Blockchain? Bitcoin? What is all the hype about?

Getting warmed up.

Before we go deep into the details of Blockchain and bitcoin, we need to understand what was the need behind any such technology. To answer this, we need to understand that data integrity and security has always been an issue of significant importance. Everyone on the internet is trying to find ways to secure their data from any tampering or hacking. For this purpose, a technology was introduced in 2009, called “Blockchain”.

A bit of history.

On Oct. 31, 2008, an unknown person or group of people known by the pseudonym Satoshi Nakamoto published a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System.” In this paper, he discussed how a digital currency can serve as a public transactions ledger*, basically meant to eliminate the need for any third party to authorize and control the transactions. The whole idea was to design a trust-less system where everyone was part of the authorizing body and nobody needed to trust the other person for a transaction. For recording all these transactions, they advised to use the revolutionary blockchain technology.

Digging into it.

I know that was a whole lot of information, let’s pick up things one by one and understand them. Starting with blockchain, blockchain in the simplest of terms can be understood as a database of records. It is a chain of blocks, which is growing and growing since it’s inception. Like any other database, it stores a list of transactions that have taken place. However, unlike traditional databases, block chain doesn’t allow modification of a data once added to the chain, i.e. it is immutable. Wait what? Simple English please! In easy words, once a block is added to the chain, it can never be modified or else it will render the chain from this current block invalid, thus making it useless.. Weird, no? Revolutionary to be precise. That’s the real key principle of blockchain that makes it unique and really secure against any alterations of modifications of data because it is practically impossible to modify any data while maintaining the blockchain.

Opening the blocks.

A blockchain as said earlier, is made up of blocks connected to each other, pretty much like bogies connected to each other in a train, if one bogie is disconnected, all the following bogies are disconnected. Now, what is a block? A block simply can be understood as a box holding something, in our case though, data. It consists of three things in easy words. Some amount of data, and two ‘hashes’.

Hashes and Cryptography.

Oh, now what is a hash? A hash is simply a long long string made by applying methods of cryptography on a piece of data. One method applied on a fix data will always yield the same string output (in case of bitcoin).

Back to blocks.

As we discussed earlier, a block holds two hashes, one of its own data, and a ‘previous hash’ which refers to the previous block’s hash, i.e hash of the block which is last in the chain before this incoming block. This previous hash is what makes a blockchain so safe and secure, i.e. each block knows the hash of the previous block, therefore, if anyone tries to alter a certain block, this would change the hash of that block, subsequently causing a mismatch between this block’s new hash and the hash stored in the next block’s ‘previous hash’ field.

Wrap up.

The aim of this piece was to provide a basic understanding of the concepts and pillars of blockchain. By now, you should have developed a basic understanding of blockchain and bitcoin, and the basic working principles behind these, and should no longer feel alien when someone discusses these revolutionary technologies.

Get in touch.

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* A ledger is in short any file that maintains the history of all transactions incurred.