“Blockchain” is a new term being thrown around by a lot of people at the moment, but not many people actually know what it is or what it means. I’m hoping to cover this topic at a very high level, in an almost explain like I’m five style, to help dispel the myths around it.
A simple (or as simple as I can make it!) definition of blockchain (Bitcoin’s version) would be something along these lines:
The blockchain is a database or ledger of all transactions that have been processed (confirmed) on the Bitcoin network by the miners. Bitcoin’s blockchain cannot be edited or deleted, only added to. Nodes (which are just people running the Bitcoin software) around the world keep a record of the blockchain (all the Bitcoin transactions to ever occur) on their computer. This means that the blockchain is distributed on thousands of computers worldwide and as a result, has no one point of failure which removes the risk of the network going down.
So, where did the term ‘blockchain’ come from?
If you’ve read the Bitcoin whitepaper written by Satoshi Nakamoto, you’ll realise that he never actually uses the term “blockchain”. Instead, he refers to blocks — which the transactions are added to — and on numerous occasions, the chain, explaining that the longest chain would be the trusted one. He certainly doesn’t refer to “blockchain” as some form of super technology which a lot of people seem to think it is. The earliest mention I’m aware of is a conversation between Satoshi and Hal Finney, with Hal actually being the one to first use the term “block chain”.
Over time, people have dubbed the word blockchain as some mystical technology that is going to solve every problem imaginable, but unfortunately this is just not the case. The term blockchain has been created over the years, but its lines have become blurred as to what exactly each person thinks it is. If you refer back to my original post on “Explaining Bitcoin and Blockchain”, I touch on some of the core pieces of technology that make up Bitcoin and cover a small piece on blockchain, which shows blockchain is actually only a small piece of the technology behind Bitcoin. Although I’m sure some may argue that they class “blockchain technology” or “distributed ledger technology” as all the pieces of the puzzle behind Bitcoin, this is not technically correct.
Private vs Public
Bitcoin is a perfect example of a public blockchain as it is not controlled by any one person or entity.
You will often see new blockchain concepts selling their product with some (or all!) of the following buzzwords: Trustless, immutable and decentralised. Unfortunately, as soon as the concept becomes a private blockchain you typically lose all three of those crucial factors; it is controlled by an entity (centralised), you now have to trust a central body and it can be edited at the will of the entity. What you have then is a slow version of a database and no need to use a blockchain.
Unfortunately, people are using blockchain as a buzzword to sell their concept, rather than having genuine reasons to use this over a regular database.
Can blockchain save the world?
As much as I am pro Bitcoin (and, of course, blockchain), I don’t like seeing snake oil salesmen using blockchain as a buzzword to push their products. Not only is it deceiving to the people they are selling to, but it is also creating a bad name for the industry as a whole. Unfortunately, the blockchain is not going to solve every problem the world has. I’m sure, over time, it will have the potential to solve some problems, but mainly on a public level rather than the private level blockchains. Over my 6 years within the industry, I have seen many blockchain concepts come and go but unfortunately outside of cryptocurrency, I have still not seen any of them stick.
Logic checking a blockchain concept
Ask yourself these questions when considering a blockchain project.
- Is it trustless?
- Is it immutable?
- Is it decentralised?
- Is it a better option than a standard database?
If your answer is no to any of the above, you should think twice before jumping in.
Although this article may on the surface seem to paint blockchain in a bad light, this is not the case. Blockchain is a genius creation and a critical piece behind the scenes of Bitcoin.
I’m sharing an honest opinion as to what blockchain is and to help highlight how it may be being falsely portrayed as something it isn’t.