Here is a brief introduction to blockchain technology's core fundamentals, no matter if you don’t have technical knowledge.
Those 2 are part of the valuable things the ‘Blockchain’ brings us, and probably one of the reasons is taking many industries by storm.
Let’s start learning what Blockchain is.
Who Invented The Blockchain?
The answer to that question is still unknown by many sources, but we will describe it simply straight the point.
19 years ago, the term was first described as a cryptographically secured chain by Stuart Haber and W. Scott Stornetta who were part of a group of researchers that wanted to create a tool to timestamp digital documents.
This can tell you that some source knowledge on Blockchain is based on their research from 1991.
The year when the Bitcoin: A Peer-to-Peer Electronic Cash System white paper appears online.
If you search on Google or any other search engine, it points out as the creator of the white paper and Bitcoin project a person named Satoshi Nakamoto or says that it can be a group of persons with that name as their alias or pseudonym.
The white paper mentioned Bitcoin, the first Decentralized Application (Dapp) that used the Blockchain. The implementation was to serve as a public transaction ledger for Cryptocurrency ( a digital asset used as a medium of exchange ).
Satoshi Nakamoto's proposal brought the problem of double-spending where there’s no need for a trusted authority or central server for the transaction.
Satoshi Nakamoto brought with Bitcoin a decentralized peer-to-peer payment network and set the scene for a decentralized network, with the underlying technology called Blockchain to keep a record of the transactions.
Nakamoto was the first to conceptualize the Blockchain with the Bitcoin white paper.
What Is Blockchain?
A blockchain is an immutable time-stamped series record of data distributed and managed by a cluster of computers.
A system of recording information in a way that makes it difficult or impossible to change, hack or cheat. Essentially a digital ledger of transactions that is duplicated and distributed across an entire network of computer systems.
Blockchain is a type of Distributed Ledger Technology (DLT).
A DLT is where transactions are recorded with an immutable cryptographic signature called a hash. These transactions are contained in blocks of data, and each new block includes a hash of the previous one, chaining them together.
How Blockchain Works?
We are going to take Bitcoin as an example of how the blockchain works.
Bitcoin is the first to use Blockchain technology to exchange digital transaction assets in the network. Bitcoin uses cryptography instead of third-party (middle-man) trust for two parties to execute transactions over the internet.
Each transaction it’s protected through a digital signature.
The database is managed autonomously, allowing the participants to use a peer-to-peer network and a distributed timestamp server.
A Blockchain, in simple terms, is a chain of data blocks with a cryptographic hash of the previous block, a timestamp, and a transaction of data.
Understanding The Byzantine Generals' Problem
The real challenge being solved on the blockchain is a general solution to the Byzantine Generals' Problem.
The Byzantine Generals' Problem is a 1980s dilemma in which an army can be thought of transactions, and the enemy city can be thought of as any man in the middle. The army’s generals need to agree on an exact time to attack because the city can withstand the attack from only one army.
It’s simply consensus-making in a system where communication channels cannot be trusted.
Why Is Blockchain Important?
Blockchain gives us Immutability, Transparency, and Decentralization for data transactions and does not modify the transaction records once updated in the ledger.
Blockchain maintains a record of the transactions on a trustless peer-to-peer network, and transactions are packed into blocks to be added to the blockchain through a consensus.
A transaction is settled between peers, then miners on the network create a block, and the data will be stored. A proof of work is validated to be included in the blockchain.
A copy of all the transactions on each node in the network with a hash is included in the group of blocks. Transactions are public and viewed by all the nodes in the network.
Security is provided because it is verified by the miners in the network and is cryptographically protected.
One of the most important things that bring Blockchain technology is a decentralized network. There is no central authority to settle the transaction between peers (no middle-man).
The removal of the middle-man gives us a fast settlement time and lower transaction fees.
There is a centralized point in a Centralized Network where all data need to pass through a server before it goes to all the nodes.
On the other hand, a Decentralized Network relies on a peer-to-peer network built on a community of users where no one is in control.
TYPES OF BLOCKCHAIN
Let's explain the different types of blockchains.
The Blockchain started as public with Bitcoin and Ethereum, but the public blockchain is not the only one. Other types of blockchains are a combination of public/private and permissionless/permissioned created fitting a specific set of use cases.
A public blockchain is the permission-less distributed ledger technology where anyone can join and do transactions, and no one has control over the network. Anyone can access public blockchain if they have an internet connection, and It is a non-restrictive version where each peer has a copy of the ledger.
A private blockchain can be defined as a closed permissioned blockchain under the control of an entity. Private blockchains are for privately held companies or organization that wants to use it for internal use cases.
Consortium or Federated Blockchain
This is a Blockchain semi-decentralized that is managed by more than one organization. It is a public/private blockchain with aspects that are made public, while others are kept private. The consensus procedures in a consortium blockchain are controlled by the preset nodes and give the authorized transactions right to just a few users.
Here we conclude our first and brief introduction to Blockchain.
We hope you now have a clearer understanding of Blockchain and how it works the fundamentals of the technology. This is the first one of many Blockchain guides we are going to published in the Blockqode newsletter.
We will talk about all aspects of blockchain, getting you from beginners to advanced development with our guides and tutorials.
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