Blockchain is a distributed database
Picture a ledger filled with transactions or other data, that is spread across a network of millions of computers. Now imagine that this network is designed to constantly update this ledger whenever new data is added and you have a basic understanding of the blockchain.
This means that data held on a blockchain exists as a shared — and continually reconciled — ledger. The blockchain ledger isn’t stored in one single location. It is spread across millions of computers worldwide. This makes the data in the blockchain public and easily verifiable.
Concept of free speech
Blockchains are based on a concept of free speech. Imagine that if everything u say is published to a blockchain. And that blockchain is an irreversible public record that’s replicated across computers all over the world. Then there is not one server that can be shut down and no one will be able to censor or take away what u have said.
Every transaction, message or other data send on the blockchain is as if a notary has stamped it. By using the summation of world computing power to perform a very difficult equation called hash to ensure that is hasn’t been tampered with. Blockchain removes corruption from everything. It makes any message, contract, transaction, in other words data resilient to any type of interference from entities that want to manipulate or shut it down.
By having not just one trusted party but millions of sources of truth connected through the blockchain that are all in consensus and agreement one can make really powerful systems able to change the world.
Centralized or decentralized
There are centralized and decentralized blockchains. The main difference between both is how they reach consensus. A public blockchain (decentralized) is a blockchain where everyone, worldwide, can read, send and help validate transactions (reach consensus). This blockchain is seen as the most ‘pure’ version.
A (semi-)private blockchain (centralized) is a blockchain where one party guarantees that transactions have taken place. Parts of the structure, such as the blockchain itself, can be public, but the way consensus is achieved is fully private. This form is far removed from the original vision behind blockchain.
Public and private key
Each (wallet)address on the blockchain consists of a private and public key. The public key is the address which is shared with the public, hence the name public key. The private key gives acces to the (wallet)address and should be kept only by the owner of the address. Think of your private key as a really long pin code.
All transactions between the public keys are visible on most blockchains. For examplpe with the Bitcoin blockchain u can see all transactions ever occured on the network. This makes all transactions going on in the network totally transparent.
No need for a ‘Trusted party’
With blockchain there is no need for a trusted party. No need for a single authority that guarantees transactions take place. Every node connected to the blockchain is a trusted party and helps in the validation proces. The actual validation process depends on the type of blockchain.
For example with a decentralized proof of work (POW) blockchain like Bitcoin, when person A wants to send some Bitcoin to person B. Person A announces the transaction to the entire blockchain, this way person B and everybody else will be able to see the pending transaction. Person B now just has to wait for the ‘miners’ to pick up the transaction. When the transaction reaches enough validations from the nodes on the blockchain person B will see the amount of Bitcoins added to his or her balance.
Different types of Concensus
Since Bitcoin was brought to life in 2009 there have been many developements in the ‘world of blockchain’. One of them is different types of consensus, the developers of these blockchains seek to improve certain flaws they saw with the Bitcoin blockchain.
Proof of work (POW)
Proof of work is a method in which a blockchain transaction is validated with computer calculation power. The more computing power is provided for verifying, the more chance of finding a block with the associated blockreward. Miners perform cryptographic work in order to find the solution which allows them to define a new block. Miners bassically compete to solve a cryptographic ‘puzzle’, known as a hash. There are no shortcuts in this process, which can only be solved with raw computational power.
Proof of stake (POS)
Proof of stake is an alternative to proof of work. Like proof of work, proof of stake attempts to provide consensus and doublespend prevention. Control of the blockchain is done by (wallet) addresses with a certain amount of coins. The more coins, the more computing power is provided for validating the relevant blockchain. This creates a monopoly problem, and is therefore often less attractive than PoW. Another issue with proof of stake is that creating forks is costless when you aren’t burning an external resource, proof of stake alone is considered to an unworkable consensus mechanism.
Delegated proof of stake (DPOS)
Delegated proof of stake is trying to combine both proof of work and proof of stake by having the community vote for the actual proof of work miners. The miners have to write a proposal to the community to get the community to vote for them. In these proposals the miners will make clear in which way they will spend the funds gained from mining and will give a certain percentage to their voters. This way both the miners and the community will be rewarded.
With blockchain it will be possible to store any form of data in a secure, decentralized and transparent way without needing a ‘trusted third party’. This means that basically any kind of information, be it financial, medical or social, that is now secured at a centralized ‘trusted’ third party can and probably will be stored on a blockchain in the future.
Life changing technology
Blockchain will decentralize our lives, it will secure all our information with millions of different parties all connected to the network. With only one person being able to access the information with their private keys. One of the biggest problem with the internet nowadays is that it is not secure. Blockchain will beef up security in so many different ways enabling us to store and access most of our personal data online..