Issue 3: the technical foundation of blockchain

A blockchain works thanks to a few key concepts. Let us learn what they are

In this edition of the newsletter, we will delve into the technical foundation of blockchain, but don't worry, we'll keep it simple and easy to understand.

To start, a blockchain is simply a list. That's it. Thank you for reading and see you next week!

Of course, I am kidding, but in essence, that's it. Now let's add some details that actually make it useful. First, it's an infinite list, second, it is permanent, it uses cryptography for security and trustworthiness, and finally, it's decentralised. Before going into each of these points, let's define the list aspect a bit more.

List

A blockchain is a list of transactions, actually called a ledger. But first, what is a transaction?

A transaction is something really simple. In the normal world, it is simply sending or exchanging something with someone, usually money. If I give you $20, that's a transaction. If I sell a TV to your friend for $900, that's another transaction. If you can take a step, you can distinguish two distinct moments: before the transaction, and after the transaction. These are called states. So, there is a state, then a transaction, and there is another state. Basically, it just means something has changed between the two moments. Easy, right?

Now if you start from a state, have a transaction, then another one, then another, and a lot more, you can represent these different moments by simply storing the transactions. An example: if you and I both have $100 to start, and then you give me $50, and after that, I give you $20. There is

• step 0: you: $100 me $100

• step 1: you $50 me $150

• step 2: you $70 me $130

But we don't need to remember all that! We can just remember how we started, and the money sent at each step. This allows us to save memory space. So then, if you string together a lot of these transactions, it becomes a ledger.

Now that we have this basis, let's talk about the infinite part. Well, imagine if your phone camera suddenly stopped recording because it was out of memory. Now add the fact that adding more memory is not possible. You simply have a useless camera because it cannot record anymore. But what if it had an infinite memory? The fact of not being able to add memory is not a problem anymore!

Now the permanent aspect. To continue with the same example, imagine if the videos you took on your phone randomly disappeared, or were modified by strangers without you knowing. That's no good, of course. We need to know that the things written on this ledger are going to stay there, and that they are truthful (you can also say, not modified). This happens thanks to the next 2 points, cryptography and decentralisation.

Cryptography and decentralisation

Cryptography: A very scary term and the most technical aspect of blockchain. There will be a full dedicated post in the future for this, but I will try to summarise it briefly here.

Cryptography is hiding information thanks to a certain code, and being able to decode it. It's what spies use since forever. Now that we have computers, this has become advanced math, but the idea is still to restrict access to information by only allowing people with the key to read it. It's what allows the money you have in the bank to stay secret. For blockchain, it allows us to verify identity, and that the data has not been changed.

Decentralisation, the true reason to be of the blockchain. If you only had the first 3 aspects, you would call that a database. It's used by basically any app/website/computer thing that exists, anywhere in the world. But blockchains are something more. I will go in more depth on this topic in another post, but I want to keep this one short and easy. Decentralisation is key because you don’t have to rely on a central authority.

And that's it! Anything else that people tell you is not fundamental to a blockchain.

Summary

At its core, a blockchain is a decentralized digital ledger that records transactions in a transparent and secure way. Each block in the chain contains a record of several transactions, and once a block is added to the chain, it cannot be altered. This makes blockchain an incredibly secure and reliable way to store data.

One of the key features of blockchain is its use of cryptography to secure the data. Cryptography involves the use of complex mathematical algorithms to encrypt and decrypt information. This ensures that only authorized parties can read and verify the data stored on the blockchain.

Another important aspect of blockchain is its decentralized nature. Unlike traditional databases, where data is stored on a central server controlled by a single entity, blockchain data is distributed across a network of computers. This means that there is no single point of failure or vulnerability that can be exploited by hackers or malicious actors.

As usual, I am happy to discuss in the comments!