What is blockchain and how does it work?

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What is blockchain and how it works?

In which contexts, outside cryptocurrencies, it can be implemented and why would it be feasible to implement it in these contexts?

security-guard blockchain

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What is blockchain and how it works?

The basic concept of blockchain is quite simple: a distributed database that maintains a list of ordered records in an increasing sequence.

This concept was originally published by Satoshi Nakamoto in the article "Bitcoin: A Peer-to-Peer Electronic Cash System" (link to PDF version) in 2008 and which was the basis for the source of the Bitcoin launched in 2009.

In itself the concept aims to group the records (say: blocks) thus forming the very "block chain" (blockchain) distributing it in a decentralized way through a network Peer-to-peer where the consensus of the connected "pairs" are responsible for the acceptance (or not) of a new block added to blockchain.

So basic to assemble the extrusion of a block are necessary: index, timestamp, data, hash and hash of the previous block.

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Note that the hash of the previous block should be found in the block that is intended to be added in order to preserve the integrity of the chain.

The first block called "genesis block" should be coded in the array (usually the server that coordinates the network Peer-to-peer).

For the integrity of blockchain there should always be only one explicit set of blocks in the chain and in the case of conflicts (if two pairs of the network generate the same block number) the string with the largest number of blocks should be chosen rejecting the addition of block coming from the "pair" which has the smallest number of blocks.

The main feature of blockchain (the concept) is to share and synchronize the chain of blocks with the pairs in the network and for this it is necessary to create rules for this flow as for example:

  • When a pair generates a new block, it transmits it to the network

  • When a pair connects to a new number, it queries the last block

  • When a pair finds a block with an index greater than the current known block, it adds the block to its current or queries to the complete block chain (synchronizing)

I do not believe that it fits here (a simple dissertation on the concept) to address topics such as mining or proof of work since this is specific to transactions (for use of validation in cryptocurrencies, intelligent contracts, etc...), since the publication of this concept until today, other correlated concepts have emerged: the altchains which aim to be alternatives to Bitcoin and therefore manage their own network and their own blockchain and the sidechain that have arisen in order to validate other blockchains.

It is worth quoting an excerpt from the definition of sidechain described by Wikipedia:

Sidechain is a blockchain validating data from other blockchains. This technology was developed as an alternative to promote integration between blockchains and add functionality without the need to modify the scripts of blockchains. Since the introduction of Bitcoin for Satoshi Nakamoto in 2008, several alternative block chains, called altchains, were created, each of these with its own technology and its own cryptocurrency, as Altcoins. The existence of several blockchains isolated generated market fragmentation and development. Sidechains emerged as an alternative to solve these problems, allowing assets to be moved between chains.

Although it is difficult to think of one (the concept) without the other (cryptocurrencies) by its own origin, the blockchain for being a free concept of trademarks or patents is not explicitly linked to the use of cryptocurrencies, payment platforms or smart contracts and has a considerable range of possible applications and even that have not yet been thought out or even implemented.

In what contexts, outside cryptocurrencies, it can be implemented?

The blockchain is not a technology and not a protocol (yet) it is what it is: a concept.

As a concept it can be implemented in the best way that its developer, group, or organization believes it to prove to you, how it emerged to serve as the basis for a decentralized digital currency model (which in itself is already a break from the traditional methods of monetary transactions) the wide range of applications stemming from this niche, until then new and with a large space to be disputed (and monetized).

However this concept can be applied to a wide range of applications that are not necessarily related to cryptocurrencies and smart contracts since data (blocks) are distributed and audited by the network itself thus providing its integrity free of interference from a central mediator to whom confidence is placed may arise possibilities of use such as in:

  • Governance:
    • distribute public spending data in a more transparent and auditable way
    • provide a national (or global citizen identification mechanism)
    • a global clinical information system (healthcare area)
    • publicly and transparently audit the electronic voting system
    • innovate the field of public records and the notary system
    • innovate the area of real estate records
    • map demographic census information more efficiently

The area of governance (state administration) is really very broad, everything practically involves information (data) from the simple demographic census to tax collection. In the case of records and notaries these intermediary agents serve as a point of trust that in this "disruptive" new reality presented by the use of blockchains would be obsolete.

  • Patents, Copyright and Royalties
    • a unified system for records

Basically today, patent, define rights and their royalties are fragmented processes and vary from country to country under the definition of their different laws. All disputes involving these issues culminate in lengthy processes that depend on the local law system (the venue of dispute), a unified system would be less susceptible to fraud, could govern global rules, reduce costs and make actions of intermediaries more transparent and shorten the time of disputes.

  • Administration
    • distribute public data more efficiently
    • provide interoperability between data from blockchains (sidechains)

Concerning the area of administration public or private it is inevitable to think of data and information without imagining a huge stack of papers and binders from small shelves to large sheds. Since we entered the computer age this has diminished badly this far from the end thanks to the imposition of the bureaucratic system, the use of blockchains in this area would considerably reduce the use of papers and the costs involved.

