In this post series on Blockchain and related technologies, I am trying to simplify explanation of concepts that are sometimes made very complex by courses and articles across the web.
Let’s start with the basics. What is Blockchain? What is the problem that it tries to solve and why do we need it?
I will use Simon Sinek’s golden circle model (why-how-what) to explain the fundamentals.
Why do we need a Blockchain?
We live in a world that is dominated by aggregators. Google has almost all data about our lives through search, mobile OS and emails. Facebook/Meta/Instagram has a deeper insight into our social lives. Amazon can predict what we need and when we need it. Banks and financial institutions decide who we can transfer money to and how much we pay for it.
Through such platforms, we get convenience and predictability of services that we use. But it comes at the price of privacy (the lack of it!) and risk of being thrown out, when you don’t abide by the platform rules.
In essence, the current state of systems can be summarised as:
- Centralised, often owned by commercial entities that operate for profit
- Lack of granular control on how our identity and data is used across the web
- Communication is often transparent and can potentially be used for unintended purposes
So there is a real need for a system that address the shortcomings and Blockchain offers a prospective solution.
How Blockchain tries to solve the world problems?
Blockchain is based on the fundamental principle of trustlessness. In essence, blockchain provides a system where a group of strangers collaborate, without having to trust each other.
Blockchain achieves this by 4 characteristics:
- Distributed – A blockchain system is distributed across the world and almost every participant in the system has a copy (full or partial) of its state, thus avoiding the need to have a centralised data store
- Immutable – Any change to blockchain’s state is immutable and can only be reversed/changed by a another change, much like entries in a financial general ledger. That’s precisely why blockchain is often referred as a distributed ledger
- Single source of truth – Trustlessness is achieved using consensus algorithms where participants agree on the change while making it really, really tough for bad actors to break
- Built-in automation – In certain blockchain systems like Ethereum, automation is achieved using smart contracts, where the business rules and compliance can be coded and enforced on any change to the blockchain
So what is a Blockchain?
Summarising our discussion so far, here’s one possible definition of a Blockchain.
A blockchain is a decentralised ledger of all transactions in a peer-to-peer system, that is distributed across the network using data synchronisation to maintain identical state across all peers
If you are coming from the world of web applications, think of blockchain as a special kind of database that is distributed across the network and every change is eventually persisted in every instance.
In the future posts, let’s dive deep into various characteristics of blockchain and how it is evolving as we speak. Until then, enjoy learning and leave your thoughts as comments to this post.