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I hope to get constructive criticism because my real goal with this post is to better understand the fundamentals — hopefully, others can help me. The emergence of blockchain technology is somewhat baffling to me and probably most people. It can be useful to do some introspection from time to time. Much of it is second nature to us now, or so mature that we have again been able to thankfully forget the distinction between the technicalities of all the competing tech of the time.
There are quite a few paradigms that you need to wrap your head around. Because this is still an emerging field, a lot of the discussion revolves around the technical aspects of implementing blockchains.
A fork happens when developers of one technology are using the underlying technology of another protocol e. Bitcoin and take it in a new direction, hoping for adoption. The forks that seem to cause the most nervousness are those that seek to usurp the original technology that they forked from.
Forks and new systems also seem to be centred around improving the technical aspects of them, but can also be because people want to take a protocol in an entirely new direction. What this means for you, is that you are hearing about the technical arguments surrounding blockchain, without any basis for understanding the paradigm we are moving from, never mind which we are moving to. However, in blockchain circles, this word is used A LOT.
These protocols are not subject to any external laws, norms, standards or anything else. The protocols are set down by those developing it. Even I can sit down now and develop a blockchain protocol to suit my needs. Whether I can get anyone else to adopt it is another story! You may not realize it, but email is a great example of a protocol. Calendars have the same thing. This is a central component of a blockchain.
The first problem you have is your working knowledge of databases is basically zero. The most experience you have with personally designing and maintaining a database most probably looks like this:.
You may have some knowledge that Google and Facebook have large data warehouses that store data centrally in secure locations.
You may even have heard of content delivery networks — which is what a lot of companies use. A company stores copies of data on many different servers around the world, to make sure that you get your content really quickly by accessing it from your nearest server.
This is how YouTube and Dropbox are able to get data to you super fast no matter where you are. However, all the servers belong to the individual companies. The databases are not shared between companies or individuals.
In a blockchain, exact copies of the same database are stored on many different servers i. Each time data changes, all the nodes get the same copy of the database once a majority of them agree that the transactions in the new database are valid. Destroying one, or many, nodes will not affect the blockchain.
The entire history of transactions will be there. As more nodes join the network, the blockchain becomes ever more distributed. Using Bitcoin as an example, the transaction records are stored on a lot of different servers owned by different people or companies. This is unlike banks for example, who only store transactions on their own servers.
Distributing copies of the database is a way of securing it. All the nodes talk to each. The security feature is that the majority of nodes will need to agree on which version of the database is correct before they copy it. This means that as the network grows and more nodes come online, the more secure it becomes. The scenario is this — imagine someone hacks one of the databases and changes the data.
There is practically not enough computing power in the world, under singular to group control, that could enable this to happen. A blockchain also stores a copy of the database which is immutable i. I am not sure if this is a necessity because I imagine I could just make a blockchain protocol which allows changes to past records. Something tells me this defeats the purpose though, maybe it makes node consensus impossible or insecure.
Anyway, this property of immutability means that only new records are added to the database. If you want to edit an old transaction or record, it needs to be done by entering a new one that either reverses or overrides a previous record. A good way to think of it is that every record is recorded forever. This introduces another area where you have no expertise i.
The little bit I understand of cryptography makes it seem like both a science and an art. For most of us, its ok to assume that cryptography experts know what they doing e. Not sure how else to say that. A coin base is the total collection of tokens. As an example, your dollar bill is a token, and the coin base is in a way, the US economy. From what I gather, not all blockchains need tokens, unless the blockchain is the basis for a currency. This will be explored further when I explore the application of blockchains for physical assets in another post.
The coin base design can take any form — it can be grown to a finite volume like Bitcoin, with its 21m bitcoin limit , it can include inflation and deflation, it can be issued all at once and then decrease over time, it can be designed eventually be bought back with real money and then disappear, or grow — it all depends on what the blockchain is being used for, what the purpose is.
This is where new business models will come in. Unfortunately, there seems to be the potential for a lot of scams here, similar to the dotcom boom. Whether those tokens will be worth anything to anyone else at any point in time, is left as an exercise to the buyer!
What you do know about databases is that they store records of things, right? Well, here again, the blockchain goes beyond that. Data that is stored can also be basically anything, including instructions i. This is where the idea of Smart Contracts come in. Logic in the form of coded instructions can also be built in. This is what allows contracts to execute on their own without human intervention.
As a simple example, you could trigger that certain transactions take place only when certain conditions are met. Those conditions will be jointly agreed by the contracting parties and automatically executed according to the terms. And remember, the data is immutable. No one can go back and retrospectively change the conditions. New conditions would need to be agreed upon and entered onto the blockchain. Until then, the existing contracts will continue to be executed.
This is also a weird one. Blockchains are most-applicable where there is a trusted intermediary necessary — and the blockchain replaces them with this distribute, secure, immutable ledger database of records and a protocol that goes along with it for how parties interact with it.
In this case, I am forced to use banks and Bitcoin as an example. If I want to send my money to you, I will give my bank the instruction to do so. If my money disappears, or the transaction never occurs, I hold my bank responsible, not you or anyone else. Now with Bitcoin, there is no bank or other central authority.
I can send and receive bitcoins over the network without needing a trusted legal entity to verify anything. Everything is verified and is done at a fraction of the time and cost of traditional intermediaries. So far, the best examples of blockchain use deals with digital assets such as currency, music and so on.
From your standpoint, it is hard to picture how things will be better because the result of the transaction is the same to you on many levels. Whether you pay for something via credit card, or download something from the app store, or pay for music streaming via Spotify — the process will probably look or feel the same from the point of your imagination.
In the case of music, for example, it will, of course, make a HUGE difference to artists when they can release music via blockchain-based markets and do away with layers of middle-men, whilst also gaining a huge amount of insight into the purchase patterns of their fans. I am planning another post dealing specifically with how blockchain can be used in non-digital assets, especially as it relates to my field of expertise — sustainability and sustainable development. The most successful blockchain implementation to date is definitely Bitcoin.
There are many others using blockchain technology that play by completely different rules. So when hearing about Bitcoin you are, from an implementation perspective, only hearing about one tiny niche in a yet-to-be-discovered endless array of applications for blockchain technology. Everything you are hearing about bitcoin, cryptocurrency, smart contracts and blockchains are also all being mixed together and interchanged.
Imagine traveling back in time and trying to explain that the internet can be used for more than just blogs. I think this is the biggest reason why this generally seems confusing. Travel back again in time getting good at this, hey? Am I allowed to write nonsense? Are cat pictures allowed? I think blockchains have the power to move society beyond democratic rule as we know it. Maybe it will be called post-Democracy, or True Democracy — who knows? The essence of progressing human development and improved standards of living are tightly tied to trust.
At the moment, societies place trust in centers of power, be that governments, corporations or individuals, all of whom have a long record of abusing that trust. Many Paradigms There are quite a few paradigms that you need to wrap your head around.
Distributed, Secure, Immutable Database This is a central component of a blockchain. The most experience you have with personally designing and maintaining a database most probably looks like this: