What is a blockchain and what’s the point of it?

I’d like to put out a quick demystifier about “blockchain” that you might either learn from or use to explain to others.

Blockchain is not as fancy as people are led to believe.

It’s just a data structure, where new additions to the data are linked in a chain (with hashing).

The point of this is so that if any modifications are made to previous data entries, it affects the later additions of the chain, such that tampering becomes EVIDENT, and rejected by users of the blockchain.

It’s better explained with an analogy.

Imagine a notebook. On page one, I write some numbers.

  • Eg: 1,2,5,8,20, 12. (The average is 8).

On page two, I write the average of all the numbers on the previous page as my first number on this page.

  • So I’d write 8, then I add some other numbers, eg: 2, 20, 10, 14.

The average of page 2 is 9. Importantly, the first number (8) is included in the calculation.

Then on page 3, I take the average of all the numbers on page 2, add some numbers, and put the average on the next page and so on.

A very interesting property results from doing this. If I change any number on a page that is not on the latest page, it changes the average of that page. And that changes the average of the next and every page afterwards. Eg if there are 20 pages, and I modify the number on page 18, then page 19’s average changes and so does page 20’s.

As a result, any change becomes tamper-EVIDENT. It doesn’t become tamper-PROOF, that’s done in another way (adding proof of work, and a rule that the chain with the most work is the valid one – in practice this means “the longest chain”).

For a blockchain, instead of using averages, hashes are used. You can research what they are, but the basic concept of a blockchain remains the same: All the blocks are linked, and any change in the previous block affects all the future blocks.

As you can probably tell, there is nothing magical about this on its own. It’s been around for decades. Satoshi invented BITCOIN, not blockchain. He just used blockchain as one of the many essential components of generating digitally scarce money resistant to shutdown.

Other crucial components are:

  • Proof of work
  • Distributed nodes
  • Consensus algorithm
  • Public/private cryptography

That’s only the tech. To be sound money, the tech needs a dominant network, which Bitcoin developed over years, free from any competition.

Earlier I mentioned proof of work makes the blockchain tamper-PROOF. Actually, something else is needed too: The algorithm. This is what’s coded in a Bitcoin node, which accepts the longest chain as the valid version of the blockchain.

What happens if there is tampering and how does resistance work in Bitcoin?

If an early block is modified, an attacker then needs to modify the next block by including an updated hash of the last block. On its own, that’s easy to do. Hash’s are nearly instant for powerful computers. The difficulty comes from the fact that the attacker also has to RE-MINE the block.

That is because some data has been modified, and so the hash for the block will not have the required number of zeros that the earlier miner had found. The block becomes invalid. The attacker must iterate random bits of data until the block when hashed provides a pre-required number of leading zeros. This requires work/energy/time. This is proof of work, and this is a barrier for the attacker.

What’s more, he’ll have to redo the work for the next block as well, all the way to the tip of the chain, and then produce more blocks to make the longest chain, to make the attacked version of the chain the valid one that all the nodes will prefer.

To conclude, I’ll say there is nothing interesting about blockchain on its own, and good luck finding another monumental use case for it other than being a component necessary to create Bitcoin.

If you’re interested in blockchain, not Bitcoin, and you didn’t know these things, then you’re not really interested in blockchain. If you did know all this, and you say blockchain is interesting and Bitcoin is not, you’re either a scammer or a victim that’s NGMI.

%d bloggers like this: