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What Is Blockchain? Blockchain Technology Explained

by | Mar 3, 2018 | Technology

Blockchain is the underlying technology behind Bitcoin and the other “crypto” systems. In a nutshell, it is a decentralized database designed to remove any reliance on a central service provider.

When Was Blockchain Invented?

The blockchain architecture and concept was developed in 2008 and is entirely open-source. The system itself is what’s known as a “ledger” – which is not a “full database” in itself, it simply records updates and transactions on an existing dataset.

The point of it is that if you’re looking to create an effective piece of software (which utilizes globally-accessible data), the “blockchain” paradigm gives you the ability to store, edit, and process data across hundreds or even thousands of decentralized servers around the world.

Why Is Blockchain Important?

The way blockchain works prevents data-loss, security breaches, and also ensures that if any one part of the “network” stops working, the others will take up the strain. Whilst this may not have an obvious set of use-value in the modern world, the simple fact is that “decentralization” technology – as demonstrated by the likes of Bitcoin – gives developers & service-providers the opportunity to create truly “ownerless” systems, which are powered by the network they help create.

This tutorial – whilst not a recommendation or endorsement for “blockchain” – is going to explain how it works and what it’s all about. As mentioned, the system itself is entirely free and open source, so you’re able to download and use it all you want.

Understanding Blockchain Technology

The most important thing to remember with “blockchain” is that its technology is exactly the same as things which exist already. In other words, it’s certainly not a “new” development, and has basically achieved notoriety mainly because of how Bitcoin has used it.

In the “technology” world, this is what’s known as a “killer app”, where a piece of software will deliver such a potent solution that it justifies the purchase of the corresponding hardware. The best “killer app” in the world was the “spreadsheet” – originally developed as “Visicalc” for the Apple II. This has undergone a large number of changes over the decades but still lies at the core of why people spend $1,000’s on PC’s even today.

How Does Blockchain Work?

Irrespective of this, the point is that “blockchain” is not really the deal that made Bitcoin popular, rather it enabled BTC to operate without any centralized infrastructure. The way it does this is by parceling a central data-set into “blocks”. These “blocks” are linked together in what’s known as a “chain” – providing a chronological record of any changes to the data it’s tracking.

Understanding Blockchain Basics

As mentioned, it’s based on the same principle behind the “GIT” source-code management system (SCM) – Merkle Trees.

A “Merkle Tree” is basically just a word to describe the way in which a series of “blocks” of data can be stored. If you had a filing-cabinet, you’d store all the information corresponding to the above. In either case, the “blockchain” system works EXACTLY like “GIT”. Git is a way to “track” developments with software source code (files).

Each time you change various files inside a Git “repository”, the changes are tracked by the “GIT” software. You’re able to “commit” these changes in what would be called a “block” in blockchain. The result is that you get a series of “versioned” files that can be referenced, changed or “forked” to provide different solutions and functionality to an application.

How Blockchain Works

The same is true with “blockchain” – each time you add an extra set of transactions to a blockchain database, extra “commits” are being created with new sets of data for the central ledger. This is how the “updates” are built on the system. On top of this, Blockchain also uses the equivalent of “BitTorrent” technology – allowing its “network” of processing servers (“nodes”) to remain up to date at all times. This is what powers the underlying “decentralized” nature of the system.

Why Blockchain Is Important?

The important thing to consider with the decentralized nature of blockchain is how it works in the real world. In reality, most people don’t care about the underlying technology and only want the benefits of the system. Thus, the likes of “Bitcoin” and other “crypto” systems are only being traded by those who want to make a profit from its price. At its core, “blockchain” promises to build a new “type” of Internet.

In other words, blockchain is designed to help the Internet “think”.

Future Blockchain Technology Applications

Autonomy will be the main solution blockchain provides in the future and is the process through which components of a network are able to operate entirely independently from other elements. They will do this whilst still maintaining their place within the network. Unfortunately, this has been somewhat unattainable due in part to the way which the “centralized” infrastructure relies on the client and server paradigm.

Autonomous systems require a “peer-to-peer” setup. The next wave of “industry” is actually going to come in the form of individual systems “thinking” for themselves, and interacting with the other members of the network through data transactions.

Other Uses For Blockchain

For example, a warehouse robot will receive a new “order” (via the “blockchain”) and then work in its own way to determine the best way to get the order processed. Today, the robot would have to be “told” what to do by a central server – making its functionality extremely rigid, and unable to consider the wider implications of what it’s doing (for example, if it has a conflicting set of data etc).

“Blockchain” and all the “crypto” systems – especially the likes of Ethereum, Ripple, and the other “platforms” are designed to provide this level of autonomy, allowing businesses, government institutions and other service providers to automate much of their infrastructure.