  • Applications (desktop, mobile, Iot, ...)
    • distribute or retrieve decentralized data
    • create new distributed security paradigms

Although the above examples may seem few can derive hundreds or thousands of use cases for applications.

Use cases do not extend exclusively to the use of data public note also the possible case of data private this of course depends on the proposed use of the system in question and how this system should provide data access and distribution.

Difficulties:

Perhaps the greatest of the paradigms that prevent the expansion of the use of systems based on this concept of blockchains is due to the fact of fragmentation in several blockchains.

Another point refers to the lack of legislation regarding how and where the concept of blocks could be used. For example:

Whether public administration uses a citizens' register based on blockchain companies, websites, governments, systems and applications in general could use this information in case of use to verify that a user is unique and that their information is "reliable".

This would open up a range for private or collaborative initiatives for virtually everything that already exists today but is fragmented between services and their providers.

Many questions are also opened here such as: who would be responsible for defining rules, the level of sensitivity of the data and the rights and duties of being able to use and manipulate them.

All this depends on the need to define legislation and possible international treaties and surely the first most relevant work will be seen in the coming decades by nations that have a more efficient and advanced legislative system.

Examples:

The following list shows cases of use of blockchain (some for cryptocurrencies and payments) by startups:

The credits on this list: 17 Blockchain Disruptive Use Cases

References and study:

The examples and references raised here are significantly small in numbers as there are many more and many with greater or lesser relevance or advertising may have been left out of this listing.

Logically and from a point of view "personal" I believe that the future of applications using the concept of blockchain should even be fragmentation which will raise considerably the use of sidechains. In addition to what our society is not prepared (nor has it begun to discuss) the disruption to traditional methods of data handling.

5

Blockchain, As the English name says, it’s a chain of blocks. It serves as a distributed database whose validity can be verified by anyone so that the security and transparency of the system are guaranteed.

It all starts with a concept of transaction, which is an atomic operation, which needs to be entered into the record of transactions. It can be a money transfer as in Bitcoin or Bitshares, can be an automated contract as in Ethereum, can be a vote as in Follow my vote, It could be something else that I haven’t seen as Blockchain or that no one has thought of yet. But what all these transactions have in common is that they need:

  1. be registered in the database so that anyone can inspect the blockchain and see them there;

  2. The creation of new blocks in the chain has to be complex enough for the blocks to be created at a predetermined average speed, but the verification of the validity of the blocks already created has to be extremely simple and fast, so that everyone can easily go through the transaction history;

  3. Transaction history cannot be fraudulent.

To blockchain makes use of algorithms that allow these properties to be satisfied.

One blockchain begins life as a collection of transactions pending, that is, that they are not in any block. These transactions are replicated by the network, and some users may try to collect some of them and create a block from the same, a process known as mining. In mining, we take the reference to the previous block and the pending transactions with which we want to create the block and solve an encryption problem whose difficulty is adjustable by the network. Once solved, the block is created and is replicated through the network; the miners will then use this new block to create subsequent blocks.

If, of course, more than one miner can generate a block before realizing that others have succeeded, they will compete to see which chain will prevail: the one that can add one more block becomes the valid one, since customers always prefer the longest chain, or the first one they received if they see another one of the same length. Eventually one will emerge as the consensus.

1

Blockchain was introduced as the underlying technology that drove Bitcoin - the first cryptocurrency. Think of it as the infrastructure for cryptocurrency - if cryptocurrencies were cars, blockchain would be the roads. While there is some debate among experts about the future of cryptocurrencies, there is no debate about the bright future of blockchain technology.

A blockchain is basically a chain of blocks. Blocks contain digital information - imagine them as data packets all tied up, like a Christmas present.

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In the case of Bitcoin blockchain:

Within each block there are a number of Bitcoin transactions that took place within a certain period of time. All the blocks together constitute the Bitcoin blockchain and witness all the transactions that have occurred since its inception.

Each block within a blockchain contains some data. In the case of Bitcoin, the data is a series of transactions. This data is organized in a single digital folder. This folder - the block in this case - is confirmed by a miner, who adds to the previous block in the blockchain.

New transaction blocks are recorded in the Bitcoin blockchain every few minutes. This is called "mining" blocks. This action links the new blocks to the existing block chain.

But to be added to the existing block chain, new blocks need to be validated. That’s the role of nodes. In the case of Bitcoin, the nodes are responsible for validating Bitcoin transactions that occur on the Bitcoin network. The way this works is that miners choose which transactions to include in a new block. Then nodes check all transactions in the block. Finally, if all is well, nodes relay the new block to other nodes.

If you want to read one complete guide about blockchain, I think this is a good resource.

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