Blockchain 101: What It Is And What It Is Not.

You have probably heard a lot of recent news about products, software and other things involving blockchain technology and you may have doubts about it. Here you have some tips to help you understand what blockchain is, what it is not and what it is close to being.

What It Is

Blockchain Is A Distributed Storage Transaction

Blockchain databases consist of several decentralized nodes. Each node verifies new additions to the blockchain by others and is capable of entering new data into the database. The majority of nodes must agree on each additional entry to the chain of blocks. This agreement mechanism guarantees the security of the network, making it difficult to violate.

As Vitalik Buterin, Founder of Ethereum explains: “The idea of a decentralized organization takes the same concept of an organization, and decentralizes it. Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization (DO) involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the blockchain. A DO may or may not make use of the legal system for some protection of its physical property, but even there such usage is secondary. For example, one can take the shareholder-owned corporation above, and transplant it entirely on the blockchain; a long-running blockchain-based contract maintains a record of each individual’s holdings of their shares, and on-blockchain voting would allow the shareholders to select the positions of the board of directors and the employees. Smart property systems can also be integrated into the blockchain directly, potentially allowing DOs to control vehicles, safety deposit boxes, and buildings.
(If you want to learn more about Ethereum, and how it works, check this great article out).

Blockchain Is Immutable

Immutability is a blockchain feature that makes data persistent during a certain period of time, free from censorship. Currently, the most common period of time used in blockchain is infinite (meaning that data is forever kept).

Before blockchain, immutability existed in closed systems. However, blockchain immutability is simply a property of blockchains.

Blockchains Are Effective And Scalable

The issue of bitcoin scalability and the phrase “blockchain scalability” is often seen in technical discussions about the bitcoin protocol. The requirements of recording every bitcoin transaction in the blockchain compromise its security because fewer users will keep a copy of the whole blockchain. Scalability is actually a feature and, yet, a current challenge of the future blockchain.

What It Is Not

Blockchain Is Not A Product

Many decentralized apps that are being built on blockchain have it as its structure or fabric when blockchain itself is not such an app or product. Blockchain cannot be seen as a product but as an additional feature.

There is not a product called blockchain. New apps can use blockchain to gain new security properties.

Blockchain Is Not For Criminals

As the most popular cryptocurrency, Bitcoin has provoked the rise of ransomware attacks—extortion schemes, like the recent WannaCry cyberattack, in which hackers hold the contents of a victim’s computer hostage until they get paid. Criminals can use Bitcoin to collect ransoms easily and without having to reveal their identities. The currency has also been associated with online drug sales, money laundering, and sex trafficking.

But while Bitcoin users can withhold their identities, they can not avoid revealing other information that can be useful to investigators. Every Bitcoin transaction is recorded on its blockchain, which is also a publicly accessible record of all transactions made using the currency. Blockchains “provide a really useful source of truth,” says Jonathan Levin, cofounder of Chainalysis, which develops software tools for analyzing blockchain data. Its products can help investigators to draw inferences about how people are using the currency.

Blockchain Is Not Exactly A Database

Databases have some useful tools that Blockchain do not have, like:

    • Centralized control of an administrator or authority – Parties trust the administrator, but if the authority owning the network is compromised, all data residing in the network can be easily compromised as well.
    • No recorded history – Information in databases is up-to-date at a particular moment in time. It does not need to be proven that it has not changed, especially because any party with access to the database can edit entries.
    • Confidentiality of data – Members-only databases allow for control access.
  • Faster performance in time – Because trust is assumed, there is no hesitation or lag in processing transactions.

Blockchain Is Not A Panacea

The blockchain system will gain momentum as people become more aware of its value and relevance. Due to its apparent complexity and ambiguity, blockchain is currently one of the most advanced tools for solving global problems of safety, authenticity, privacy, accessibility, and security of artifacts and transactions. But it is too new and has too many challenges on the horizon before professionals can trust this technology.

What It Is And Is Not At The Same Time

Blockchain Is Not (Only) Bitcoin

Bitcoin is blockchain, but blockchain is not bitcoin. Bitcoin is digital money, a virtual currency that was the first successful blockchain product. Blockchain is the technology that enables cryptocurrency like bitcoin. While they go hand-in-hand, there are other use cases for blockchain besides bitcoin. Blockchain can ensure that the terms of programmable autonomous contracts, known as smart contracts, are met. Besides, it can be used for online voting to address voter fraud or to secure identity. Moreover, there are many other situations lacking transparency and security where blockchain can be used.

Blockchain Is And Is Not A Replacement For (Anonymous) Private Messaging

The notion that Bitcoin is completely anonymous is quite widespread. Yet, it is also incorrect even though transactions involving Bitcoins do not suppose the transmission of personal information. It is possible for Bitcoin owners to protect their identity up to a certain extent, but not completely. Individuals can spend Bitcoins without using their name but their transactions can be connected to the addresses where they receive Bitcoins. If those addresses are tied to their personal identity, all the transactions associated with them will be tied to their identity as well, since Blockchain keeps a permanent record of every transaction carried out.

All the above mentioned are what I consider to be the most common aspects and misconceptions according to my knowledge of blockchain, without going into detail. At the moment, it is not that easy to decide, given that it has so much publicity and many new features.

The most basic way to define a chain is that it uses electronic signatures to guarantee its origin, that it is immutable to guarantee that data has not been corrupted and that it is distributed, to avoid fraudulent uses.


Article written by Javier Sanz, Firmware and Blockchain Developer at Barbara IoT.