Blockchain Explained for Beginners

-by Aman Kumar

This article is a part of the Debugged Magazine released by Coding Club of Indian Institute of Technology, Guwahati. To read the entire magazine click here

Have you ever heard of Dogecoin? Elon musk keeps promoting it on his Twitter account. This “Meme cryptocurrency” runs on blockchain technology, similar to other cryptocurrencies like bitcoin and Ethereum. As the name suggests cryptocurrency is a digital currency that is secured by strong cryptographic encryptions and it doesn’t require any traditional financial institutions like banks to verify transactions. It’s a completely secure decentralized system that uses so-called blockchain technology to operate.

What is a Decentralised system and what makes it so secure?

In a decentralised blockchain network, members have a copy of the exact same data. Anyone can join it and view it, it’s public information. The data is stored in a chain of blocks, hence the name “block-chain”. Data corruption or loss is impossible in this scenario as if there’s a problem in your copy of data, others can help to correct it. Each block contains data like medical reports or employee data; in the case of cryptocurrency, it contains transactional details.

Apart from data, it contains the hash of the previous block and its own hash. These hashes play an essential role in the validation of these blocks and since the hash of each block depends on the hash of the previous block; one cannot simply modify a single block. If someone tries to modify the content of a block, its hash will change and it won’t match with the previous hash that the next block contains; so, they would need to change all these, locks after that block which is practically impossible as calculating the hash takes approximately 10 mins per block in case of bitcoin and there are 700,000 blocks. Even if they succeed in modifying the blocks, the majority of members in the blockchain network would need to agree upon that change.

CURRENT SYSTEMS ARE ALSO SECURE, right?

Heard about the recent twitch data breach? Using blockchain technology, the data can be divided into tiny chunks and stored on different devices. Even if a hacker gets access to a device, they won’t gain anything since no single device contains a complete file, thus making it practically impossible to hack. No more data breach, more privacy, ez life!

Another example is an election, some people (and all the losing parties) don’t trust the election process. What if we made all the data public? Public but encrypted and decentralised. Well now no one can question the authenticity of votes and elections could be conducted more effectively and peacefully.

OK, IT’S SECURE, but how are the blocks added?

As there is no central authority here, the blocks are added by the members themselves, those who add these blocks are called miners. Miners are incentivised for their computational efforts; in the case of the bitcoin blockchain, they currently receive 6.25 bitcoin i.e., 2.5 Crore Indian Rupees. Let’s understand this process by sending my friend 55 dogecoins. To send 55 dogecoins, I must have at least that many dogecoins, so assume that I have 60 dogecoins.

If I claim that I have 60 dogecoins, I have some “transaction_id” that address me, and the total amount of those “transaction_id” is 60 dogecoin. Now, if I gift my friend 55 dogecoins, it means that using my secret key, also known as “private key”, I sign and produce the output containing two addresses, one addressing him with value 55 and one addressing myself with the remaining balance. The miners can verify this transaction using my public key and add it to the block. Once the block has enough transaction data it is added to the blockchain by miners.

ARE ALL THE BLOCKCHAINs SIMILAR TO BITCOIN?

Certainly not, the only thing common in all blockchain is decentralization. Ethereum is known for decentralized apps (DAPP) — that’s the fancy word they came up with for programs controlled by logic written in smart contracts. Smart Contracts consists of software code and are executed by the blockchain network, and once signed, these can’t be modified. What this means is that if a renter makes a DAPP that allow tenants to use their home if and only if they have paid the money and a tenant signs it then his house door will be locked automatically if he misses the payment. However, there is a downside to this, google DAO to learn about it. (This could mean the end to Harvey Spector’s career)

IS IT ONLY LIMITED TO FINANCE, or does it have something else to offer also?

If you have noticed, the way blockchain stores data resembles the (double) linked-list data structure. One of the properties of linked-list is to track back all the elements and blockchain inherits this property. Let’s take an example, say that there is a dispute in your village about the ownership of a piece of land (as the current owner has passed). Now you need to track the previous owners of this land. Lucky for you, the records are stored in a blockchain and so the matter can be easily resolved. Concluding, you can trace back in blockchain and view every single entry/change that has ever happened since the origin of blockchain.

BUT WAIT, in the previous example did you notice any other benefit?

There is one since blockchain is secure and can be accessed by anyone, there is no need for a middleman. You can simply search for the records yourself and resolve the dispute. Doesn’t this make the process a lot faster?

And even when I hypothetically made my friend 55 dogecoins richer there was no middleman, which means no high service charges by financial institutions. Blockchain does what the internet was supposed to do, cut the middleman and give power to the users.

After reading this article I hope that blockchain is more than a meme to you (and you have gained the bragging rights to say you understand blockchain), but but but…. It’s still a meme for quantum computing. Quantum computing algorithms (like Shor’s algorithm) can determine the private key of users from their public key. Would that be nice? Research is going on in this field to make blockchain a quantum-proof technology — quite promising research. Hopefully, we will soon use this incredibly promising technology more frequently in our daily lives. Do you think that blockchain can be the vaccine for this Tech giant controlled world?