We live in the era of digital technologies launching everyday and exciting discoveries happening wherever in the world. Blockchain technology was a discovery in the second half of the 2000’. Just nowadays, it’s gaining popularity. But, do you know that 1982 was the year when blockchain was described for the first time? Let’s look back for a little and see what was in the beginning. Because it would be easier to understand all that inner process and how to use it.
The first mention of this system was described in a dissertation from 1982, “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups”. Although the dissertation mostly described smart contract prototypes, it also touched on blockchain and smart contracts. Nick Szabo presented technical and informational knowledge of blockchain to the world in his paper on smart contracts and another one called BitGold. The latter focused on digital money and how it was envisioned by Nick Szabo. These activities took place until 1999.
Almost 10 years later, in 2008 Satoshi Nakomoto published bitcoin, and this event was a turning point in the popularisation and application of the forgotten technology.
Development and technical features
In early works and descriptions of blockchain technology, it acted as a more centralised system where signatures of verified and trusted parties were required to add a block. But the main goal in creating the blockchain was that immutability of data remained and is still the main characteristic. Satoshi Nakomoto simplified this design and now we have a more sophisticated, yet less demanding, mechanism.
How it works
Blockchain is a sequential unbreakable chain of blocks. Each block is tied with another by hash.
Block is a unit of data. There is written full information about the transaction. The filling of the block turns into hash. Hash is a mathematical function into which the information in the block is converted. A feature of the hash function: it cannot be reversed; once converted to a function, the data remains only a fixed length 64 character set.
There are two such hashes in a block. One relates to the previous block, which inseparably binds the two blocks and its own hash, which is formed from the information in the block. Even if a dot, comma, one letter or digit is changed in the block data, the hash will immediately change. This will cause an instant chain reaction: the changed block will break the chain from the previous block to the next. This causes the entire chain to lose its validity. In order to return the chain to its previous state, you must recalculate all the blocks in the chain, which is almost impossible. A recalculation would take too much time, resources and money. Although hacking a blockchain is theoretically possible, not many people would dare to do it. It’s called Attack 51: in order to hack a blockchain and go undetected, you need more than 50% of the power and processors in the entire chain.
Once the data has been sent to the blockchain, the block needs to be approved. This is done by miners (with PoW systems) and validators (with PoS systems). As you know, bitcoin is mined on a PoW basis, and this process is called mining. In the case of PoS and its subspecies, such as DPoS, mining also takes place, but by validators and you don’t need to have advanced and powerful computers. The Decimal blockchain, for example, runs on the DPoS algorithm, which allows participants to become either network validators or delegators, who essentially delegate their authority to validators.
With the consensus algorithm, nodes do their work and are rewarded for their efforts. Nodes are the computers that are responsible for adding blocks and conducting transactions.
Types of Blockchain
There are a few types of blockchain. Each of them is designed for exact purpose and convenient in any way of business or real life.
Open blockchain. Such a blockchain is open to all; it does not require specific accesses, permissions to add or other restrictions. Anyone with the Internet access, the ability to purchase the relevant currency (for PoS) or a computer (for PoW) can become a participant in the chain, i.e. a validator or a miner respectively. For example, the Decimal blockchain is open, anyone can become a participant in it.
Private blockchain. Just the opposite of the previous kind, you need to have special access to enter it. This can be a permission from the chain administrator or an invitation.
Hybrid (blended) blockchain. This is a blockchain that combines the characteristics of an open and private type. For example, it can be an open blockchain, but specific functions will require administrator permission.
Sidechain. Literally means side chain, because it develops and exists separately from, but still belongs to, the main chain. It can be based on other tokens and a different consensus algorithm.
Like any software, blockchain needs updates. Usually, updates to the chain do not happen very often, because adding features requires tests of the network and checking that additional features work. Some networks, for this reason, even have multiple sidechains that have the ability to use different tools and systems. Recently, the Decimal blockchain had an automatic update that gave access to coin burning and the use of smart contracts. Even such, the rather old bitcoin blockchain updated in 2021, for the first time in four years.
Blockchain technology has a very long history. Compared to the speed of technological progress, though, it is used very recently, of course. Blockchain has many advantages: security and anonymity of participants, safety of records, a variety of possibilities and use cases, information is almost impossible to counterfeit, decentralised and so on.
Every new project based on blockchain promotes its evolution and popularisation.