TLDR; Blockchains are distributed ledger networks that operate as tamper-resistant, transparent, append-only data structures.
As Crypto continues to swallow the financial world whole, it is becoming all the more important to understand the technology that powers it.
At the highest level blockchain is a data structure that does not have a delete function. Once data enters the blockchain it is there forever. This is what makes it such a desirable backbone for crypto & digital assets. But being immutable is not all that Blockchains must be.
First, it is perhaps important to note that blockchains are not all the same; they exist in two general archetypes, public & permissioned. Each archetype has its own nuances & specifications, however as their names might suggest, one is public & the other is not. Here we address the most important properties of public proof-of-work blockchains.
Public blockchains are designed to be owned by no single group of actors & belong to all people equally. The leading characteristic of a public blockchain is the degree to which it is open.
Openness, as it pertains to a network, means the ease with which anybody can join & participate in that network. It must be open across all dimensions, which means the code which constitutes the network's logic, as well as, the interface between a user & the network. Given that public blockchains are pseudonymous, there should be no way to deny anybody the right to participate. Simply put, a public blockchain must be readily accessible, readily inspectable & resilient to malicious actor attempts at subverting the network. Moreover, in order for a public blockchain to be desirable for mass adoption, it must possess an incredible amount of security.
These four properties make this machine work.
1) Boarderlessness — The salability through space.
Boarderlessness is basically a fancy way of saying the blockchain must have the ability to operate anywhere, anytime, regardless of geographic predisposition.
If you live in America & you have a friend who lives in Ukraine transacting with traditional financial instruments (ACH transfer) between the two of you will be difficult & consuming in time & money. Transacting in cash becomes nearly impossible. The difficulties in the transaction arise due to the divergencies in-laws of each state. However, should you guys/gals decide to transact in a cryptocurrency such as Bitcoin, that problem goes away. Neither America nor Ukraine own/can stop the Bitcoin blockchain. Transacting in Bitcoin means replacing all the intermediary systems of both governments with the Bitcoin system. Since all transactions on Bitcoin settle irreversibly & identities are pseudonymous, the transaction, in essence, becomes a cash one.
Boarderlessness shares much of its benefits with another supremely important property, Censorship resistance making for a great leeway into it.
2) Censorship Resistance — The balance of authority.
As defined by Oxford, Censorship is the suppression of speech, public communication & other information. Although the application of censorship in cases such as obscuring pornography from the underaged, it is a double-edged sword that all the same protects kids from porn, denies the public their right to know the truth, & even puts citizens at risk of blind manipulation (as in the case with Russian media).
Blockchain’s biggest promise is that of disintermediation; the replacement of central multi-party authorities with distributed systems. As we have seen in the above example of a simple transaction between two friends, governments & other state-level agencies can get in the way. Any regulatory body can intervene in the personal financial affairs of people & even deny them the right to participate in their systems. (There have been many cases brought to light where individuals from countries such as Afghanistan/Iraq being denied banking in America {while the political implications are understandable, the end result is unacceptable}). In the world of public blockchains, nobody can stop you from participating because they have a personal agenda. Nobody can stop you from transacting because they don't like your face/nationality. Nobody can tell you when you can & cannot transact because a public blockchain is open 24/7/365 baby.
3) Transparency— The key to trust.
That which belongs to the public must lend itself entirely to the public. This is where transparency comes in. As defining factor of a public blockchain that allows anyone, at any time, the ability to inspect the activity on the network; transparency is a key variable to building & maintaining trust in a blockchain network.
Since all of the activity on blockchains is ruled by hard code, it is theoretically impossible to conduct fake transactions (as the consensus mechanism will deny that activity from being published to the ledger). Nevertheless, there comes occasions that might require an audit of the activity; such as delayed transaction throughput due to a congested network or criminal tracking by some enforcement agencies. Commerical reasons come to mind such as verifying the asset holdings of public companies & forward crediting involved parties (such as a coinbase transaction being crediting on a Gemini account in a matter of seconds then having to wait upwards of 10–30 minutes for the blockchain to finalize the transaction). Perhaps even deeply personal needs such as viewing where assets are being held or sent & how often assets may move, require transparency.
*4) Security — The deterrence of error & brute manipulation.
While the amount of security a network provides does not constitute whether or not it is public, in order for a network to feasibly satisfy the demands of a public appetite for guarantees, it must possess extreme levels of security.
Security in public blockchain networks exists across two main facets. First and foremost, of course, the code governing a blockchain’s logic must be airtight. If the code is not secure, how can its application be? This includes the privacy preservation circuits baked into the code itself. The other side of security is the network's capability to deter breaking of the system's operational flow. As it pertains to proof-of-work-based chains, operational security comes in the form of mining (converting electrical energy into hashing/computation). Mining secures the network from unwanted events happening such as fraudulent behavior of users, network partitions & brute force takeovers. Bitcoin is the most powerful computational network on the planet. There is so much energy directed at the Bitcoin network that in order to accumulate enough material to take it over would take longer to produce than the network will just naturally grow (which in effect would render all that accumulated material inadequate).
Security can exist in other forms of consensus mechanisms such as Proof-of-Stake, pBFT, BFT, & their many variants. Then security can again be different from one chain to the other based on the hashing algorithms they utilize for the mining process (some popular hashing algorithms are SHA-256, Scrpyt, X11, Cryptonight, Lyra2REv2 & Keccak).
As distributed ledger technology & the cryptocurrency industry matures new radical solutions are popping up that intend to displace blockchains completely. Aside from the constantly evolving modifications & breakthroughs in consensus, new data structures known as DAG’s (directed-acyclic-graph) are being used in projects such as IOTA to provide exponentially better transactional throughput while claiming to retain the “same guarantees” in security. So far, those claims have shrunk in their impositions & blockchains continue to grow their network hash rates.
To bring it all back & sum it up, a public blockchain must have the four properties (borderlessness, censorship resistance, transparency & security). If any of these are missing, it might be best to double-check if what you originally thought about a project is really true.
Onwards & Upwards!
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