By: First Union
What is Blockchain and is it Important?
While for many, the concept of blockchain might seem somewhat complex, it is a bit easier to understand than you might think. A blockchain represents a database. A database in turn is a collection of data that gets stored, generally speaking, within some form of a computer system. This information is structured in such a way—often in table format—to make searching and filtering relevant information easier for a user. Unlike a simple spreadsheet, a database is designed to accommodate a great deal of data and make sure that it is readily accessible to multiple users at once. The data is usually stored on powerful servers comprised of more than one computer system. That said, blockchain is a special type of database that differs somewhat from what we typically think of as far as databases go; in this article, we will look closer at what exactly a blockchain is.
Blockchain as Storage
With blockchain, how data is stored is a bit different than with a typical database. The information is collected and stored together in groups, or what are called blocks. The blocks all have certain storage parameters; when the blocks are filled, they are linked together in a chain, hence the name blockchain. As new information gets added, it will go into another block which will also eventually be added to the chain.
With a standard database, the data is most often stored in tables. As noted with blockchain, there is instead a series of blocks housing information that all get compiled into a chain. The benefit of using blockchain technology is that there is a timeline of data and each block consequently gets a timestamp of exactly when it was added to that chain. This makes for a permanent record that is far more secure than what we see in traditional databases.
Blockchain and Decentralization
The most popular blockchain and the one people are most familiar with is Bitcoin. Bitcoin requires a database of sorts to store relevant information. This data, since Bitcoin's inception, has been stored on a blockchain. The Bitcoin blockchain houses all information regarding every single Bitcoin transaction. Unlike with some more traditional servers, Bitcoin's blockchain is not housed in one place. There are numerous computers and/or groups of computers that are operated by different people and/or groups of people around the world.
Because Bitcoin's blockchain is structured in this way, and the computers are operated by individuals and separate groups in multiple locations around the globe, it is considered to be decentralized. There are some private and consequently centralized blockchains in existence, but this model does not apply to Bitcoin's blockchain.
Within Bitcoin's blockchain, there is a record of every transaction ever made about this particular cryptocurrency. And because of its decentralized structure, an error in a single node can generally be corrected by the thousands of other nodes that exist. The transaction record in this way essentially cannot be altered unless a majority of members agree to change something within the blockchain.
Bitcoin's blockchain system is thereby more transparent than many centralized monetary systems. And the system as it is designed also establishes a record of events. Any subsequent changes that are made must be agreed upon by the majority of operators.
Blockchain and Transparency
Because Bitcoin's blockchain is so decentralized, anyone can see the transactions taking place in real-time if they have access to the right technology. It is an extremely transparent system to this end. Essentially what this means is that even the average person can track Bitcoin at any given point.
So let's say, the system is hacked. While the hacker can potentially take millions of Bitcoins, those Bitcoins are traceable because of the transparency associated with the system. Therefore, the stolen cryptocurrency could be traced if it were to be used and the currency reclaimed.
Blockchain and Security
Once a block is added to the chain, it gets stored linearly. Each block has its timestamp making it quite difficult to go back and alter a block that has been added to the chain. As of the end of 2020, Bitcoin's blockchain surpassed 656k. Unless there is a consensus to do so, a block is very hard to change.
If a hacker wants to compromise the system somehow and steal Bitcoins, it would be a pretty difficult endeavor to pull off. They would first have to alter their copy of the chain. However, in doing this, it would be readily apparent that their copy no longer coincides with everyone else's copy of the blockchain. This would allow people to quickly pinpoint a potential hack of the blockchain system. Not to mention, pulling off such a hack would require a ton of money as the hacker in question would need to change all of the blocks because they'd need to have different timestamps.
The network members would certainly notice any such alterations to the blockchain, making this type of hack nearly impossible to execute. The members could then easily go to a new version of the chain which has not been tampered with. Keep in mind too, that was such an attack to occur, the value of Bitcoin would drastically decrease, thereby leaving the hacker with essentially worthless cryptocurrency.
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