What Is Blockchain?

• 2019/11/09 I wanted to explain blockchain without diving into programmer jargon.

What is blockchain?

People often equate blockchain with Bitcoin, but blockchain is the technology and Bitcoin is just one cryptocurrency built on top of it. If you had to describe it in Japanese, you could call it a distributed ledger system. It is not brand-new tech—it is a combination of existing ideas. Four major components underpin it:

• P2P (peer-to-peer networking)
• Cryptography
• Consensus algorithms
• Smart contracts

I will focus on the pieces that make tampering “impossible”: hashing and consensus.

Hashing

Hashing uses functions such as SHA-256 or RIPEMD-160 to produce irreversible values. Web apps already rely on this—when you sign into an SNS, your password is not stored in plaintext but as a hash. You can go from password -> hash, but not from hash -> password. Blockchain assumes this one-way property. (Digital signatures also use public-key cryptography: you can derive a public key from a private key, but never the other way around. Look up elliptic-curve cryptography for details.)

Consensus algorithms

Consensus algorithms solve the problem of how distributed nodes agree on a single result. Peer-to-peer simply means every node is equal: they connect directly to one another. Suppose Alice sends Bob 1 BTC. Neighboring nodes verify that transaction, and once they deem it valid it propagates outward. Each node validates the transaction, forming consensus. (That is an oversimplification, but you get the idea.)

Why tampering is impractical

Blocks are bundles of transactions. They link like a chain because each block contains information about the previous block. That is the key insight. If you try to tamper with a transaction, you modify the block that contains it. But you must also update every block above it in the chain. While you are at it you must also brute-force the corresponding hash values, which takes immense compute power and time, and the chain keeps growing while you work. In practice, tampering is impossible.

Takeaways

• The novelty is in how existing technologies are combined.
• Because it is decentralized, the system does not die when one node fails.
• There is no central authority.
• Tampering is, in theory, impossible.

My personal view:

• You can build extremely robust systems on top of blockchain.
• Today it is still expensive to build such systems.
• The cryptocurrency boom overshadowed other use cases, and information about non-crypto deployments is still scarce (and often only documented in English).

People worldwide are figuring out what else blockchain can do. Crypto happened to be the breakout hit, but the technology has far more potential. I am excited to see where it goes. Next time I may write about smart contracts on Ethereum using Geth + Solidity.