AN INTRODUCTION TO BLOCKCHAIN TECHNOLOGY
1. How Secure is Blockchain?
Unlike centralized databases, blockchain protocols feature unprecedented levels of network security, particularly among permissionless blockchains. In most cases, security is achieved by the unique combination of decentralized network participants and energy-consuming or restrictive consensus mechanisms needed to verify transactions and provide a disincentive for malicious actors in the process.
Tampering with a permissionless blockchain protocol, by either attempting to alter past transactions or double-spend in the present, would require an enormous amount of computing power and an ability to simultaneously control 51% of the distributed network nodes around the world. These factors together give blockchain technology its unique and powerful security features.
2. How Does a Blockchain Work?
To function, blockchains require participation by a set of users (the parties who agree to exchange assets on the network), and a distributed network of nodes (the parties who agree to maintain copies of the ledger and actively verify user transactions).
In the Bitcoin blockchain, for example, anyone can become a user by buying bitcoin and sending it to a willing recipient, and anyone can become a node by downloading the Bitcoin blockchain software stack. In permissioned blockchain networks, only approved participants can become nodes and append transactions to the network.
When users exchange digital assets on a blockchain, this exchange generates a unique transaction which requires verification. Every transaction that takes place on a blockchain network is gathered into a pool and can be viewed by all participating nodes. Network nodes are tasked with validating the transactions according to a consensus mechanism (the specific set of verification rules that define individual blockchain protocols). Nodes verify that new transactions are legitimate and that no one using the network is trying to double spend (send the same asset to two different parties simultaneously).
Once the pool of recent transactions is validated by a node, it forms the newest block, one which is time stamped and cryptographically linked to both the preceding block, and the next block to be formed.
3. An Intro To Blockchain
A blockchain is a distributed software network that functions both as a digital ledger and a mechanism enabling the secure transfer of assets without an intermediary. Just as the internet is a technology that facilitates the digital flow of information, blockchain is a technology that facilitates the digital exchange of units of value. Anything from currencies to land titles to votes can be tokenized, stored, and exchanged on a blockchain network.
The first manifestation of blockchain technology emerged in 2009 with the Bitcoin blockchain, a secure, censorship-resistant, peer to peer electronic cash system. Because Bitcoin is accessible to anyone, it is an example of an open, or a permissionless blockchain.
Today, there are many forms of blockchain technology. Some blockchains have been designed to meet the needs of a finite group of participants, where access to the network is restricted. These are examples of private, or permissioned blockchains.
In addition to the secure transfer of value, blockchain technology provides a permanent forensic record of transactions and a single version of the truth – a network state that is fully transparent and displayed in real time for the benefit of all participants.
Regardless of the type of blockchain protocol that is deployed, blockchain technology holds great promise to transform centuries-old business models, paving the way for higher levels of legitimacy in government and creating new opportunities for prosperity for everyday citizens.
Blockchain Intro Videos
Following are a few videos that are a great introduction to blockchain technology. For even more videos, please visit our “Blockchain 101” Youtube Playlist