Imagine if an infrastructure which is available and everyone can securely process transactional code and access the data that can never be tampered. All the transactions are stored in a form of a block which is very hard to manipulate or tamper once they are stored on a blockchain. This is the behavior of blockchain where you can store the data in the most trustworthy way in the scenarios where there is no trust. Blockchain obviously is not a place where you can store a large amount of data for every transaction. For e.g. you cannot store a lot of images or documents in bulk, but you can for sure store an information that can validate that your documents or images are tampered with or not.
Most data stored on a blockchain is focused on transactions and states of objects, rather than the actual objects themselves.
The Legacy and Drawbacks
It was made very easy to transfer/share audio files using Napster (a network for file sharing in 1999). Since it used a centralized directory network, it was called a mixed peer to peer network. Users using this infrastructure had the flexibility to retain a copy of the file shared, and so a single digit asset retention led infinity number of copies to be stored on a network that was global. The technology was benefitted with a computer with so ease that it got Tower Records which eventually led to the shutting down of around its 89 stores based out of U.S. by 2006.
In early 2008, millions of credit-card numbers were exposed by a known payment system due to data leak and were resulted in fraudulent transactions. These episodes describe the immediate danger of relying and living in the digital world that relies on some middleman who generated money from the transactions and exposes the people to digital exploitation, fraud, and greed.
There was the challenging need to create a digital infrastructure which is mediator free and available to transfer digital assets freely and reliably. The infrastructure’s demand was to be secure, the transfer should be peer to peer rather than shared or copied, could be trusted and should not have any central governing authority.
The Bitcoin Blockchain: Genesis
On 3rd January 2009, about 50 digital coins were mined via a new kind of infrastructure and the infrastructure not only mined by also recorded the coins on a public ledger that was impossible to tamper and replicated on a peer-to-peer decentralized network on the internet. Those 50 digital coins were named as bitcoins and were registered as the genesis block i.e. the first establishment to be called as Bitcoin blockchain. The one important thing that makes this infrastructure unique is that crypto-currency powered by blockchain has no centralized governance and trust authority like banks and other financial institutions to validate the transactions. The blockchains do not depend on a mediator, this makes it possible to transfer digital assets globally on the internet with no involvement of a middleman. The terminology “blockchain” is not only limited to bitcoins but in general, applies to cryptocurrencies. The data located in the blockchain is encrypted with modern cryptographic techniques which makes it more reliable and tamper-proof. It is not prone to any single point of failure as it is replicated on each node that consists of the peer-to-peer network which makes the technology more trustworthy and available. Bitcoin technologies keep on maturing itself rapidly since its launch and so there is a drastic variation of their implementation details making the study of blockchains vast, complex and dynamic. Since the genesis, blockchains have become more mature to work smarter and faster. It is being perfected and refined more and more as it expands. Some blockchains like Ethereum also support smart contracts i.e. allowing scripting on the blockchain. And so, you can apply your customized constraints over the blockchain nodes. So, beyond the limitations, blockchain technology has proved to be a new kind of hack-proof, programmable storage technology.
How does it work
So how does it all work? It begins with someone doing a single or a group of transactions. A transaction is typically sending data in the form of a contract. Depending on the blockchain implementation you are using, it can also involve cryptocurrency being sent from one account to another. The transactions are sent to a large peer to peer network of computers. These are basically distributed throughout the world. Each computer is called a node and they all have a copy of the existing data. Thereafter the transaction is first validated then executed on the basis of pre-shared contracts and scripts. This ensures that all nodes execute using the same set of rules. When the transaction was executed, the result is added to the blockchain. Since this is done at each node, you would have to compromise every node in the chain in order to compromise the transaction.
When doing transactions in the blockchain, there are some aspects that are absolutely necessary for it to have the characteristics. First, all transactions are atomic. This means that the full operation run or nothing at all. Let’s say you have a monetary transaction. You would want to ensure that both the function that credits one account and a function that debits another are executed successfully. If one of them fails, the entire transaction should fail. If not, you might end up either destroying or creating money. Secondly, transactions run independently of each other. So, no two operations can interact or interfere with each other. It has to be inspectable. Every single method call that comes to blockchain comes with the actual address to the caller. Just think about it. This gives a unique possibility for securing and auditing solutions on a very, very wide scale. This is unique to the blockchain. Blockchain objects are immortal. That means that all data from an object are permanent.
Since Bitcoin blockchain came out to be world’s first known blockchain technology, “blockchain” is often understood as being a synonym of Bitcoin. The modern blockchain technology not only tracks the digital currency but also provides an offering to track digital assets and the working model of these blockchains is far different from the operation strategy of Bitcoin’s blockchain.
In short, blockchain is a kind of data structure which is tamper-proof and it tracks the digital assets as they pass from owner to owner. The digital asset could be a digital coin like Bitcoin, any document or the transaction could be a monetary transaction between anonymous strangers on the internet. It can for e.g., give you an ability to store your medical information where only you have a secure access or someone you allow would have that access. Not only this but an asset with a digital fingerprint can also be tracked on a blockchain. Blockchain makes sure that the ownership of digital assets should be transferred rather than being shared or copied and so it solves the problem related to “double-spend”. Blockchain accomplishes this outstanding coup rapidly and internationally with no central authority to govern. This makes the commerce more advanced for business thereby eliminating the middleman and transactional fees.