What is Blockchain?
Blockchain = Protocol + Data + Security + Decentralization + CensorshipResistance
Blockchain is a transformative technology that empowers individuals to trade information through peer-to-peer transactions and lower the use of intermediaries like large banks. Trust among peers is made possible through cryptography and a reliable network of computers that adhere to a set of well defined rules, or protocol.
Blockchains store data in a structure that effectively timestamps the information through a digital verification process and changes to the data are stored in blocks. “chained” together by linking to the “hash” of the block before it, hence a “chain of blocks”. You can think of the hash as a “digital fingerprint” of the data. Even a tiny change has a large avalanche effect on the fingerprint, making it nearly impossible to fake a change, but very easy to identify if a bad actor is in the system.
Since copies of the data are stored in a public, open, borderless way, the network of computers verifying the data keep it secured, reliable, decentralized and censorship resistant, making it widely available to everyone.
Instead of the data being owned by one company, it becomes available for anyone to verify through a decentralized consensus algorithm such as Proof of Work. These nodes performing the verification are known as miners, and although it’s a group effort, ‘mining’ is competitive in nature. The miner that verifies a transaction first, is rewarded; thus, there is an economic incentive to keep the data secure.
Not all blockchains are alike. There are a couple notable ones that are heavily used in practice: Bitcoin and Ethereum are the most well known. The types of data that are stored on each blockchain represent different digital assets that are native to their chains. Some blockchains allow us go expand upon that to use Smart Contracts, which allow us to develop decentralized applications on top of the protocol.
Next, we’ll cover the subtle differences between native Cryptocurrency versus Tokens.
Dan Emmons is owner of Emmonspired LLC, a Certified Bitcoin Professional, Certified Ethereum Developer, Full Stack Developer and Advisor on Cryptocurrency projects. He is also the creator of a Youtube Channel and iTunes Podcast called ByteSizeBlockchain.