To understand what blockchain technical explanation truly is, we need to understand the need for this new technology. Understanding the need for a new technology helps us understand the technology itself.
In the current model of centralized record keeping, records or ledgers are maintained centrally by few individuals on a centralized server. Let’s say, there are 1000 entries on this ledger and theoretically someone can go back to entry number 45 to make an adjustment, for any reason. Ability to make changes or adjust the records makes it gullible to manipulate, in other words, this centralization of record keeping does not infer lot of trust.
While the intermediaries and authorities such as banks, auditors and government agencies come into play to authenticate the records, the issue of trust that stems from a centralized record keeping model still exists.
Think of Enron which happened in spite of all the intermediaries (and some may say with the help of intermediaries).
Now imagine if the copies of these ledgers were not on just one server but on a million computers that act as individual servers, connected by a single technology platform. If someone wants to go back and change entry number 45 all the entries starting 45 through 1000 will throw an error because the change has occurred on one computer while the other 999,999 computers are still maintaining the previous record.
Let’s break down that a bit.
All the million computers were holding a copy of the all the 1000 records that were congruent with each other, as long as this congruency is maintained, there is nothing to flag.
When someone tries to change a previous entry, it does not match with the data on the other computers. Only way a change can take place is if majority (say 51%) of the computers maintaining the record agree that the change is valid.
This is a huge shift from being able to change the records at one’s whim to having to be accountable for every single change. This immutability instills trust and the ability to bring trust into practically any record keeping model is what brought blockchain massive attention.
Node, Block, Lock, Chain
Do not worry, we do not expect you to understand what a blockchain is from previous explanation because it does not cover the basic jargon that is native to blockchain. So let’s break that down to make you a basic expert of blockchain.
The million computers that we described above are what are called nodes, individual computers that act as servers that maintain a copy of the whole ledger. These nodes are connected to the network by a technology platform, this technology platform is the blockchain technology itself.
Every entry, in our example we said there are 1000 entries, so these 1000 entries form individual blocks of data. However, every time an entry is made all the nodes connected to the network are updated so that each individual node has the exact same data, when this update is completed, it is locked making the block complete.
For instance, let’s say you made your first entry. This entry is then passed to all the nodes and once at least 51% of the nodes on the blockchain network agree that this entry is valid, the entry is then accepted and updated in all the nodes. This acceptance of the network locks the entry with a cryptographic signature (32 character alpha-numeric code created by the system automatically).
This is important to understand. Blockchain always moves forward and once an entry is accepted forming the block, it cannot be changed. In this case, your first entry now forms a block with its own signature, your second entry will then build on the first entry’s signature as starting point. This mechanism of acceptance, verification, locking and building the next entry based on the last entry contributes to the blockchain’s feature of immutability.
Whenever a new entry is made, this same procedure commences. In other words, each of these 1000 entries, which form the individual blocks, have been entered, verified and accepted by majority of the nodes on the network, one over and after the other, forming a chain.
You cannot change a random entry without causing the chain to break.
So there you are: a transaction or record when accepted by the majority of the nodes on the blockchain network forms a block, and a series of uninterrupted blocks form the immutable chain called blockchain.
A hypothetical example of the healthcare industry in a blockchain operated the world
Let’s say a nurse administers an injection on a patient and this is recorded in their computer system. Next day, the hospital realizes that the injection that was administered was the wrong one and that it could be fatal for the patient. In theory, someone can go back into the system and edit the record of what injection was administered or delete the record itself. Even though a wrong injection was administered, the nurse may have made the right entry in terms of what was supposed to be administered and no one would ever know what went wrong.
However, imagine a world where all the vendors, inventory and hospital records are on the blockchain. Now, the nurse will not be able to go back and change the original entry. Even if the original entry was properly recorded, the inventory records will show that they have a surplus of the medicine that was supposed to have been administered while another one which has no record of being administered is missing.
Although the example is a simple one, one can see the implications of a blockchain enabled future in creating trust, holding parties accountable and enabling transparency, while increasing speed of transaction, reducing costs and enhancing security.