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What is Blockchain – simplified for the non tech

In this world of computers, how different computers interact with each other has become the most significant area of study, discussions, research and innovation. Back in the day, we had some basic networking structures like ring topology, star topology which defined the set of protocols computers will follow in a network.
With the advent of internet, computers were now able to interact with not one or two, but a million computers at the same time across the globe. The main purpose of making internet accessible to the general public was flow of information and commerce. Internet was supposed to liberalize us and
make our work easier. But today, things have changed. Centralised authorities and organisations are controlling our private data and using it to manipulate us into either buying their goods or giving into their demands. We pay 30% – 40% while making payments online for our goods and services. Our data is analysed openly and sold to other companies. The internet itself has only 3-4 major players which actually control the entire data set. You can verify the same yourself by downloading apps likes “Ghostery” and run some checks. Internet is not decentralised anymore. And this is not just internet.
If we enter any industry, there are middle men who try to take advantage of the distance between
makers and consumers and earn exorbitant amounts. Sometimes, the products sold may be fake or
adulterated. You cannot be sure.

How can we change all this?
If you ever get the chance, please do read Bitcoin’s white paper. After reading it twice will you understand as to why he created it. And the coincidence was, it just happened after the 2008 global depression. Intentionally or unintentionally, while creating bitcoin he introduced the concept that we have all been excited about.

Blockchain

It is a simple data structure based on the distributed technology to be honest and is very easy to understand.
Before delving into it any further, let’s figure out what is a distributed ledger.
We have three types of data structure :

  1. Centralised Structure – A typical client server setting where one centralized node controls the movement of data between all the different nodes in the network. It defines the protocol of data movement
  2. Decentralized Structure – It is the distribution of functions that the centralised node carries out in the above structure to other nodes in a large data setting
  3. Distributed Structure – This is a structure that has consensually shared and synchronized data across the entire network, expanding to multiple sites, geographies, etc. Each network participant in this structure has access to the main data and owns it.

Imagine that you are connected into a network of say, 50 people. Whenever a computer does a transaction in the network with any other computer, the transaction is posted across the network. This transaction is first validated based on certain criteria (Consensus Algorithm) and then it’s stored
into a block. The block has a limited memory size, say 1 MB. When the block is full, it is time stamped and sealed.

 

Then why is it called Block “Chain”?
That’s where the crux lies. Each block is chained to the previous block and the subsequent block containing data using digital signatures (Hash codes). There digital signatures are unique. Even a change from “ABC” to “AbC” can change the entire digital signature and this is what helps keep the system immune from data tampering. The digital signature of the current block is based on the previous block and the digital signature of the next block is based on the digital signature of the current block.
If someone tries to change data in one computer about the transaction that has been posted, the digital signature of all the subsequent blocks will change and everyone in the network will come to know that such a change has happened and on which computer did it take place. That is the reason why Blockchains are said to be data immutable. And these transactions can be anything – Exchange of contracts, crypto currencies, deeds, music, movie, etc any data under the sun.

So, let’s see what we understood –

  • Blockchain is a data structure based on the distributed ledger technology
  • Each block contains transactions that are posted and validated on the network by validators
    based on certain criteria (Consensus Algorithm)
  • Each block is chained with the other block using digital signatures (hash codes) which are
    unique, based on the data. The digital signature of the current block is based on the previous
    block and so on
  • Transactions can be anything – Exchange of crypto currencies, contracts, music, etc, any kind
    of data
  • Data immutable since any kind of data tampering can be spotted and located

 

People often confuse Bitcoin and Blockchain. They are not the same. Bitcoin is a different Blockchain based on a protocol which has been built only for carrying our peer to peer bitcoin transactions. Likewise, Ethereum is another Blockchain which executes smart contracts (digital contracts which are automated based on the coding executed).
Bitcoin and Ethereum are different protocols but are based on the core concept of Blockchain.
Starting to set up the business – For creating a blockchain business, you need to develop a blockchain based protocol and define the set of rules that suit your business, create the security and engagement infrastructure and fulfil the requirement of your customers. But it is not easy for everyone. People who are already involved in the blockchain technology also find it difficult to create a robust and useful system on which to run the blockchain business. That is where Ethereum network comes into play.
Ethereum/Neo let people from different backgrounds, different ideas use their Blockchain infrastructure, to create their own crypto currency token and develop a business. In Ethereum, each business is called a ‘smart contract’. These tokens can then be used to transact, send, receive over
the network.
Blockchain is being implemented in 19 industries as we speak. And the utility is only increasing with
it’s wide spread knowledge and awareness.