What is Blockchain? (Explainer) | The Big Story | Real Vision™

So what exactly is a blockchain? Blockchain is a distributed database that
stores information in blocks, what you can think of as a kind of virtual container for
data. As new data gets added, additional blocks
are created. The blocks are then linked together chronologically
to form a sequence of blocks called a chain. As new information gets added, the chains
get longer. This method of data storage is called nondestructive,
meaning old data never gets erased or overwritten because the previous blocks in the chain remain
unchanged. Each new block that is written contains something
called a cryptographic hash, a small mathematical fingerprint of the blocks that came before
it in the chain, making it extremely difficult to tamper with the data that resides inside
the blocks. One of the things that makes blockchain so
powerful is its distributed nature. Distributed in this case means that data isn’t
just stored in one centralized database controlled by a single account or administrator, but
across a wide-ranging network of computers called nodes. In fact, the capacity for global networking
itself is the very core of how blockchain works. Modern distributed computer networks began
in the late 1960s with ARPANET, a precursor of the modern internet, which connected computers
at research universities out West. But peer-to-peer networks, which power block
train’s communication and are so central to its functionality, are a much more recent
invention. The first well-known peer-to-peer network
was Napster, which appeared in the late 1990s. Napster– as you probably remember– allowed
users to share music files between their personal computers. Each node– or independent computer on the
network– has the ability to share data with all of the others without being coordinated
by a central computer. To continue with the music metaphor, peer-to-peer
networks that power blockchain are like an orchestra without a conductor. Each node is a musician listening to a vast
symphony and playing its own music by ear. Okay, so now we know that block chains organize
data in blocks, and we know that blockchains can use peer-to-peer networks to distribute
and store data all over the world. But how does the blockchain know which nodes
have accurate information? In other words, how does blockchain know what
data is authentic? If any node can modify the chain, what’s to
stop a malicious node from trying to fool the rest of the network for its own advantage. That’s a problem called consensus; which is
really about maintaining agreement on a network. Consensus, as it turns out, is a very old
kind of challenge, which mathematicians and computer scientists call the Byzantine General’s
Problem. What’s an ancient general got to do with blockchain? Well, sending out messages between multiple
parties and making sure they are valid is a problem that people have been struggling
with for thousands of years. Imagine you want to send out a message to
your army that says “Attack at Dawn”, but your message is intercepted and replaced by
your enemy with a counterfeit message that reads “Retreat at Dawn”. If that happens you’ve got a serious problem
on your hands. On the battle field and in finance, there
are a lot of ways things can go wrong. But here’s the headline: blockchain claims
to have solved the Byzantine Generals Problem using unique properties of high speed computer
networks and massive number crunching power. There are a number of different ‘Consensus
Mechanisms’ that blockchains can use to do this. But to give you can idea of how consensus
works here are some of the broad strokes. Participants on the blockchain use their computers
to simultaneously solve very hard math problems. When one node successfully solves a math problem,
a new problem is generated and all the computers on the network switch from solving the old
problem to solving the new problem. Solving hard math problems takes time. But because blockchain keeps full records
of al the changes that have occurred, and nothing is ever thrown away, the sequence
of answers combined with the times the answers were sent out to all the other nodes on the
network, allows the entire network to validate that the data hasn’t been tampered with. We’ve simplified this view of blockchain;
there’s a lot of wonky math going on behind the scenes but if you followed it along so
far, you’ve probably got a pretty good idea of the general way blockchain creates trust
in a distributed network with no single party in charge.

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