Blockchain Basics 2 – Breaking Down the Blockchain

carusovc/ November 11, 2017/ Blockchain Basics/ 0 comments

Read Part 1 Yet? If Not Click Here

First off, what is a blockchain? A blockchain can be defined as:

An application of a decentralized system, in which many individuals share in an immutable distributed ledger to record an agreed-upon history of transactions.

Yeah, that’s a lot… Luckily, this entire section is dedicated to breaking this definition down into three easily digestible segments that, when put back together, paint a clear and accurate description of what a goes into a blockchain. At the end of this section, you will have an understanding of what a blockchain really is, and will hopefully be ready to dive into the gritty details. Without further delay, let’s get started.

1. An application of a Decentralized System

This is the first key part of a blockchain that defines the type of organization that a blockchain takes the form as. You’ve probably heard of a centralized organization such as the military. The military has one chain of command where each lower-ranking Enlisted Private reports to one Corporal. Then that Corporal along with their equal Corporals all report to their superior Sergeant. This repeats to create a hierarchical centralized system. Centralized systems don’t necessarily have to follow a hierarchy (although it is common), but rather always have one central figure. Take a look below to see two examples of centralized systems.

Now that we understand what a centralized system is, we can talk about the important stuff: decentralized systems. A decentralized system is a structure that has no central figure. While this is less common in organizations, the idea for a decentralized system was around long before blockchain. A not so obvious example of a decentralized system can be see in insects such as ants. Ant colonies work together passing information about food, supplies, and even threats directly without having to answer to a chain of bosses or follow specific protocols. A second example of a decentralized system is a capitalist economy. In the United States, although there a laws and regulations, the economy as a whole is completely decentralized. Nobody tells you what to buy and when or, if you’re a company, what to sell and for how much. In general, a market economy functions without any higher power dictating what it can and cannot do.

This is exactly how a blockchain works. Nobody commands anyone on the blockchain and individuals are free to do what they want, when they want, how they want. This is the first pillar of a blockchain; it is completely and entirely, decentralized.

2.  ‘in which many individuals share in an immutable distributed ledger

The second pillar of a blockchain is what is referred to as a distributed ledger. To make this easier to digest, we will explain it using the analogy of a notebook.

Before blockchain technology, you had a notebook that was yours and only yours. You could write or erase in it at your discretion. However, nobody else could see you notebook. If you wanted for your friend to see your notebook you would have to send it to them via the postal service, during which time, you would no longer have your notebook. While your friend had your notebook, they could also write new things in it, or change your old writing, all without you knowing. Blockchain, on the other hand, is like a magical notebook. Instead of you having your notebook, everybody in the world has a copy of the magical notebook. When you write in your notebook, it appears on everyone’s notebooks. When people from around the world write in their notebook, it appears in yours. On top of this, nobody can erase anything you wrote so it is in the notebook forever. This is exactly how a blockchain works, except all online and all happening in real life.

A blockchain is a system to record transactions, AKA a ledger. Everyone that joins the blockchain is given a copy of this ledger that automatically updates in real time as new transactions take place. This is what is called a distributed ledger. This distributed ledger is read-by and added-to by every person involved on the blockchain. On top of this, because everyone has a copy of this ledger, nobody can go back and change someone-else’s transactions. If someone attempted to edit previously recorded transactions, they will then have a different ledger than everybody else, proving them incorrect. This lack of changeability is referred to as immutability. This distributed ledger that is immutable is the second principle of a blockchain and one of the most important technologies behind the blockchain revolution.

3. ‘to record an agreed-upon history of transactions

The final pillar of a blockchain is an agreed-upon history of transactions, otherwise known as a consensus. This element of a blockchain is extremely important to the trustworthiness and fidelity between individuals interacting on a blockchain. Since a blockchain is a method for people to interact, there has to be a historical record showing what those transactions are, and when they occurred. This ties directly into the idea of immutability. If someone were to attack the system by attempting to change the past, all the other users of the blockchain could come together and show that they have an agreed-upon history of transactions proving the attacker illegitimate. Even if 49% of the users attempted to lie in some coordinated way, the other 51% could show their history proving the attackers wrong. Consensus is quite a complicated subject that will be discussed in greater detail further down the line in Blockchain Basics articles. For now, know that a consensus is a way to agree on an official history of transactions used by all members of a blockchain.

Putting It all back together

We have broken down the definition of a blockchain into three pillars including a decentralized system, immutable distributed ledger, and consensus based history. While these technologies may have not been invented with the inception of the blockchain, the combination of the three together form what we call a blockchain today. Blockchain is a very complex system with many moving parts that changes every day. However, these core principles have formed a technological breakthrough that just may change the world.

To continue with part 3 of the Blockchain Basics series please click here.If you enjoyed this article please leave a comment and feel free to subscribe to Innovation, Decentralized for more. Thanks!

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