Kassandra Learn: What is the Blockchain?
In a nutshell…
Blockchains are a transparent way of keeping a database of records.
Blockchains have wide applications outside of financial purposes because they keep automatic records of different digital events (like a check-in at a hotel, or the transportation of goods, or a healthcare check-up, etc.)
Blockchain is important because it is:
- Accessible
- Decentralized
- Public
What is the Blockchain?
According to Merriam Webster, a blockchain is:
From this definition, the most important ideas are that a blockchain is a database of records that is
1) decentralized,
2) public, and
3) simultaneously accessible.
But that’s not very helpful for understanding what blockchain technology really is and how it actually works. Instead, it leaves us with more questions than answers:
- What does “decentralized” mean and why is it important?
- How does the public nature of blockchain technology help with transparency?
- How will accessibility change the way we do business for the better?
In order to answer these big questions, we’re going to get back to basics. Let’s look at an example that most of us will be familiar with: a bank account statement.
Online Banking and the Blockchain are both simultaneously accessible
When you log into your bank account, you can view your transaction history (as seen above from this example from Chase bank).
Every time you log into your account from any computer, you can see your transactions with the bank. This is because the bank stores the information in a database and gives you secure access because you have your login and password.
Bank records use a digital database that contains information like financial transactions, just like the definition of the blockchain we looked at earlier. These records can be simultaneously used and shared because you can log into your bank and view your account information from multiple devices, once again just like a blockchain.
However, bank statements differ from the blockchain when it comes to being public and decentralized.
The Blockchain is Public
Blockchain networks are public databases but that doesn’t mean that users are not private or secure.
Public, in this case, does not mean that everyone can see the specific transaction details of your account. Instead, it means that all accounts, and all transactions to and from those accounts, can be viewed by anyone with permission who downloads the blockchain.
Blockchain data can be viewed using block explorers. This is software that allows users to search for information that is stored on the blockchain. Anyone with the internet can view a list of the blockchain’s transaction history. You can check and verify details about people and their transactions without needing a third party like a bank or an accountant.
The image below shows a representation of what you might see on a blockchain using our example Chase bank statement. We can see the actual description of the transactions are not publicly available.
The Blockchain is Decentralized
Banks are centralized because all of the data and access is owned and controlled through the bank. Banks do not provide access for outside entities to download their private data. As such, they are the only ones who can see trends and data about every transaction and can share that data for profit. Even scarier, banks can be hacked and their private information can be interfered with.
There is no way to see if the bank changes any of its data about transactions on your own. You have to trust the bank or go through lengthy legal procedures to prove that data has been changed.
The Blockchain is Different
Decentralized blockchain technology means that the records are copied and shared across a network of many computers.
Whenever new transaction information is added to the blockchain, every computer on that shared network updates the record. This makes blockchain impossible to tamper with or hack.
Even better, the accessibility of the blockchain means that you do not need to depend on an outside party to check and verify transactions and guarantee people can pay for services or make transactions. This puts your money and how it works completely in your own hands.
That’s a lot of information to take in at once so let’s summarise. Don’t worry, we’ll revisit the points in more detail in other articles!
What we’ve learned
- Blockchain is simultaneously accessible. Anyone with an internet connection can access and add to blockchain records.
- Blockchain is decentralized. Because blockchain records are added to and updated across a network of computers, it cannot be changed or tampered with.
- Blockchain is public because you can check transaction data but private because your identity is confidential.
