Understanding Blockchain

Understanding Blockchain

A Way to Understand How Blockchain Works

What’s up everyone? This is Samyak Ramteke, Co-Founder of Brytebook. Welcome back to my personal tech blog, where I give you the tools you need to understand the Web3 better.

Today I’m talking about Blockchain. I’m talking about

  • What Blockchain is and
  • What it is used for and
  • Why it's important for you to understand it at a basic level.

What is Blockchain?

So, basically blockchain is an online record of transactions.

It is a growing set of records, bunched together into ‘blocks’ like legos, which are linked together using cryptography.

Cryptography is when you use techniques to secure information by using code so that only those people for whom the information is intended can understand it and process it. In our case, it is the person involved in the transaction.

So, we know it's a way to keep records, but there are a lot of clever ideas built on top of that.

The first is about how blockchain keeps those records. It’s called a distributed ledger system.

In this system a record of every transaction is held by many people in many places at the same time. So, as a result of that, every time something is changed in the blockchain, everyone in the network is notified about the change and they have to agree on the changes.

This makes it really hard to hack the system. As it would require someone to change every single record at the exact same time. Which is really hard.

Blockchain is really exciting. While there are a lot of things that make blockchain exciting, one of the key factors is that it’s decentralized. Well, what does that mean?

The vast majority of the services and sites you visit, store and keep their data in a database. You bank, Netflix, Google, you name it, they all operate in a centralized system.

The blockchain meanwhile is a decentralized system. That means the data lives on a network, instead of in one place.

But why is that a good thing? Well because there are a lot of problems with a centralized system. Like, security, cost and transparency.

Problems with Centralized System

Your data is not secure. If these centralized databases get hacked, they can expose all the data at once. We’ve seen that happen more and more recently.

Building centralized systems is often expensive as a company needs to provide all the digital capacity to make a system run smoothly.

Your data is not your own and companies often monetize from your data too.

No Transparency. How the information gets used, by whom and for what is a bit grey in today’s time. The decentralized internet can change that!

There have been a few decentralized services in the past. Remember Napster?

They were examples of decentralized services. But they had a flaw: those services weren’t very good at preventing duplicates of files. It’s a problem of double spending. The problem was that the same digital token can be spent more than once.

Your bank solves this problem by checking with its centralized database to see if money has been spent or used more than once. The blockchain solves that without the need for a centralized database.

We talked a lot about blockchain? But who invented it?

The idea of blockchain has been discussed among cryptographers since the early 90s. But it wasn’t until the mysterious Satoshi Nakamoto came along that blockchain as we understand it today was created. Bitcoin is a system built on blockchain.

What makes blockchain so special?

It's a trust-less system. Today when we buy things online, there are a number of things we have to trust. Whether it be a seller, a payment system, a bank or even a website. A blockchain doesn't require so much trust, allowing anyone to exchange goods or services without a third party.

No more middlemen.

Many of today's networks are controlled by middlemen or agencies that often charge for the flow of information. In a blockchain, there is no such control, which can lead to lower costs and speedier transactions.

Transparency.

In a public blockchain like Bitcoin (there are private blockchains, check out our guide to find out the difference) anyone can see transactions, making it easier to track the flow of goods or services.

No one is in control.

Because blockchain is a decentralized system, it means no one person or group can control the system, meaning things can only change via consensus. What can blockchain be used for?

We have seen a lot of case uses for blockchain.

The anticipated ones are:

  • Energy - Person-to-person energy swapping. Potentially between borders.
  • Supply Chains - To track all sorts of shipments with complete transparency. - -
  • Connecting records as items pass across many different handlers.
  • Open Data Marketplaces - Large open-source platforms to exchange big-data anonymously. Data is often described as the lifeblood of internet businesses.
  • Governments - Blockchain technology could be used to increase speed and visibility in the public sector.
  • Auditing & Regulating - Although not typically implemented, blockchain tech could be set up to be a looking glass into public transactions making regulatory roles significantly faster and easier.
  • Insurance - Make insurance more transparent, with set conditions for payouts. The Internet Of Things - Connecting smart devices to the Internet of Things and the sharing economy.

The Future

Blockchain started with Bitcoin, but there are no limits to where this technology could go in future. Projects like Ethereum and Ripple have taken the principles of blockchain and taken it in new directions. But that's just the beginning.

With that I would love to hear from you. Send an email at samyakramteke.blog@gmail.com or DM me on twitter at samyakr_ .

As always, thank you so much for reading this blog. Please let others know who you would think would enjoy the post.