I have been trying to wrap my head around blockchain technology for a long time. Merriam-Webster defines the idiom of wrapping your mind around; To find a way to understand or accept (something).
I have asked myself, what is a blockchain? What are its characteristics? And how can someone describe it?
Below are bits and pieces that I have read in books and learned from studying online about it.
A blockchain is a chain of attached records that uses cryptography. Whatever amount of data or transactions are in a blockchain, they are secure from any changes.
A blockchain is a decentralized database, or open ledger, where every transaction is recorded and open for everyone else. For instance: The Bitcoin blockchain records every transaction that is done, to or from, a public Bitcoin address. It does not expose private information about the person who owns those addresses, nor does it disclose any private keys. Everyone running nodes connected to that blockchain will have access to see any of those transactions.
A block on a blockchain is simply a place that stores data. Every block has its fingerprint or what is known as a hash. Every block in a blockchain includes the Hash from the previous block.
Miners in the Bitcoin blockchain are the ones who validate blocks. They get rewarded for solving a complex mathematical problem if they are the first one to solve it. The first one to solve the complex problem can add that block (or set of data with transactions) to the blockchain. Blocks on the Bitcoin blockchain added about every 10 minutes.
The process which you have often heard about is called Proof of Work. The miners’ reward is now 6.25 BTC for every block that they add.
I found a straightforward but excellent definition of what a blockchain is on blockgeeks.com:
A blockchain is, in the simplest of terms, a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data is secured and bound to each other using cryptographic principles (i.e., chain).
I have found that different blockchains have different ways of operating. Many are Public, but some are Private. Blockchains run differently in their ecosystems and address many kinds of problems.
Most blockchains contain the following:
*A database that stores data in real-time.
*Cryptographic signatures and hash references. *Records that are unchangeable.
*Person to person data sharing (Peer to Peer).
*The ability to broadcast data to everyone connected (running nodes) on that blockchain.
The key to a public blockchain is that everyone participating in the blockchain network checks everything. Everyone can see what is going on.
Anyone can view the contents of a public blockchain. Users can choose to connect their computers to a blockchain via network nodes. If linked, the computer software will receive a copy of that blockchain and is automatically updated when a new block gets added to the blockchain.
So, who uses blockchain technology besides Bitcoin? There are many other uses and users. Ethereum network primarily uses its’ blockchain for smart contracts. Walmart has a blockchain that monitors the supply chain of their products to determine where the errors are along the manufacturing and shipping process.
101blockchains.com gives a good list of companies now using blockchain technology as of January 26, 2020. Below are a dozen of them that you will recognize:
Barclays, DHL,Singapore Airlines,Walmart, AIG, British Airways,Anheuser Busch, Shell Energy, Scotiabank,Ford Siemens, AIA Group
What helped me wrap my head around how blockchains function was a simple video I found on deloitte.com of a woman explaining a blockchain in under 100 words. It is one of the most uncomplicated and clear definitions of the mechanics of how a blockchain works.
I transcribed what she said, word for word, from her video. Below the link is her explanation:
You are a node. You have a file transaction on your computer (let’s call that your ledger). You are working with some accountants (let us call them Miners) who have the same file on their computers, so now its distributed. You send a reply-all email to all these accountants to see if you have enough money to make a big purchase. They rush to review your file as they want to get paid in their salary (let us call that Bitcoin). The first accountant to review your request and validate it along with their reasoning (which is called Proof of Work) sends this to the other accountants. If the other accountants agree with their thinking, then you have a consensus in the network. They can then add a new block to the blockchain. Now you can make that big purchase.
This scenario above sounds simple enough, but it finally allowed me to understand the mechanics of a blockchain. Blockchains are, of course, very complicated than all of this. They are best left to the techies to figure it all out. At least now, I have a better grasp of what they are all about and how they work.