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Anyone who pays attention to emerging technologies knows that there is a lot of confusion around the concept of blockchain. While people have been talking about blockchain for years and a wide range of industries have been using blockchain, many people aren’t quite sure what it is and how it works. In this blog, I hope to clear up some of the confusion about this rapidly growing technology.
A definition
So what is blockchain? The short answer is that the blockchain is a secure, poorly written database that no one should own. I say “badly written” because there are some arguments that blockchain isn’t necessarily the best database structure out there, but it’s not meant to be. Basically, the blockchain is a self-sufficient and autonomous database.
On a more detailed level, a blockchain is a decentralized data structure of transactional records that ensures security, transparency and immutability, which means that records cannot be changed. You can also think of a chain of records stored in the form of blocks, which are typically not controlled by any single authority. Or you can think of blockchains as fairly simple databases wrapped in varying degrees of encryption.
Trust systems
Blockchain is not trying to solve a database problem. He’s trying to solve a trust issue. Blockchains are a type of distributed ledger system that was born out of a need for trust.
Individual and multinational structures use imposed trust systems. You have a central sorting center or a single database and exchanges. It can be stock exchanges and clearing houses that support them.
The Depository Trust and Clearing Corporation (DTCC), a clearing house that settles securities transactions for NASDAQ, is a trust system. Bitcoin is a trust system. The same for many other security groups, from central banks to toll roads and your local library. A trust system can be anything that keeps track of records and the people or companies that use them.
A distributed trust system, distributed ledger or blockchain decentralizes the trust system. It all goes to a peer-to-peer database with some form of trust built into it. Blockchains are a form of distributed trust, as blockchains embed a cryptography in each block and use a consensus algorithm.
Blockchain vs distributed ledger
You will often see the terms “blockchain” and “distributed ledger” used interchangeably. While it is true that blockchains are mostly distributed ledgers, not all distributed legends are blockchains. You will see people talking about a distributed ledger system, but it doesn’t actually use a blockchain. He’s using some other form of distributed trust.
Problems of distrust
One of the key factors for blockchain and distributed ledger solutions is a certain level of distrust between different entities, be it companies, governance organizations, groups or individuals. This group of technologies could be a solution to allow different entities to cooperate, do business together and generate profits, even if they have reasons to be wary of one or the other.
Trust and distrust play into the choices of the blockchain architecture regarding consensus and cryptography. The harder it is to obtain consent, the more likely it is that consent will be challenged and the stronger your encryption needs to be. The more groups trust each other, the less robust your encryption needs to be. It all comes back to trust in many ways.
Key aspects
A blockchain is a database shared between different entities that have different levels of trust, including no trust. This reality has many built-in architectural problems. And that, at the end of the day, is all about blockchain. It is a question of overcoming these problems.
Blockchain takes people and transactions that you have no reason to trust and builds trust in the system, blocking it according to database rules in a permissionless system.
to know more
To explore innovative uses of blockchain in different industries, visit the Dell Technologies blockchain site.
For more information on how to accelerate your AI journey, visit Intel AI Builders and AI Solutions from Dell Technologies.
Copyright © 2020 IDG Communications, Inc.
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