Skip to main content

Back 2 Basics: What is Blockchain?

Sometimes you have to revisit the basics. So, let's do it!

What is blockchain?
This answer varies based on who you ask (which is never a good sign) but the simplest explanation is that it is a type of distributed database. Instead of data being stored in a central server (with centralized control), the data is stored in nodes which comprise the network. A node can be any electronic device connected to the network (the requirements for nodes vary by network). Generally, the nodes have to agree on the addition of new data, and each node contains the same unique data representing each and every transaction on the network. The data representing individual transactions is packaged into blocks and then blocks are linked via hashes. A hash is a unique identifier that basically represents the two blocks it is linking and it forms the chain. Thus, you have a basic blockchain.

So in super simplified terms, you have a network of nodes that all record the same data. Groups of data are packaged into blocks which are then connected by hashes. The hashes and the blocks create a chain of blocks, or a blockchain. Make sense?

What is the difference between a public blockchain and a private blockchain?
Public blockchains, also known as permissionless blockchains, do not have restrictions on who can transact on the network. Anyone can participate (transact) on that network and no one controls the network. On the flip side, private blockchains are permissioned networks which restrict who can participate on the network and how users can participate. Bitcoin is an example of a public blockchain and Hyperledger is an example of a private blockchain.

What is the difference between an open blockchain and a closed blockchain?
An open blockchain is a blockchain in which anyone on the network (public or private) can access or read the data memorialized on the network. A closed blockchain is a blockchain (again, public or private) in which access to the data memorialized on the network is restricted to certain users.

People generally think of public blockchains as open and private blockchains as closed, but public blockchains can be closed and private blockchains can be open.

And those are the basics!

#blockchain

Comments

Popular posts from this blog

The Rundown on CBDCs

Everyday there is a news report about a country that is "exploring" or "studying" the possibility of developing a central bank digital currency (CBDC). In the past few days, I've read articles about Rwanda, Israel and France looking to pilot programs with CBDCs. And yesterday, the Bank of International Settlements announced its backing of the development of CBDCs. With approximately 80% of central banks around the world taking a closer look at CBDCs, now is as good a time as any to learn more about them. What Are They? A central bank digital currency is exactly what it sounds like--a digital currency issued by a central bank. In the same way our central bank, the Federal Reserve, issues the U.S. dollar, it would similarly issue some official U.S. digital currency ('digital dollar'). This is pretty much where the simplicity of it all ends. Things get really hairy (really fast) when central banks have to figure out how CBDCs fit into a traditional financ

Before You Mint Your NFT

With NFT season taking a bit of a breather (kinda), I thought this would be the perfect time to lay out a few things to consider before minting an NFT.  If you missed the frenzy, well, welcome. "NFT" stands for non-fungible token and these digital tokens represent real world ownership and provenance of a particular asset. NFTs are minted (i.e., produced), stored and transacted (bought/sold/traded) on a distributed ledger like blockchain. Some NFTs represent ownership of tangible assets and some NFTs are digital/virtual assets  (yes, a digital piece of art was purchased for $69M). "Non-fungibility" is a scary word but it essentially means that the asset is unique, cannot be interchanged with another asset, and cannot be replicated. Think of NFTs as either collectibles, like artwork and trading cards, or title to tangible/real property, like real estate and cars.  So with all the excitement having simmered down a bit, below are a few things to think about before you

A Changing Tide. But Not Really.

I almost titled this post, "An Open Love Letter to Rep. Darren Soto" but I thought that might be weird. I landed on [whatever it is] because it has recently occurred to me that there may be significant legislation around blockchain coming out of Congress this session. Rep. Soto (FL-09) has been one of blockchain's biggest champions on Capitol Hill and I expect that will continue to be the case. In anticipation of "big things blockin," I thought I'd revisit two blockchain bills that made it out of the House of Representatives during the last congressional session. Given the change in the make-up of the Senate, maybe we'll see them again. But maybe we won't need to see them again....? Stay tuned. The first of the two bills was the Blockchain Innovation Act. This legislation sought to have the Department of Commerce and Federal Trade Commission study the use of blockchain technology in commerce and assess its fraud and security risks and benefits. This