What is the Blockchain?
In its simplest explanation, a blockchain is a database of information that is stored electronically on a computer system. Whilst that is an overly simplistic explanation, at its core, the concept or idea around blockchain is very simple.
But to be able to really understand and grasp what makes blockchain different, we need to go back to some basics and first explain what a database actually is.
A database is an electronic repository of information, that is designed to store large volumes of data that can be accessed, filtered, and manipulated quickly. Data or Information contained within computer databases is usually structured in the form of a table, which allows for easier searching and filtering.
The larger databases do this by keeping the data on powerful computers connected to fast fibre networks. These servers often utilise thousands of computers, due to the computational power and storage capacity required. This allows multiple users to use the database simultaneously.
So Blockchain is a database? What makes it so special?
Yes, Blockchain is a database. But there are also a couple of tweaks that differentiate it.
Firstly, one of the main differences between a blockchain and a standard database is how data is structured.
A blockchain collects information together in groups, known as blocks. These blocks hold chunks of information. They have a finite storage capacity, and when a block’s storage is maxed out, it is “chained” to the previous block, and a new block is started. This has the effect of making a chain of different blocks. This process is then repeated, with new information being added to a newly formed block, which once full, will also be added to the chain. So its this structure that is a big difference between block chain and a standard database.
The blockchain system also creates a timeline of data, which is irreversible, because once the block is full and added to the chain, each block in the chain is given an exact timestamp.
How is this used in crypto?
Lets look at how Bitcoin uses blockchain.
Bitcoins blockchain is just a specific type of database that stores every Bitcoin transaction carried out. We mentioned earlier that a database requires a lot of computational power, and bitcoins blockchain is no different. However, in the case of Bitcoin’s, and unlike most databases, the computers used in the bitcoin blockchain are not all under one roof, and each individual computer or group of computers is operated by a unique individual or group of individuals.
To put this into perspective. Try to imagine a company, that has a database holding all of its clients information, that is stored on a server comprised of 15,000 computers. This company needs to have a building to store and maintain all 15,000 of these computers under one roof.
Bitcoins database, or blockchain, is also stored on thousands of computers, but in this case, each computer, or group of computers are located at different geographic locations around the world. These computers are called nodes.
Does this mean that the nodes are decentralised?
Yes! That bitcoin model means that the bitcoin block chain is used in a decentralised way.
Within the chain, each node has a complete record of data that has been stored on the bitcoin chain since it started — i.e the entire history of all Bitcoin transactions. This is helpful if there are any errors, because if one node contains or develops a data error, the system is able to use thousands of other nodes to cross reference the information and correct itself if needed. This means that no single node within the network can change any information held within it, making the transaction history within the blocks that form the Bitcoin blockchain irreversible.
What happens if someone with bad intentions attempts to steal or mess with the system?
If any individual or group of people try to tamber or alter Bitcoin’s transactional history records, all other individual nodes will cross-reference each other and identify the node with the wrong info.
So its secure?
As always, there are always people with bad intentions looking to take advantage of systems for illegitimate gain.
The bitcoin blockchain address issues of security in a number of ways.
The first is the structure itself. All new blocks are stored in chronological order, and added directly to the end of the chain . This means that each block has a position on the chain, called a “height.”
The only way to alter the contents of the block is if a majority consensus agree. This means that if a hacker wants to change the data within the blockchain and steal Bitcoin, they can do this on their own copy of the blockchain, without any problem — but this means that their copy wouldn’t align with everyone else’s version, and this would be picked up and identified when the nodes cross reference with each other, meaning that the hackers version would be identified as illegitimate.
For the hacker to succeed they would need to simultaneously control and alter 51% of the copies of the blockchain. This would mean that the altered versions become the majority. An attack of this kind would require crazy amounts of money and resources. Furthermore, each Block is encoded cryptographically according to the previous blocks hash, meaning any change to any of the blocks previous to the current Block, would render the enter chain incorrect..
But an attack can happen?
Technically yes — but the sheer size of bitcoins network, and the growth rate means that the chances of anyone having the money and resources to carry out an attack of this kind is next to impossible. Not only would the costs be insurmountable, but it would also not likely have the desired result. Any hack of this kind, containing such significant alterations to the blockchain would be noticed, and the network members would simply fork to a new version of the chain that has not been affected.
Another consequence would be value. The compromised version would fall in value, leaving the hacker with an ultimately worthless asset.
This new blockchain technology sounds great!
That is half right! Although we agree that blockchain technology is great, it isn’t new!
Blockchain was first tested during a 1991 research project in 1991, making blockchain 30 year old! During that time, it has been tweaked, scrutinised and perfected, to the extent that now in 2021, we are wondering what the technology is capable of and where it’s headed?
It is clear that blockchain has a lot of potential uses, and we assess that it is only a matter of time before it moves away from predominantly crypto based uses, to become more widely utilised and mainstreamed in business, government and tech.
Well guys, that’s about all for todays video. I hope that you found this video about blockchain, and the way it is utilised by bitcoin to be helpful and informative. As always, if you have any questions that I haven’t answered, or simply want to share your thoughts, then please do let me know in the comments section down below.
And of course, if you haven’t already, please do like and subscribe to the channel. That would really help and be appreciated. Thanks for watching, I will see you in the next one!
