.
I think I’ve covered most aspects of Blockchain. We understood how Blockchain is a decentralized and distributed system. We learned the public nature of blockchain and how to influence the ties up public participation using incentivization. We also learned how the system’s security and integrity are maintained using cryptographic hashing functions tied up with a consensus mechanism.
I hope you learned much about blockchain, so that’s it. I hope you have enjoyed reading this article, please be kind enough to like it, and you can comment on any of your doubts and queries, and we will reply to them at the earliest.