2. What is Blockchain?
The blockchain is a public ledger of information collected through a network that sits on top of the internet. It is how this information is recorded that gives blockchain its groundbreaking potential.
Blockchain technology is not a company, nor is it an app, but rather an entirely new way of documenting data on the internet. The technology can be used to develop blockchain applications, such as social networks, messengers, games, exchanges, storage platforms, voting systems, prediction markets, online shops and much more. In this sense, it is similar to the internet, which is why some have dubbed it “The Internet 3.0”.
The information recorded on the blockchain can take on any form, whether it be denoting a transfer of money, ownership, a transaction, someone's identity, an agreement between two parties, or even how much electricity a lightbulb has used. However, to do so requires a confirmation from several of devices, such as computers, on the network. Once an agreement, otherwise known as a consensus, is reached between these devices to store something on the blockchain it is unquestionably there, it cannot be disputed, removed or altered, without the knowledge and permission of those who made that record, as well as the wider community.
As nothing that is recorded on the blockchain can be changed, it is important to be absolutely sure where you are sending money. On the blockchain, once a transaction is sent it is sealed and cannot be reversed.
Rather than keeping information in one central point, as is done by traditional recording methods, multiple copies of the same data are stored in different locations and on different devices on the network, such as computers or printers. This is known as a peer to peer (P2P) network. This means that even if one point of storage is damaged or lost, multiple copies remain safe and secure elsewhere. Similarly, if one piece of information is changed without the agreement of the rightful owners, there are countless other examples in existence, where the information is true, making the false record obsolete.
Why is it Called “Blockchain”?
Blockchain owes its name to how it works and the manner in which it stores data, namely that the information is packaged into blocks, which link to form a chain with other blocks of similar information.
It is this act of linking blocks into a chain that makes the information stored on the blockchain so trustworthy. Once the data is recorded in a block it cannot be altered without having to change every block that came before and after it, making it impossible to do so without being caught.
Distributed ledgers have 3 key attributes:
- Recorded: stored information is time-stamped
- Transparent: anyone can see the ledger of transactions.
- Decentralized: the ledger exists on multiple computers, often referred to as nodes.
Normally, each block contains the data it is recording, for example a transaction like 1 Lisk token being sent from Alice to Bob, as well as timestamps of when that information was recorded. It will also include a digital signature linked to the account that made the recording and a unique identifying link, in the form of a hash (think of it as a digital fingerprint), to the previous block in the chain. It is this link that makes it impossible for any of the information to be altered or for a block to be inserted between two existing blocks. In order to do so all prior blocks would need to be edited too. As a result, each block strengthens the previous block and the security of the entire blockchain because it means more blocks would need to be changed to tamper with any information.
When combined, all of these create an unquestionable storage of information, one that cannot be disputed or declared to be untrue.
Who Created Blockchain?
The first recorded mention of blockchain technology came in a document, or whitepaper, published in 2008 by the mysterious founder or founders of Bitcoin, only known as Satoshi Nakamoto. Speculation about the true identity of this undeniably brilliant coder has continued to this day, with Nakamoto claiming in early correspondences to be a man living in Japan, born on 5th April 1975.
However, due to his decision to document Bitcoin in English and his mastery of the language, the general belief in the blockchain community is that Nakamoto is of non-Japanese descent and either European or North American. As blockchain, and as such the Bitcoin network, is transparent, anyone can view Satoshi Nakamoto’s Bitcoin holding. He is known to currently hold roughly one million Bitcoins.
There are several theories as to why Satoshi Nakamoto decided to remain anonymous, however the general consensus is that he was a timid developer who simply did not wish for the attention that would have undoubtedly come with creating such a disruptive technology.
It is also worth knowing that Satoshi Nakamoto did not build every aspect of blockchain from scratch. In fact, none of the technologies used in blockchain were particularly new and had been around for several years. However, it is when they are used in combination with one another that they create the revolutionary offering that is blockchain technology.
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If "What is Blockchain?" has still left you a bit confused, ELI5 Blockchain is an even simpler explanation, designed to cater to anyone from ages 5 and up. The content is no different from "What is Blockchain?" just written at a more easily understood pace.