Layman : BlockChain
Trying my hand to understand and explaining the BlockChain technology.
Lets begin with oversimplification of the fundamentals
Trust is the fundamental currency of commerce
The currency note is issued in trust. You trust the Reserver/Federal Bank of your country
The records & owner ship details of the house you want to buy are also on the based on trust. You verify the record from your lawyer, real estate agent & still be wary about its correctness.
The “ledger” is associated with each transaction we do in real life. There is ledger associated with each purchase, sale, exchange, modification. You buy a car, the sale history, service history are ledgers. The intellectual property, song/art copyrights, are recorded ledgers. These ledgers work on the principle “Trust but Verify”.
Intermediaries are hence created to maintain these ledgers. Banks are the most common intermediaries. Vehicle & Home Registries and other government agencies. These intermediaries help us Verify & Trust.
Here is where BlockChain fundamentally comes in
BlockChains consists of 3 high level constructs.
- Block: A block is a list of transactions/records. Block can be thought as a notebook keeping a list of transactions or a ledger.
- Chain: A chain is created by linking the current block with all the previous blocks. How the link is created? Simply put, Block contains a KEY which was created by using the current BLOCK data + KEY of the previous BLOCK.
- Network: A network is interconnected computers, they connect with each other. Each computer is called a NODE. Each node has the complete Chain. A Node can validate the transactions in the block. A Node can also be a Miner, who creates a blank Block. Nodes are everywhere (distributed) and each Node can validate each Block (no central intermediary)
Lets take an example and see how the above 3 parts inter play. Say you purchase a used car. You would want to see the Insurance history of the car. Insurance company starts a BlockChain of transactions. Each purchase/renewal/lapse of insurance of a car is recorded as a transaction in a block.
Day 1. New insurance for your Ferrari — Block 14 — Key 14
Day 365. Insurance Lapse your Ferrari — Block 47 — Key 47
Day 370. Insurance Renew your Ferrari — Block 51 — Key 51
The above three transactions occur on different days, and are recorded on the block that was active on that particular day. Each Block has a associated Key. Each Key is created by combining the Current Block and previous Key and creating a chain 47, 48, … 51. So if someone tries to remove the Lapsed transaction. The KEY 47 will be changed to Key 47(2). Hence causing a cascading change on all Blocks on top of Block 47. Each Node (distributed computer) now can validate easily and say the Keys are not correct hence someone tried to change already recorded transaction.
BlockChain takes the “Trust But Verify” flow out of the hands of intermediary and gives anyone with a simple computer to validate the information transfer.
