What is Blockchain?

From a distance, a blockchain might not look that different from things you’re familiar with, like Wikipedia.

With a blockchain, many people can write entries into a record of information. After that, a community of users can control how the record of information is modified and updated. Likewise, Wikipedia entries are not the product of a single publisher. No one person controls the information.

Descending to a closer level, the differences that make blockchain technology unique become more clear. While both run on distributed networks (the internet), Wikipedia is built into the World Wide Web (WWW) using a client-server network model.

A user or client with permissions associated with an account is able to change Wikipedia entries stored on a centralised server. Whenever a user accesses the Wikipedia page, they will get the updated version of the ‘master copy’ of the Wikipedia entry. Control of the database remains with Wikipedia administrators allowing for access and permissions to be maintained by a central authority.

Wikipedia’s digital backbone is like the highly protected and centralised databases that governments or banks or insurance companies keep today. Control of centralised databases rests with their owners, including the management of updates, access and protecting against cyber-threats.

The distributed database created by blockchain technology has a fundamentally different digital backbone. This is also the most distinct and important feature of blockchain technology.

Origin of The Blockchain

The first work on a cryptographically secured chain of blocks was described in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to put in place a system where document timestamps could not be tampered with. In 1992, Bayer, Haber and Stornetta incorporated Merkle trees to the design, which improved its efficiency by allowing several document certificates to be collected into one block.

The first blockchain was conceptualised by a person (or group of people) known as Satoshi Nakamoto in 2008. Nakamoto improved the design in an important way. He did this by using a Hash cash-like method to add blocks to the chain without requiring them to be signed by a trusted party. The design was implemented the following year by Nakamoto. A core component of the crypto-currency bitcoin, where it serves as the public ledger for all transactions on the network.

In August 2014, the bitcoin blockchain file size, containing records of all transactions that have occurred on the network, reached 20 GB. In January 2015, the size had grown to almost 30 GB, and from January 2016 to January 2017, the bitcoin blockchain grew from 50 GB to 100 GB in size.

The words block and chain were used separately in Satoshi Nakamoto's original paper, but were eventually popularised as a single word, blockchain, by 2016. The term blockchain 2.0 refers to new applications of the distributed blockchain database, first emerging in 2014. The Economist described one implementation of this second-generation programmable blockchain as coming with "a programming language that allows users to write more sophisticated smart contracts, thus creating invoices that pay themselves when a shipment arrives or share certificates which automatically send their owners dividends if profits reach a certain level."