Blockchains are secure databases by design. The concept was introduced in 2008 by Satoshi Nakamoto, and then implemented for the first time in 2009 as part of the digital bitcoin currency; the blockchain serves as the public ledger for all bitcoin transactions.
At its basic definition, a blockchain is a computer file used for storing data. Like any computer file (including the document you are reading now) it exists on a digital storage medium, such as a computer hard drive.
However Blockchains has three properties which differentiate them from how the other types of computer files.
- They are distributed
The file containing this article can, in theory, simply be stored on one computer and accessed over the internet by however many people want to use (i.e read) it.A blockchain, on the other hand, is duplicated, in its entirety, across many computers. This means that no person or entity (such as a corporation, or government) has control over the content of the file.Editing the blockchain is only possible if there is a consensus between the network of computers storing separate, but identical, versions of the blockchain. And this is made possible thanks to the second fundamental innovation of blockchain, cryptography.
Fundamentally means that the data which makes up a blockchain is encoded. Cryptography ensures that users can only edit the parts of the blockchain that they “own” by possessing the private keys necessary to write to the file. It also ensures that everyone’s copy of the distributed blockchain is kept in synch.If some document was stored in a blockchain, however, you would need to input the codes to prove you had the right to make changes. If the codes do not match, then changes would not be accepted onto the other copies of the document, which are distributed across many (potentially an unlimited number) of other computers.
Blockchains are to some extent public. This can mean “accessible to anyone”, as for example:
– in the case with the Bitcoin blockchain
– in the case with blockchains deployed within organisations or businesses for internal use. This means that anyone on the network can monitor the file for changes, even if they don’t necessarily have permission to edit it, or access all of the data it contains in its unencrypted form.
By putting all of these elements together meant the ‘double spend’ (potential flaw in a digital cash scheme in which the same single digital token can be spent more than once) problem formerly inherent to digital data was solved for the first time. While a computer file can be copied and shared an endless number of times, it was generally impossible to use it as a store of value (like gold, or cash, or a valuable work of art). Nevertheless now with blockchain technology this may reach its solution, which has led to it being described as enabling the creation of the “internet of value”.