What is a blockchain?
Great question! There is all kinds of debate and conversations about blockchain in our modern world, and they are only intensifying. The underlying technology of the blockchain, if examined to its depths, seems to be just as complicated as it is fascinating, but it’s worthwhile to begin to examine the mechanics of it at a basic level. That is what I will seek to do now, and in articles to come, I hope to dive into the specifics of how the blockchain works more thoroughly.
To start, consider the word “blockchain.” Breaking it into its parts gives us “block” and “chain;” essentially, the blockchain is just a digital chain of blocks.
So what’s a block?
A block contains several key components: a blockheader, a series of transactions, an answer to a complicated math problem, and the digital signature of the miner of the block.
The blockheader is essentially what contains the information that links the blockchain together and relates each previous block to the next. To illustrate this, consider a cake. To make a complete cake (the blockchain) you need several individual pieces (blocks). Each of those pieces must individually taste good in order for the entire cake to function. If, for example, someone “hacks” the icing and it comes out completely wrong, the whole cake will smell bad. The blockheader is basically the verifiable taste of each specific item in the cake (blockchain), which renders the whole blockchain (cake) delicious and valid. If the header of any individual block doesn’t line up with the rest of the chain, we all know that someone tried to hack that particular block, and we throw it in the garbage — along with the rest of the cake since it was made by a bunch of applied math majors.
The series of transactions is the meat and bones of the block. Every transaction that has ever been executed in a system like Bitcoin is recorded throughout the Bitcoin blockchain. The number of transactions per block varies greatly, but is generally in the neighborhood of 1500.
The block is validated by “miners,” who are tasked with figuring out the solution to a very complicated math problem. By complicated, I mean that the only way to solve it is by guess and check; it’s not possible to reverse engineer and solve algebraically like we all learned to do in high school. The miner must employ a computer to guess millions and billions of potential answers until they randomly arrive at the correct sequence. This validation method ensures the security of the blockchain by limiting the number of blocks the network can validate at any given time. Because the valid stem of the blockchain is the one that has required the most previous work at any given time, in order to hack the system someone would have to concentrate enough computer power to launch a “51% attack” and overpower the entire network. Which in the end would only be able to hack the most recent transactions as older previous ones would be verified too many times. With the current size of the Bitcoin and Ethereum networks currently renders this essentially impossible.
The digital signature of the miner who validated the block is just used to reward him/her with the appropriate number of whatever crypto asset is being used on the chain. For Bitcoin, miners are rewarded with new Bitcoins. For the Ethereum chain, miners are rewarded with Ether. The rewarding mechanism is a key element of the blockchain because it is the only way through which miners are incentivized to process new transactions. Without a reward, no one would bother spending the time and energy it takes to validate new blocks, and the entire blockchain would cease to function.
So there you have it, a very brief overview of how the blockchain functions at the surface. I’m always searching for new metaphors to explain these concepts; if you have a good one that you like to use, share it below!