People Innovation Excellence

Beginning at the Beginning: What Blockchains Are

A blockchain is a data structure that makes it possible to create a digital ledger of data and share it among a network of independent parties. There are many different types of blockchains.

»»Public blockchains: Public blockchains, such as Bitcoin, are large distributed networks that are run through a native cryptocurrency. A cryptocurrency is a unique bit of data that that can be traded between two parties. Public blockchains are open for anyone to participate at any level and have opensource code that their community maintains.
»»Permissioned blockchains: Permissioned blockchains, such as Ripple, control roles that individuals can play within the network. They’re still large and distributed systems that use a native token. Their core code may or may not be open source.
»»Private blockchains: Private blockchains also known as distributed ledger technology (DLT) tend to be smaller and do not utilize a token or cryptocurrency. Their membership is closely controlled. These types of blockchains are favored by consortiums that have trusted members and trade confidential information.

All three types of blockchains use cryptography to allow each participant on any given network to manage the ledger in a secure way without the need for a central authority to enforce the rules. The removal of central authority from the database structure is one of the most important and powerful aspects of blockchains.

Blockchains create permanent records and histories of transactions, but nothing is really permanent. The permanence of the record is based on the dependability and health of the network. In the context of blockchains, this means that if a large portion of the blockchain community wanted to change information written to their blockchain, they could. Cryptocurrency is used as a reward to incentivize lots of users to facilitate the healthy function of the network through competition. If the records are changed inappropriately, this is known as a 51 percent attack.  Small networks with few independent minors are vulnerable because it doesn’t take much effort to change their information, and powerful miners could do so and gain extra cryptocurrency. Ethereum Class experienced just this type of attack.

When data is recorded in a blockchain, it’s extremely difficult to change or remove it. When someone wants to add a record to a blockchain, also called a transaction or an entry, users in the network who have validation control verify the proposed transaction. This is where things get tricky because every blockchain has a slightly different spin on how this works and who can validate a transaction.


Tiana Laurence

Blockchain For Dummies®, 2nd Edition. 2019 by John Wiley & Sons, Inc., Hoboken, New Jersey

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