What is Blockchain? Part 1: Definition

To explain it in a simple way, we can say that a blockchain is like a database, it is a way to record values and transactions.
But then why all this hype?
Calling a blockchain a new type of database would be like saying that e-mail is a new way to send letters. Although blockchain is a database, this definition does not explain the true innovation of how blockchain records values and transactions.
In the past, when a value or transaction was stored in a database, people relied on a third party such as a bank, government, or company to record that information. Everyone trusts that banks will not steal their money because they are regulated by the government, and if a bank fails they trust the government to make sure their money is safe.
Everyone is confident that these external institutions will take care of their money and information. Everyone is confident that banks and financial companies will keep their credit card data confidential and secure. They trust that banks and financial companies will have databases of their balances and transactions, and that these databases will be accurately updated. Banks, in turn, trust governments to have databases and lists of printed banknotes.
In these institutions, information is centralised, and each of them operates its own system with its own data.
The common theme in all these daily transactions is the trust we place in the institutions and centralized databases that they operate to maintain a detailed archive of our lives.
Now, imagine that a global financial crisis could cause several large financial institutions that have existed for centuries to fail, bringing with them the lifetime savings of so many people. Imagine living in a country, perhaps in the Eurozone, which in 2015 is forced to freeze its current accounts and allows withdrawals of only € 70 per day.
Would you have the same confidence?
Probably not.
But what is exactly the blockchain?
Let’s move from the bank world to libraries. Imagine that you want to read a book, you go to the library and you discover that the book is already taken. Obviously, the library won’t share the info about the current reader of the book, but he could be your neighbor, way more close than then library itself. You want to read the book but you have to wait until the library will make it available again.
How would you solve the problem? Imagine to have a shared library between you and your neighbor. You have a lot of books that he wants to read and he has a lot of books that you want to read. You can share them, without going through the library and its bureaucracy. Imagine if this shared library could be open to everyone, so that everybody could share its books and keep track of the movements, the original owners and so on and so forth. Now everyone has a copy of the decentralized library database.
Every transfer is a transaction, and these transactions are collected in blocks, and every block is linked to the previous one forming a chain of blocks of transactions. This is why it is called “Blockchain”
Since every block is linked to the previous one, it is impossible to hack a transaction. It would be necessary to modify every block before and after the one where the transaction is registered.
In order to accept transaction we use the term of “decentralized consesus”. It means that, in order for a transaction to be approved, more than 50% of the participant of the blockchain should approve it. This avoid any chance of doing a fraud.
Did you like the article? Don’t miss part 2, where we’ll address the topic of trust in the blockchain
