What is Blockchain technology?
The one thing we have learned about technology is that there is always something new. When the internet came into existence (really, not that long ago) we had to get used to a lot of new words. Here are a few words that (basically) nobody new 25 years ago:
- web page
- url address
- wifi
- search engine optimization
The process has been more difficult for some than others, but we have managed to integrate these words into our lives. Now we act upon them, for the most part, without even having to think about it.
Every day flood of new technology, new devices and new digital services comes into the world. Keeping track can be disorienting! This course aims to clear away some of the confusion about the latest digital technology starting with the idea of a blockchain.
What is a blockchain?
The first thing we will need to look at is blockchain technology, which is, simply, a form of database that stores information to be retrieved at a later date.
You encounter databases everyday. If you work in an office, the applications you use are pulling all of their information from a database. When you go to a retail store and slide your purchase across a scanner, that information goes into a database, which can be retrieved when you want to return your item.
There are many different types of databases that store information, and blockchain is a unique type of database that has been a game changer in how data can be managed.
A modern database
Blockchain is a special type of database that stores information in a unique way with the basic function to keep accurate & reliable records.
Blockchains store data in ‘blocks’ that are then ‘chained’, together (it is not just a clever name!). We won’t get too technical here, but when new information is added it is chained onto the block that was previously added. In addition, before a new block is added all of the previous blocks must be verified that their contents are correct.
Moreover, all of the contents and records are verified in a way that we are not used to - by a network instead of a single trusted individual.
We have to admit that it seems odd to have ‘everyone’ do the bookkeeping instead of a single financial specialist. It'd be a waste of time for a big company to have all their employees audit the same expense report. But for databases, it turns out that this is actually much more efficient and secure.
Generally, in a blockchain when a new piece of data is put into the network all of the previous information is verified by the network to make sure that it is correct - making the blockchain database immutable (or unchanging).
This makes it both impossible to change the database once the information is in there and also to cheat the system - sorry, no more movies or tv shows where a person hacks into the system in minutes and changes his grade on the database.
What goes into the system stays in the system, and can even be verified by independent third parties (this is what open source means – anyone can view the transaction details or code).
Blockchains are more complex than this, but for our purposes the most important thing to know is that they are a great way to get a permanent record of transactions that can be continually verified.
How are blockchains being used?
Blockchains are being used in numerous ways, and are being experimented with to be used in all areas of life – financial products, supply chain management, art, energy, tickets to events, movie production and more.
We will get more to the applications in our last topic under blockchain, but, for now, it will be most helpful to look at the blockchain that popularized the database: Bitcoin.
Bitcoin was not the first blockchain, but it really is what brought blockchain technology to the world.
Our next topic focuses on Bitcoin will help us see the benefits of the blockchain database.