What is blockchain?
You are trapped in a conversation. The person with whom you are speaking, utilizing a performative nonchalance, drops in phrases like “crypto” and “blockchain” and “decentralized” and “use case” and “Satoshi” and you stand there and smile and maybe look at your shoes, waiting for it all to be over because you have nothing to say.
This is fine. You are not yet fluent in the language of blocks and their silly little chains. No shame in that. It doesn’t help that experts in the blockchain/cryptocurrency world tend to muddy the waters with overly complex explanations for what, at its heart, is a simple ecosystem.
So, what is blockchain? It’s a ledger. It’s a record of transactions. It tells us that something took place, and when it took place, and who was involved.
That’s it! Blog over!
Okay, you want a little more. Here’s what we’ll do. Let’s pretend that the online, digital world of blockchain occurred in real life, in a real city, with real people. These people will represent computers, and networks, and nodes, and all that other labyrinthine tech-speak that hides the simplicity of blockchain.
I sell fancy umbrellas. You decide to purchase one of my fancy umbrellas. But, for security, tracking, and compliance purposes (our local Umbrella Guild is highly regulated), I must have concrete, unfalsifiable proof that our umbrella transaction took place exactly how it truly happened.
On a piece of nice, fresh parchment, we detail the transaction: the two parties involved, the date and time it took place, the goods being sold, and any other pertinent information. Once we both agree that, yes, this is the transaction that took place, we sign the document (and, say, add our thumbprints for good measure).
This is the RECORD.
For the Umbrella Guild, the mere record of the transaction will simply not do. I could edit the parchment when you leave, I could lie to the Guild about its existence, I could alter the cost for tax purposes, etc. What we need is non-partial verification of the record and its details. Good thing we have a large group of verification experts willing to come on down to the shop. Think of them as amateur notary publics.
One by one they arrive, look over the parchment, give their stamp of approval to our record, make a copy of the record for safekeeping, and go on home. These people do not know each other, they don’t ever meet, and have no way of connecting. They live all across the city. I don’t know them. You don’t know them. Any collusion to verify an incorrect or illegal or self-enriching record is impossible. They are decentralized.
These people are the NODES.
Creating the Block
Once we receive the final approval from the Node People, our record is verified. It’s now ready to enter a block of records. A robot courier (this robot is un-hackable and 100% trustworthy) arrives to take your parchment to the city’s Hall of Records.
Upon arrival in the Hall, your parchment is added to a box with a group of other, similar records, created within the same timeline as yours. These records have also been verified and authorized in the exact manner as your parchment.
Once the box is perfectly full of verified records and we seal it up, something magical happens. On the front of this box – in permanent, un-erasable ink – a 64-character “passcode” appears. This code - containing both numbers and letters - uniquely embodies the details of every transaction contained in the box. Remember this. It’s not just a random number. It quite literally represents the contents of each and every piece of parchment contained within. This is a unique set of characters; it exists nowhere else in the history of records.
This “passcode” is the HASH. This box is the BLOCK.
Joining the Chain
Our robot courier (nice guy, hard worker, named “Crabtrex 2000”), now takes our box to an impossibly large, secure room. There, we find rows upon seemingly infinite rows of other “finished boxes”, all connected together. These rows are connected in chronological order; in each row, the last box finished is connected to the box finished immediately before it. Simple. But how do we connect our box to one of the rows?
We didn’t tell you about the back of the box. Sorry about that. Not only did our passcode magically appear on the front of our box (let’s call ours “Box 100”, for simplicity), the passcode of the box that was finished and sealed immediately prior to ours (“Box 99”) magically appeared on the back of our box. This is standard protocol in the Hall of Records.
(“Box” is one of those words that gets odder the more you write it and read it. My apologies. We’ll get through this together.)
Crabtrex 2000 hauls our box to the rows upon rows of other boxes. He finds Box 99 and connects the two matching passcodes – the front of Box 99 and the back of our box. When the passcodes match, the boxes securely lock into place.
The next box to come into the Hall for storage (“Box 101”), will follow this process. Our code will magically appear on its back, and Box 101 will connect to our box in the exact same way.
Each of these rows of boxes is a BLOCKCHAIN.
Why The Blockchain Works
Okay, so what? These boxes are connected, big deal. Well, it’s all about those hashes; our magic passcodes.
Let’s say I want to check my original piece of parchment. I need to re-verify our initial umbrella transaction. I go down to the Hall of Records. I can take a look at our parchment.
However, if I alter one single detail on my parchment, at any time, the passcode will change on our box. And, when the passcode changes, the chain breaks. The codes – the very things that connect our box to the box in front of ours – will no longer line up.
And when I say any change, I mean it. Delete one comma? Passcode changes. Transcribe the entirety of “Lord of the Rings” in the footnotes? Passcode changes. Add one decimal point? Passcode changes.
If the chain breaks, we know the records have been compromised. If the chain remains unbroken, we know, without a doubt, that the information inside each and every box is legitimate. That’s blockchain. That’s why it matters.
Back to Reality
Let’s bring this full circle. The actual blockchain exists in the digital world, but the basics from our umbrella example remain true. In reality, the transaction that takes place creates a digital RECORD (our “parchment”), complete with digital signatures from both parties involved. This record is independently verified by decentralized NODES (our “notary publics”), which are basically a series of pre-authorized computers that exist outside any singular network. Upon node verification, the record is combined with a series of other records to create one BLOCK (our “box”). This block is given a unique, 64-character HASH (our “passcode”) on one end, and the hash of the previously created block on the other end. These hashes connect in chronological order to create the BLOCKCHAIN.
And, just like in our example, if any records are altered within any block, that block’s hash is also altered, thus breaking the chain.
Our journey has ended. Hopefully, you understand blockchain. Now it’s your turn to confuse people at dinner parties.