A blockchain is a series of computers working as a network to link blocks containing very specific information in a chain, making the Blockchain very secure. Each block is timestamped making it very difficult to backdate or tamper with the information in the block.
Blockchain can be applied to solve various problems, like transfer of money, property, contracts but the most important problem that Blockchains have sold, is that we do not need any third party like a bank, lawyers or even governments to enforce the specific aspects which the specific blockchain or application is addressing. We therefor do not need to "Trust" any third party making these blockchains trustless, which is a huge development in the way the world is currently working. I will make a specific point to write about the impact which I see Blockchains will have on our future but for now, let's explain, how Blockchains can intermediate third parties.
Blockchain is not Bitcoin, but rather the technology which enabled Bitcoin and makes Bitcoin a secure trustless network. Without a Blockchain Bitcoin cannot exist.
Blockchain Explained
Blockchains are a chain of blocks each containing information or data. If we can use Bitcoin as an example, each block contains information about the sender of the Bitcoin, the receiver of the Bitcoin, the amount of Bitcoins transferred.
The first block in every blockchain is called the Genesis block.
The information in a block also contains a Hash. There are various types of hashes, but for this example we will use SHA256 to explain.
What is SHA256 - HASH?
I will create a separate article explaining the detail of SHA256 Hash for those interested, but for now I will explain at a very high level.
Due to the vast amount of computers in the Blockchain network, a standard needed to be created for the encryption of the information. SHA256 Hash is the standard which were chosen to ensure the Blockchain is secure and guarantees the integrity of the information in the Blockchain.
Let's show an example using some of the words used in the Harry Potter books. When we use the SHA256 Hash, it always outputs a string containing 64 Letters or Numbers. It is always the same length even if we use one letter, one word or a combination of words as per the example below.
Why provides the ability for a Blockchain to be trustless?
Each block in the Bitcoin Blockchain contains the following providing it with a unique fingerprint:
+ Data
- Hash
- Hash of the previous block
When we look at the following example, we will note that the first block (Genesis Block), has no previous hash, each block will contain a new hash for the specific block and also the hash of the previous block building the integrity of the Blockchain.
Blockchains are therefore very secure as when the specific information in the block changes, the hash corresponding to the information also changes making the block and all subsequent blocks invalid.
In short blockchains are secure and credible, making this technology set a huge game changer in the future of all our lives. The financial industry has never seen a revolution like other industries, but Blockchain is set to revolutionise the future of the financial industry which is very much needed.
Happy Blogging!
