Summary: A blockchain is a software platform that can be used in ways we could previously only use human institutions. Banks? Accreditation boards? Government programs? All these and more could find that the core service they provide (trustworthiness) is no longer needed, because it’s now provided by blockchain software. In other words, the blockchain is a piece of software that we can give real responsibility, cutting out previously necessary stakeholders and middle-men.
Blockchain tech has been hailed as one of the most important inventions of a generation, capable of taking down huge legacy businesses and opening new frontiers in technology -- but few people these days can actually explain what it is and how it works. Vanbex believes that a much wider array of people should be using blockchain products, and the easiest way to ensure that is to make sure that a wider array of people actually understand what those products do and more importantly how they do it.
A blockchain is a software platform run on a large number of networked computers so as to provide secure, distributed hosting of information -- think of it like a super-stable, super-secure version of the cloud, with some crucial special abilities. The most fundamental difference in how a blockchain is used differently than cloud storage is that the blockchain doesn’t generally host whole files, but rather small bits of code.
What this code is and does depends on the blockchain in question -- Bitcoin’s blockchain only supports simple ”scripting” commands necessary for funds transfers, while more programmable versions like the Ethereum and EOS blockchains support more complex coding languages. Either way, though, the point is that this code is hosted in a distributed, secure manner.
OK. So… what’s secure, distributed hosting?
Blockchain software is secure because of the high level of encryption in its design, but that’s only part of what makes it reliable. Just as important is the fact that data hosted in the blockchain is hosted transparently -- it’s always possible to verify that a particular portion of data is unchanged from the last time you checked it.
This means that users don’t have to worry about any hypothetical malicious actors changing the blockchain, because any modifications made will be immediately visible.
A file hosted on a blockchain is also “distributed,” meaning that it is hosted on multiple computers -- not mirrored with a single master copy acting as the authority, but truly distributed (or “decentralized”) between many equivalently authoritative hosts.
Thus, even someone hosting a blockchain is not the “owner” since they are not the host but a host, just one of many. This helps to make the blockchain resilient to so-called “DDoS” cyber-attacks to drive that information off the internet, entirely. Any attack would have to affect all the blockchain’s hosts at once in order to be successful.
That’s incredibly helpful -- but it also requires that all these secure, distributed hosts stay in agreement with one another about just what it is that they’re hosting. In blockchain parlance, this is called the need for “consensus.” Many of the most intensive aspects of hosting a blockchain are only necessary to maintain consensus between all the many computers doing the hosting.
But, if you can manage it, you’ve got a platform that can do some truly incredible things.
Just what can a distributed platform do?
The biggest implication of the blockchain’s security is that, with all this running as intended, we can finally trust software as implicitly as we have historically trusted only human institutions. Blockchain specialize in so-called “trustless” applications -- those that require valuable interaction between two parties who do not know or trust one another, say a faceless service provider and a largely anonymous customer. Historically, a trusted human third party like a bank was needed to administer such trustless interactions, but now we have the blockchain to fill that role with software.
The most obvious trustless interaction is a funds transfer, but you can’t digitally send wads of US dollars without bringing a bank into the equation. Since the whole point is to try to cut such actors out entirely, that won’t work -- but thankfully, the blockchain’s inherent security means that we can trust it to track unique ID numbers in precisely the same way that a national financial system tracks the ID numbers on physical cash notes.
The general term for these highly secured, totally unique value-carrying ID numbers are “coins” or “tokens,” though they have more specific names within any particular blockchain ecosystem. Bitcoin for the Bitcoin blockchain, Ether for Ethereum, etc.
Unlike paper money, however, tokens are used for far more than just storing and trading monetary value. Depending on the use of the blockchain in question, tokens can be designed to do all sorts of things -- they can act like non-refundable coupons for services, or represent an accumulation of reputation, or come packaged with equally secured metadata like the holder’s medical information.
So-called “utility tokens” are common in the modern blockchain world, and they often exist in tandem with so-called “security tokens,” which function as pure investments. In principle, there’s no limit to the number of different tokens a single blockchain could track, though there is a practical limit on what people can actually follow. Restable blockchain services like Ethereum allow customers to start and run their own new token system on the overall Ethereum network.
Check back for more!
There’s obviously a lot more to blockchains -- from potentially world-changing applications like blockchain social services to foundational processes like token “mining” and data hashing.
We’ll dig into all this and more over the coming weeks, so be sure to check the Vanbex blog for updates!