What is a Blockchain?

In simple and general terms a blockchain is a technology that enables the secure sharing of data. The data, typically a list of transactions, is stored in a database called ledger (essencially like an accounting book).

More precisely a blockchain is a shared, immutable distributed ledger that stores transaction on an increasing number of records. Everytime there is a new transaction a new record is created. The blocks (records) are securely linked together via cryptographic hashes.

Although mostly associated with cryptocurrencies a blockchain network can track anything. Some examples are:

• Tangible assets like a house, car, cash, land.
• Intangible assets like intellectual property, patents, copyrights.

On a blockchain network, each block contains a cryptographic hash of the previous block, a timestamp, and the transaction data. Since each block contains information about the previous block, they effectively form a chain, with each additional block linking to the ones before it. Blockchain transactions are then resistant to alteration. Once recorded, the data in any given block cannot be changed retroactively without altering all subsequent blocks. Such a change would need network consensus to become effective.

Nevetheless, blockchains are susceptible to so called "51% attack" (see "The Dangers of 51% Attack Explained"). A 51% attack occurs when a single entity controls over 50% of a blockchain’s mining power. In this circunstances, this entity can alter transactions because having the majority control allows them to determine which transactions are valid.

The idea of blockchain was first proposed by Satoshi Nakamoto in their "Bitcoin: A Peer-to-Peer Electronic Cash System" paper: "The solution we propose begins with a timestamp server. A timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash, such as in a newspaper or Usenet post (...). The timestamp proves that the data must have existed at the time, obviously, in order to get into the hash. Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it.".

The authors continue: "To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof-of-work system (...). The proof-of-work involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits required and can be verified by executing a single hash.".

In summary a blockchain is:

• A decentralized registry. Instead of relying on a central authority (like a bank or government), a blockchain operates on a peer-to-peer (P2P) network where all participants (nodes) share and validate the data.
• Immutable. Once a piece of data (a block) is added to the blockchain, it cannot be altered or deleted. This immutability is achieved through cryptographic hashing and consensus mechanisms.
• Transparent. All participants in the network can view the blockchain's history, ensuring transparency. However, the level of visibility varies depending on whether the blockchain is public or private.
• Secure. Cryptography ensures that data on the blockchain is secure and resistant to tampering or unauthorized access.

Blockchain is a transformative technology with the potential to revolutionize industries by offering transparency, security, and decentralization. While it is most commonly associated with cryptocurrencies, its applications extend to areas like finance, healthcare, supply chain, and beyond. As the technology evolves, its full potential is likely to expand further.