What is Blockchain?

This video explains what blockchain is, why it was developed, how it is being used now, and how it could be used in the future.

So, let’s start off with the first question:

what is this blockchain thing everyone is buzzing about?

The word “block” is meant to represent a list of records. While the word “chain” is meant to describe the linked relationship between these lists of records.

So imagine a list of records linked to another list of records. That is basically what the term “blockchain” describes: linked sets of records.

The first known use of blockchain-type technology was in 1991 by Stuart Haber and Scott Stornetta.

As our world was evolving toward the digital paradigm, concerns about the accuracy, security, and modifiability of digital records were raised.

At the time, use of third party time-stamping services was the only option available that attempted to address these concerns.

However, relying on time-stamping services that could be susceptible to bribes or security breaches was not ideal.

This is because it is imperative to maintain the integrity of digital records by ensuring they cannot be modified, backdated, or forward-dated. Otherwise, digital record storage was not likely to be adopted or succeed.

This brings up the next question:

Why was Blockchain Developed?

Haber and Stornetta worked on developing a technology that automatically ensured the accuracy, security, and modifiability of digital records using computers and mathematics.

They decided to employ the use of cryptology to achieve the desired level of privacy and security for digital record keeping.

Now, Cryptography is the study of secure communications. While cryptology is the term used when you study the application of mathematics to cryptography.

In 1992, Haber, Stornetta, and a Mr.Bayer enhanced their cryptographically-based blockchain technology by adding the use of hash trees, which are also known as Merkle trees.

Let me break this down further for you.

First let’s talk about hashes.

I’m going to to give you an idea of what hashes and hash functions are using social security numbers we receive in the United States.

Imagine a list of some random names that are commonly found in the United States:

John Smith
Kate Holt
Rebecca Johnson
Stephen Stewart

You can see they all contain different combinations of letters and each of the names are different lengths.

Next, let’s imagine a list of unassigned social security numbers:

123-45-6789
234-56-7890
345-67-8901
456-78-9012

You can see all of these social security numbers are in a standardized format.

Each social security number contains a set of three whole numbers, a dash, two whole numbers, a dash, and four whole numbers.

Now, let’s imagine the United States uses a computer function to map each person’s name to a unique social security number.

Regardless of the length of a person’s name or the letters used within a person’s name, the computer function maps it to the standardized social security number.

Now, back to the hashes. Any computer function that maps arbitrarily-sized data, like a list of people’s names, to a fixed form of data, like social security numbers, is called a hash function.

Now the output of the hash function is a fixed form of data, just like a social security number. And this output is commonly known as a hash value, hash code, digest, or simply a hash.

Going back to how the word “block” in block chain represents lists of records, let’s imagine a list of social security numbers or hashes.

Imagine that each list of social security numbers are stored in blocks. And each block represents a region, and the child blocks stemming from those represent states, and the child blocks stemming from states are cities, and etcetera.

That should give you a very simplistic idea of what a hash tree is: blocks of hashes stemming from each other that resemble a tree with branches and leaves.

The incorporation of the hash tree to Haber, Stornetta, and Bayer’s 1992 blockchain-type technology allowed them to securely store larger sets of digital records.

On to the next question:

How is Blockchain being Used Now?

It wasn’t until 2008, that the first “distributed” blockchain was created for use as the underlying technology of bitcoin, a digital currency. It was made by an anonymous person or group that goes by the pseudonym Satoshi Nakamoto

A common misconception is that bitcoin is synonymous with blockchain. That, however, is not the case.

The blockchain facilitates the secure and private transfer of the digital currency called bitcoin, as well as posts the transactions to a public ledger to maintain data integrity.

Right now, most financial transactions are facilitated and recorded through the use of third parties such as banks, visa, mastercard, and other financial institutions.

The blockchain foundation allows bitcoin currency transactions to occur securely and privately, while maintaining the accuracy of the transactions by posting a time-stamped, unmodifiable record of the transaction to a public ledger without the use of a third party.

Instead, it uses computers, mathematical algorithms, and cryptology to perform these functions which allows a direct connection between bitcoin users by removing the need for a third-party.

So again, imagine a list of transactions as a block. And each block is being recorded on a public ledger. So as blocks of transactions are recorded on a running ledger, it creates a chain of blocks. Hence the term “blockchain.”

So where is this blockchain and what does the term public ledger mean?

Every transaction between bitcoin users is processed by a computer that has a bitcoin processing software called a bitcoin client. This computer is connected to other computers via an online network.

So imagine a computer with bitcoin processing software on it connected to the internet, which allows the computer to connect to a network of other computers online with bitcoin processing software.

The technical term for each computer that participates in the blockchain network is the word “node.” So the blockchain network has several nodes, or computers, that it saves all the recorded blocks of transactions on.

This is where the word “distributed” or “decentralized” ledger comes from. Since every transaction is saved on every node, or computer with bitcoin client software, on the bitcoin network, the ledger of all bitcoin transactions is described as “distributed.”

So if you have a laptop with bitcoin client software, and keep it connected to the internet and the bitcoin network, you will have the entire bitcoin transaction ledger saved on your computer.

However, if your computer breaks, it will not affect the ledger because that same ledger is distributed on several other computers around the world. So the network cannot be taken down at any specific point.

All of these computers process and record blocks of transactions to this public ledger that is saved on all of the nodes connected to the bitcoin network.

The blockchain process creates unique hashes for each transaction as I mentioned before that functions to make transactions secure and private.

These hashes, as well as time-stamps, and other unique identifiers are created for each transaction and recorded on the public ledger.

So anyone can go and look at the bitcoin public ledger and see all of the transactions. When you send or receive bitcoin, you can identify your transaction by the unique hash that is created, the address of the user it was sent to which is a randomly generated set of numbers and letters, or the IP address it was sent from.

How can Blockchain Technology be used in the Future?

How else can we utilize blockchain technology besides facilitating digital currency transactions like it does for bitcoin?

There are several applications for blockchain technology in multiple types of industries.

Blockchain technology creates transparency, validates and secures records, manages smart contracts, and eliminates middleman or third parties.

Some examples of how blockchain could be used includes recording land record transactions or mortgages, maintaining digital smart contracts like wills or promissory notes, managing digital identities like passports or birth certificates, housing distributed cloud networks to store information like documents or media, and a myriad of other exciting things.

Thank you for watching my video and reading my article.

Blockchain will revolutionize our economy and lives over the next few years.

What do you think blockchain technology has in store for us in the future? What other information should we know and understand about blockchain that I may have missed?

Leave your comments below.