Demystifying blockchain. Blockchain is revolutionising the way businesses interact with their clients and each other. Still curious about what it is? Don’t worry. We’re here to help you understand what blockchain is and why it should be on your radar.
Let’s start demystifying blockchain together and dive into what it is and how it works.
What are blockchains?
A ledger, or simple collection of data in chronological order, has been used for ages to track information. From wheat in bushels to barrels of wine, ledgers have been an essential tool for recording data throughout history.
With the shift from paper to digital in the 20th century, databases were created to take advantage of the new paradigm. Suddenly, data could be shared, sorted, searched, and transported more efficiently than ever before.
As our world becomes more interconnected and our interactions increasingly digital, we need a more collaborative and robust solution for managing our data. Enter blockchain.
Originally conceived for Bitcoin and other cryptocurrencies, blockchain has since evolved into much more. It’s a decentralised data ledger that securely connects users, allowing a group of selected members to share data.
Blockchain eliminates data duplication and enhances security by providing data integrity through a single source of truth. Since data can’t be changed without the majority of stakeholders’ consent in a blockchain system, preventing fraud and data tampering is easy. Blockchain ledgers allow for sharing, but not for altering. All participants will be notified if someone tries to change the data.
To better understand this concept, let’s use the analogy of Google Docs and blockchain.
With traditional word processors like Microsoft Word, collaborating on a project involves a lot of back and forth. A person works on a document, and the recipient can’t make changes or add comments until the author sends the file back. Only the person working on it or someone nearby can see comments, notes, and other modifications made to the document.
Google Docs, on the other hand, allows you and everyone else with whom the documents have been shared to access the file and work together in real time. Everyone with access can see it, comment on it, or suggest modifications. All participants can even see the revision history. Nobody can deny what has been observed and entered, and no one can alter something without the rest of the group noticing it as well.
That’s precisely how blockchain functions. Instead of a shared document, all parties involved have access to a shared ledger. Everyone in that network can verify any changes made there.
Blockchain technology’s fundamental function is to store transactions in a shared chain of linked blocks in a fashion that requires consensus from all users before adding any new blocks. However, its implications go far beyond a simple definition. Blockchain is disrupting business for the better.
Some important definitions for demystifying blockchain
To better understand how blockchain technology works, let’s familiarise ourselves with a few key definitions.
Decentralised trust:
One of the main advantages of using blockchain technology over traditional data stores is ensuring data integrity without relying on a centralised authority. This is known as decentralised trust through reliable data.
Blockchain blocks:
The name “blockchain” comes from the fact that data is stored in blocks, and each block is connected to the one before it, forming a chain-like structure. With blockchain technology, only new blocks can be added (appended) to an existing blockchain. Once a block is uploaded to the blockchain, you cannot change or remove it.
Consensus algorithms:
These algorithms maintain the rules of a blockchain system. Once the involved parties establish the rules, the consensus algorithm ensures they are followed within the blockchain.
Blockchain nodes:
Nodes are the storage devices that keep the data synchronised or up-to-date, storing the blockchain’s data blocks. Any node can quickly determine whether a block has changed since it was added. When a new full node joins the blockchain network, it downloads a copy of every block ever added to the chain. Once synchronised with other nodes and possessing the most recent blockchain version, the new node can receive new blocks just like the others.
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