Do you know that blockchain is a technology that keeps track of a set of transactions, in a decentralized, secure, and transparent way, in the form of a chain of blocks? You still don’t understand anything? Don’t panic, we’ll explain everything to you in the article!
What is Blockchain Technology?
Blockchains is a technology that store and exchange value on the internet without a centralized intermediary. They are the technological engine of cryptocurrencies, the Decentralized Web, and its corollary, decentralized finance.
A blockchain is a database that contains the history of all exchanges between its users since its creation. This database is secure and distributed: it is shared by its various users, without intermediaries, which allows everyone to check the validity of the chain.
A blockchain can therefore be likened to a public, anonymous, and tamper-proof ledger. As the mathematician Jean-Paul Delahaye writes, you have to imagine “a very large notebook, which everyone can read freely and free of charge, on which everyone can write, but which is impossible to erase and indestructible. »
The first blockchain appeared in 2008 with the digital currency bitcoin, developed by an unknown person presenting himself under the pseudonym Satoshi Nakamoto. It is the underlying architecture.
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If blockchain and Bitcoin were built together, today there are many associated blockchains and cryptocurrencies.
Some companies sometimes consider the creation of so-called “private” blockchains, whose access and use are limited to a certain number of players. This makes it possible to experiment internally but with limits in terms of innovation (restricted ecosystem) and ROI (cost of the infrastructure to be put in place).
How does blockchain work?
Suppose we want to store data about a poker hand in a database. We will start by assigning a number to each of the cards in the deck: 1 is the ace of spades, 2 is the 2 of spades, 3 is the 3 of spades, up to 52, the king of hearts. Your hand might look like this:
Think of record numbers like row numbers in a spreadsheet. Database programmers call them ledgers, and blockchain programmers call them blocks. Row, record, block – they all refer to a single piece of data.
Your opponent’s hand would occupy rows 6-10, another hand could be stored in rows 11-15, and so on. So if you want to specify which hand it is, all you have to do is tell the database which row contains the first card.
The links of the chain
Of course, in a distributed peer-to-peer database, other users can deal cards along with you. Your cards are unlikely to appear in consecutive rows. So we can add pointers to the previous and next maps to link the data in a chain:
|Registration||Card value||Previous card||Next card|
The top card in your hand is stored in row 15. The value of the card is 12, making it the queen of spades. There is no previous row in your hand, so we put a 0 in the “Previous card” column. The next card is stored in row 37.
So we look at line 37. It also specifies a single card, indicates the line where the previous card is (15), and indicates the next card, which is stored in line 118.
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In computing, this structure is known as a doubly linked list because it is linked both forward and backward. Pointers are stored in the database as data along with map values.
What is Blockchain Security?
There’s nothing stopping us – or hackers – from altering card values. This database makes cheating easy. Anyone with access to the database could change the value of the first four cards in your hand to 1, 14, 27, 40 – that’s four aces.
We can guard against data errors and hackers by adding a column. For each row, we will add a column that contains the sum of the card values, like this:
|Registration||Card value||Previous card||Next card||Checksum|
Do you see how it works? For our second card, the checksum value is 56, which is the sum of the values of the first two cards, 12 and 44. The checksum of the third card is the sum of the next two cards. Whenever we read the value of a card, we can calculate the checksum and compare it to the checksum stored in the database. If they are not identical, we know that the data has been tampered with.
Memory cards in your computer and smartphone detect errors using this system. This system is also used to find errors on your hard drive.
This simple checksum system is an essential part of blockchain technology. It is well known to first-year computer science students.
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It is also ridiculously vulnerable to hackers. Anyone with sufficient access rights to modify card values could also modify checksums to conceal their work. Or the hacker could modify the “previous card” and “next card” pointers to replace a card in hand with a card stored in another row.
Nakamoto anticipated these vulnerabilities in its blockchain architecture. Instead of employing simple addition to create checksums and track links in the data chain, it used a cryptographic process called “hash.”
Hashing and Encryption:
Hashing creates a unique identifier by combining the value of the previous record with the value of the current record in a one-way mathematical process, resulting in a hash value like 06C4D99F32047. This process is said to be unidirectional because there is no corresponding mathematical process to transform 06C4D99F32047 back into the original data.
In a blockchain, the hash value of each block is based on the hash value of the previous block, which is based on the hash value of the block before, going all the way back to block 0 of Nakamoto. You can calculate the hash value of any block and compare it to the hash value that is stored in the block. If they do not match, the data has been corrupted.
In a typical database, it is possible to alter the data, then calculate new hash values and inject them into subsequent blocks or records to hide the effects. This does not work with a peer-to-peer distributed blockchain database, as the attacker would have to modify copies of the database stored on hundreds or thousands of computers simultaneously.
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A consequence is that, although it is possible to add new blocks of data to the blockchain, previous blocks cannot be deleted or modified. This means that you cannot send yourself $100,000 in bitcoins and clear the transaction.
Every transaction on the blockchain is validated using this hashing mechanism.
Additionally, Nakamoto implemented encryption to ensure that the data stored in the blockchain would be visible to every user, but decryptable only by those with the appropriate decryption keys. Without the key, all you see is a stream of nonsense characters.
This process takes some time depending on the blockchain considered (about ten minutes for Bitcoin, 15 seconds for Ethereum).
What is the potential of blockchain technology?
The decentralized nature of blockchains, coupled with their security and transparency, promises much wider applications than the monetary field.
The use of blockchains can be classified into several categories:
- Monetary applications: use of global currencies (Bitcoin, Ether, etc.) which provide an international standard and a potential safe haven for certain populations subject to inflation or unbanked.
- The tokenization of valuable assets (real estate, video game collectibles, works of art, etc.)
- More complex financial applications (hedge funds, insurance, loans, etc.), with, for example, decentralized finance
- Certification applications use the blockchain as a decentralized notary, in order to guarantee the integrity of digital files.
Due to its transparency and security, the blockchain can be used in other contexts than the monetary field. Indeed, it can be used for the transfer of assets, whether in a monetary context or for the transmission of securities, votes, shares, and bonds. But it can also serve as a register and thus ensure better traceability of products and assets. Finally, it can be applied in the context of smart contracts. These are stand-alone programs that allow the automatic execution of the conditions and terms of a contract, without the need for any human intervention.
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Blockchain can therefore be applied to a large number of sectors, including the banking, industrial, pharmaceutical, insurance, and health sectors. It makes it possible to replace trusted third parties with a reliable and fully automated system.
What is a Blockchain? You know it now.
What is the definition of blockchain? How does blockchain technology work? We hope this explanation of blockchain has given you a better understanding and appreciation of this remarkable and revolutionary peer-to-peer database architecture and its applications.