Blockchain 101
Top Features of a Blockchain
Decentralized
Rather than a central authority (such as Google running Google servers in warehouses filled with computers), the blockchain is run by a network of nodes. Central authorities have a single point of failure (that warehouse) whereas the blockchain allows the data to be stored across nodes in various locations. The blockchain nodes, which are essentially computers linked to a network, can be run by anyone who wishes to participate. The more participants, the more decentralized the network becomes. Participating simply means that a participant’s computer is storing and checking the blockchain data.
Immutable & Secure
Once data is stored on the blockchain it is nearly impossible to change or erase it. Blockchains use hashing algorithms to add new blocks to the blockchain. Based on data inside the block, a mathematical function turns the digital data into a string of numbers and letters. Changing one number or letter in the digital data creates an entirely new hash. But not only does each block have its own unique hash, it carries the hash of the block before it.
For example, if one bad acting node tries to change data at one instance in the blockchain, all the other nodes would crosscheck with each other and pinpoint the bad actor quickly and prevent this new ‘wrong’ version of the blockchain from being accepted. Hackers can try to hack other nodes into accepting this ‘wrong’ version of the blockchain, but they would need to hack majority of the network, or over 50% of the network. This is called a 51% attack. For a network of 5 computers, they only need 3. In a network of 500,000 computers, they would need over 250,000. Hence why the larger the network, the closer to impossible it becomes to hack.
Transparent
On public blockchains, every single transaction or information stored in every block is public. Anyone can view, check, or download it. Furthermore, while hacks do occur and the hacker can remain anonymous, the bitcoin or assets they’ve taken are traceable. If the stolen assets are used elsewhere, it would be known to the network.
Private
While the transactions are public, people can remain pseudo-anonymous because the only identifying information is an individual’s public wallet key when interacting with the blockchain. Public keys are a long combination of numbers and letters that have no ties to the individual's private login keys and information.
The blockchain is an immutable distributed digital ledger or distributed ledger technology (DLT). You can think of it as a database that is stored across a number of nodes of a computer network constantly being reviewed and updated. Instead of a typical database, however, blockchains collect data in groups or ‘blocks’ that hold sets of information. Typically, this data is a record of transactions stored in a group until a block is filled. The size of a block equals the amount of data it stores and is set at the creation of the blockchain. For example, Bitcoin averages 500 to 2000 Bitcoin transactions per block. Ethereum doesn’t have a block limit, but a gas limit. We will have more pieces on gas limit and block sizes.
