Blockchain | Explaination | Analogy to House of Cards

Here's a simple explanation of the technology behind cryptocurrencies the Blockchain! It's also going to be the technology that will shape our future by automating numerous legal procedures. So let's start . . . . .

Blockchain, the distributed, decentralized and immutable ledger. Formed by blocks of data that are cryptographically linked to create a secure chain.

Distributed

Consider a network of nodes (computers), the blockchain ledger is distributed to all the nodes on this network and all the nodes will be responsible for maintaining the ledger. Hence it's called distributed, but how is it different from present system of distributed databases? that brings us to why it's also called decentralized.

Decentralized

Since all the nodes on the network are responsible for maintaining the ledger, there is no central entity that owns the ledger. The ledger is public! The present systems may employ distributed databases but those databases belong to or are owned by central entities, giving them the power to use that data. Decentralization will help in disrupting the power of big companies like Google, Amazon etc. and giving the control to individuals (Oh the future is exciting!).

Immutable

So how exactly is the data on a blockchain immutable? The process begins by creating a new block of data, in this case the data is usually a set of transactions. Once the block is ready a cryptographic hash of the previous block on the blockchain is calculated and stored in the new block. This causes the new block to be linked to the previous. To make it simple consider a blockchain of 3 blocks :

Block1->Block2->Block3

To add a new block we create Block4 and store on it the cryptographic hash of Block3. The chain now becomes:

Block1->Block2->Block3->Block4

Let's look inside Block3. Applying the same logic, Block3 contains the cryptographic hash of Block2. Which means when we calculated the hash of Block3 to store it on Block4, it was affected by the hash of Block2. Same process repeats all over the chain. And as the chain grows in size the older blocks become more and more secure. Although someone might be able to successfully tamper data on some block. If this does happen then due to the property of hash algorithms (i.e. no two different values produce the same hash), the subsequent links will be broken and invalidated. Which means one cannot tamper with the blockchain without making it apparent that the data was tampered with.

Now let's imagine that a malicious user did manage to tamper with the blockchain and produced a entire new blockchain with false data. But wait, he managed to do this on his own computer, what about the other computers on the network? they will identify the malicious chain and refuse to accept (More on this in later posts).

Analogy to a House of Cards

Keeping the technical terms aside you can imagine the blockchain to be like a house of cards. You create a floor and on top of that you build another floor. As the house keeps on growing the bottom floors become more and more difficult to modify. And if you try to modify the any floor, the house falls down and you have to start over.

If that didn't help you to understand, feel free to ask me :) and stay tuned for more!