What is blockchain?_

What is Blockchain?_

Blockchain is like a big database, in which the content is divided in dependent, impartial groups (blocks). In this network you can store information. The database is decentralized and distributed amongst all the participants in the network. It also uses cryptography to add digital signatures to a, for example, new transaction.

Everyone connected to the network holds the same copy of the database (the ledger). The ledger will be updated when something is added and validated among the rules of the network (e.g. enough balance to make a transaction). The ledger is the main record which holds the list of blocks in that network and thus is an immutable record of all data in “the database”.

Specific information about, for example, a transaction is distributed in this big database. So every group that is part of blockchain has the same specific information about this transaction, like a room full of witnesses. So all participants can check if a specific transaction is correct. There should never be a discussion about a specific transaction, because there is a room full of witnesses who also know everything about this transaction (this still happens though).

No changes_

Blockchain is not owned by anyone, so there is no super-admin who can change information within a Blockchain (in theory). To be more specific, no transaction can be changed when it is recorded on the blockchain. Information within the chain is there permanently. If you change a transaction, a new piece of information is added to the chain. But only if the whole chain accepts this new piece of information, because all participants verify that it is valid.

Example of a blockchain based transaction_

Now that you know a bit about how the technology behind the blockchain, let’s try to clarify it by giving you an example. In this example we will follow the events that happen when Alice sends 1 Bitcoin to Bob.

1. Alice wants to make a transaction from her Bitcoin account to Bob’s Bitcoin account. In order to do this, she needs to meet the network rules. In other words, she needs to prove ownership of her account.
2. Alice creates a transaction with her wallet, filling in Bob’s Bitcoin address as recipient and her Bitcoin account to credit. The transaction requires also an amount to transfer and a fee for the block creators (miners).
3. After Alice checked everything is correct, she presses the send button. On the background, the wallet will now prove Alice owns the Bitcoin account by signing the transaction with a signature. This signature is created with the private key, that belongs to Alice’s Bitcoin account.
4. When the transaction is signed, the wallet will now start broadcasting the transaction to all it’s connected neighbor wallets.
5. The neighbor wallets will start validating Alice’s transaction against the rules of the network. For example, they will check if the Bitcoin account of Alice has enough balance to make the transaction and they will check if the signature is correct.
6. When a neighbor wallet, thinks the transaction is correct, it will broadcast the transaction to his neighbours, which will start validating Alice’s transaction as well.
7. By the time the transaction has reached a miner, it will be validated and added to the next block.

Blockchain is a complicated subject. With this article we tried to make it as understandable as possible for you! We advise you to keep in touch with the blockchain developments in many different industries, because it could help you innovate your company in big ways.

Stay tuned_

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Can’t wait to read more about blockchain? Read about how we implemented blockchain for KLM and Bosch