The Blockchain Explained

What is the Blockchain ?

What is the Blockchain ?

The blockchain is a linked set of processed files using the Internet or more generally a distributed network. Some blockchains are accessible by anyone, others need permission. The permissionless public blockchains utilise the power of the Internet to process payments and other data. The permissioned or private blockchains determine who may access the network for reasons of security.

The blockchain consists of blocks of processed data. This is typically transaction data, generated when someone makes a payment with a cryptocurrency. It can also contain other data. In general, the block contain the output of executing programs on a network.

So the blockchain actually consists of blocks ?

It does, it consists of blocks of data, each with a header file.

Are the blocks connected ?

They are connected, as each block is generated when it is filled and linked to the preceding one. Taken together the entire chain represents a ledger of all transactions which have taken place in the cryptocurrency.

Is there only one blockchain for a cryptocurrency ?

Multiple copies of a blockchain are stored. This is part of the processes which help secure it.

Why does a blockchain need to be secured ?

It needs to be secured for the same reason any ledger needs to be secured. Once data has been added, it needs to be safe from being altered.

How does the blockchain secure itself ?

The blockchain secures itself by using cryptographic techniques. This is why a cryptocurrency is called a cryptocurrency.

What is the relationship of the blockchain to the Internet ?

The Internet is a huge network of connected devices which enables distributed processes to operate on it. The blockchain makes use of distributed process to operate, and utilises the same processes the Internet uses.

Distributed processes are programs which can operate at the same time sharing work. This is part of the decentralised nature of the blockchain.

The blockchain does have programs which operate it, but there is not a central process controlling everything. This is why a blockchain is described as a decentralised electronic ledger. Some blockchains use specialised programs to increase efficiencies.

Why is efficiency important to the blockchain ?

Because blockchains are processing payments. As they scale up and deal with more transactions per second, problems become apparent with a distributed structure. These are like systemic bottlenecks, such as the size of the blocks and the speed at which transactions processing is regulated by the system. Different blockchains have been formed to deal with such problems.

In the blockchain like a self-regulating mechanism ?

It is in effect an automated process for executing programs and storing the result, which uses cryptography, transparency and other means to secure this record. The capacity to store multiple copies is part and parcel of the distributed nature of its operation.

Is the blockchain a program or a file ?

To create the files requires programs to run, initiated by transactions being made across the Internet. People and programs interactively create the blockchain.

The blockchain vs the Internet: two peas in a secure pod ?

To a significant extent the blockchain is the Internet. The Internet consists of communications channels linking devices connected to it. This capacity to send and receive data to connected devices has a generated a cornucopia of applications, based on sending and receiving data, such as email, messaging, and downloads and uploads of all kinds, with centralised servers processing data at scale.

However the blockchain can be seen as a scale up of the capabilities of the Internet, because it uses these communication channels and connected device to process data, on a large scale, as well as sending and receiving data. This makes the Internet a kind of plug and play system potentially for a whole new range of applications.

One issue with the internet for whatever it is used for is the fact that it is connected devices using communication channels. This means that data can be intercepted. Similarly if the Internet is being used to process and store data, then the same security issues come into play. For sending and receiving data cryptography has been used to secure data using encryption. For the blockchain cryptography has been use to secure the ledger, ensuring is is highly unlikely it can be altered.

However the blockchain has encountered its own issues. These are based on the capacity of the Internet to process data and issues with it not being a centralised processing system. This itself has spawned blockchains to try and tackle these issues. A further issue is that while the ledger can be secured, the data is public, though blockchains have been created to try and add privacy to some data. Thus the interplay of public vs private and decentralisation vs centralisation, consequential on the nature of the Internet and the applications of the blockchain has been a disruptive force to the blockchain, generating solutions.