Introduction
Let’s revisit blockchain! Amongst all these articles about options trading, GameFi, why web3 is necessary, and so on — let’s look at why blockchain is important and more importantly, what the hell is it?
Blockchain: Security, Immutability, & Transparency
Allow me to revisit the underlying theory behind the ‘blockchain’, and explore some of the benefits. Security, immutability, and transparency; these are the three words I want you to keep in your mind as you go through this section. I will explain the theory behind the technology, and will mix in why blockchain matters — but these three words should be your main takeaway.
At its core, blockchain is a decentralized ledger of data. Imagine if Google’s entire repository of user data was decentralized, i.e. not accessible by anyone, including Google itself! No more selling of confidential data, because no one has access to that data at all! Data decentralization is accomplished because the data is first encrypted, then spread across multiple “nodes” (computers / servers that are connected to a blockchain network), instead of a single server farm housing all the data.
TL;DR: your data is only your data via the blockchain, no one else has any access to it. Especially given the concern of targeted marketing perhaps becoming too targeted, blockchain should become the gold standard for user privacy and data confidentiality. This is security for you.
But why the “blocks”? Blocks are the encrypted data structures that house the data in a blockchain network. While typical databases simply store data row-wise, these rows can be switched around and can mess up the timeline. With blocks, chunks of data are grouped together and encrypted. This encryption (a cryptographic hash) contains information pertaining to the individual transactions it houses, the timestamp of the block’s creation, as well as some information about the block preceding it thereby ensuring connectedness between blocks!
Imagine it like this:
The first block (genesis block) is AB. The second block is a different block, but its cryptographic hash has “B” in it, taken from the previous block AB, to show connectedness! CD, where C is taken from BC; DE, where D is taken from CD, and so on!
If someone were to move things around:
This makes no sense! There is no “C” in block “AB”! The blockchain works with greater sophistication than this, but the underlying mechanism is the same — transactions cannot be switched around.
Aside from this, a transaction cannot be interfered with either! The block “BC” was created with not only the previous block in mind, but with the data it contains as well. If even one transaction were changed, BC would maybe become BO, then the next block CD wouldn’t make any sense!
This is why data stored on the blockchain is considered virtually immutable: nobody can interfere with the blockchain without it being incredibly obvious! Once it becomes obvious, this malicious transaction of data manipulation can be prevented by the network, and here we are: back to security.
So — no transaction can be interfered with (immutable), the blockchain network is public (transparent), and all data is encrypted (security). What more could we need?!What about: speed, trust, visibility, and so on, and so on. Blockchain technology is better than existing database architecture in every way!
Lastly, I want to get the main stigma out of the way: blockchain does not mean that all your transactions can be seen as your transactions. All transactions are connected to a public key, with mostly no connection to your identity. Anyone on the blockchain can simply trace a transaction of the public key, but that’s it! Unless you give people your public key, no one knows about your transactions. But, if we talk about this in the context of tracing the transactions of governments and companies, we can look at where the money goes, where it comes from, and do our own little investigations on these organizations’ integrity. From finally being able to trace where our tax money goes, to tracking whether a company’s money transactions are legitimate — the opportunities are endless!
Conclusion
Blockchain is the future, and we’re slowly progressing towards a world where it becomes the standard. Hopefully we can begin to use blockchain technology unconsciously: when we place an order on Walmart, when auditors track a company’s financial data, or when a government claims that it spent a trillion dollars on the military. The opportunities of blockchain are endless because of its benefits, and stay tuned for an article on these benefits’ applicability!
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Akhil Vajjhala is a sophomore at New York University — Stern School of Business, studying finance and accounting with a minor in mathematics and computers. He’s pivoted his career from traditional investment banking to web3, and hasn’t looked back since! Degen interests range from decentralized derivatives to blockchain applications in the real world. Less-degen include sports, Superbad, and Seinfeld, in no particular order. Reach out to him on Twitter @AkhilVajjhala!
