First of all, what is not a blockchain?
Many people misunderstand the terms and concepts, leading to typical mistakes like the followings:
- Blockchain is NOT a cryptocurrency.
- Blockchain is NOT a programming language.
- Blockchain is NOT a cryptographic codification.
- Blockchain is NOT an IA or Machine Learning technology.
- Blockchain is NOT a Python library or framework.
The blockchain: what is it?
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” – Don & Alex Tapscott
According to IBM, Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.
Business runs on information. The faster it’s received and the more accurate it is, the better. Blockchain is ideal for delivering that information because it provides immediate, shared and completely transparent information stored on an immutable ledger that can be accessed only by permissioned network members. A blockchain network can track orders, payments, accounts, production and much more. And because members share a single view of the truth, you can see all details of a transaction end to end, giving you greater confidence, as well as new efficiencies and opportunities.
“In the end, it works as an immutable record of transactions that do not require to rely on an external authority to validate the authenticity and integrity of the data. Transactions are typically economic, but we can store any kind of information in the blocks.” – Telmo Subira Rodriguez
Key elements of a blockchain
Distributed Ledger Technology (DLT)
All network participants have access to the distributed ledger and its immutable record of transactions. With this shared ledger, transactions are recorded only once, eliminating the duplication of effort that’s typical of traditional business networks.
No participant can change or tamper with a transaction after it’s been recorded to the shared ledger. If a transaction record includes an error, a new transaction must be added to reverse the error, and both transactions are then visible.
To speed transactions, a set of rules — called a smart contract — is stored on the blockchain and executed automatically. A smart contract can define conditions for corporate bond transfers, include terms for travel insurance to be paid and much more.
The blockchain: How does it work?
The value of the Blockchain technology comes from the distributed security of the system. For this reason, there are several characteristics that are completely necessary for developing or using a Blockchain.
Below you will find the 5 key concepts that are the basis of the Blockchain technology as we know it up to the date, based on the SuperDataScience course for Blockchain:
- Cryptographic Hash
- Immutable Ledger
- P2P Network
- Consensus Protocol
- Block Validation or ‘Mining’
As each transaction occurs, it is recorded as a “block” of data
Those transactions show the movement of an asset that can be tangible (a product) or intangible (intellectual). The data block can record the information of your choice: who, what, when, where, how much and even the condition — such as the temperature of a food shipment.
Each block is connected to the ones before and after it
These blocks form a chain of data as an asset moves from place to place or ownership changes hands. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block being inserted between two existing blocks.
Transactions are blocked together in an irreversible chain: a blockchain
Each additional block strengthens the verification of the previous block and hence the entire blockchain. This renders the blockchain tamper-evident, delivering the key strength of immutability. This removes the possibility of tampering by a malicious actor — and builds a ledger of transactions you and other network members can trust.
Benefits & Conclusion
Operations often waste effort on duplicate record keeping and third-party validations. Record-keeping systems can be vulnerable to fraud and cyberattacks. Limited transparency can slow data verification. And with the arrival of IoT, transaction volumes have exploded. All of this slows business, drains the bottom line — and means we need a better way. Enter blockchain.
With blockchain, as a member of a members-only network, you can rest assured that you are receiving accurate and timely data, and that your confidential blockchain records will be shared only with network members to whom you have specifically granted access.
Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.
With a distributed ledger that is shared among members of a network, time-wasting record reconciliations are eliminated. And to speed transactions, a set of rules — called a smart contract — can be stored on the blockchain and executed automatically.
The Blockchain allows users to create a reliable and immutable system for recording any kind of transaction or information. There is no need for an external or internal authority: every user relies on the technology itself, following predefined rules to meet consensus and ensure the integrity and authenticity of the data.