Blockchain

One thing that uses cryptography is blockchain, and blockchain is what gives us the ability to do things like cryptocurrency. So let's go over what blockchain is.

I do have a whole course on cryptocurrency, so you may be interested in checking that out. However, what I've done is I've taken the highlights from the blockchain side of this, and we're going to re-hit the highlights of it. I'm going to real briefly mention the history and why we use blockchain, then we'll get into what a block is, we'll get into what blockchain is, and how we can use it for things like a distributed ledger.

A brief history

Just a brief mention about the history around blockchain: it's been around for a long time, or at least the concept of it has been around for a long time. The idea is not new with cryptocurrency. Cryptocurrency is relatively new; blockchain goes back quite a bit further. We see some of the earlier mentions of it in 1982, although it wasn't called blockchain at that point.

The idea behind blockchain is that we can keep a level of integrity around the information that we're storing. Let me give you an example. Let's say we're archiving old data and we're putting it into these blocks, and let's say we're just going to block them up by year, so let's say this is 2002, this is 2003, this is 2004. What happens is, let's say I wanted to manipulate some data: I could go back to 2002, go in there and change some data, and no one would ever know about it. But the idea behind blockchain is that if you were to change that data of that record right there, it would change every proceeding record after it, hence creating a chain between these blocks.

So where would we want to use blockchain? Well, there are lots of cases where we want to maintain integrity: cryptocurrency, smart contracts, financial services, games, supply chains, domain names, and a lot more. Really any data that we want to keep electronic integrity to, we could use blockchain to do just that.

What a block is

Here we have a block. What is a block? We're just going to give the block some sort of number here. We're going to get into this previous hash right here; we'll talk about that in a second, we're not going to get into that next. And then we have a spot for data, and we could put any type of data in here. One of the things that's commonly used for is some sort of ledger, keeping track of financial transactions, or maybe we're keeping transactions of things that we're buying or selling, or who owns some sort of domain. Whatever data we wanted to, we could put into here. And then what happens is we take all of this information and we turn it into a hash, and so that's what we see here at the bottom, is a hash.

Chaining the blocks together

So what is a chain? What's a chain of these blocks? We see here that block one just has all zeros for the hash here, and then in the data, let's say we're recording financial transactions, so this is our ledger right here and it records all of those transactions. Then we use all of that to create the hash for block one.

Now that hash gets moved over, or used, in block two, which then has its own set of transactions, and once that's complete, that all gets hashed and creates this unique hash right here, which then gets placed into block three. Block three goes through its recording transactions, which all gets hashed into this block three hash right here.

Now if I wanted to go back and change something in block one, that would change the hash for block one, which would then change block two, and so forth — therefore the hash of block two would change, which then would change block three, which would change the hash for block three. So you can see it has this cascade effect. We can't change something in a prior block without affecting all the blocks after that.

This creates a certain amount of integrity, because what happens is I know if this hash changes, something's been changed somewhere in the history, or if any of these hashes don't line up between the different blocks. These would need to match and these would need to match; if those don't match, then it flags that something's been changed and there's an integrity issue with the data.

Decentralization and the distributed ledger

Now that we can keep the integrity of the data, this allows us to do some interesting things. We can go to decentralization of this data — that is, we can have many different sources that are working on this data and we don't have to have a single central spot, a single entity or a single machine that's actually processing this data, because that's a point of weakness. So we can decentralize the processing of this data.

In this case right here we have many different servers. They all have the same information and they all keep each other accountable, and if one of these machines gets off, then the other ones will realize that it's off and it will do an auto correction to make it come back online with all of the other servers. So we have a decentralized way of managing this.

There are a few different concepts and terminologies we can attach to this. One is distributed ledger. That's because if we're putting financial transactions inside of here, this is a ledger, and we're distributing it across many different machines, so now we have a distributed ledger.

In a lot of cases this is an open or public ledger, which means that all of these transactions that are happening that are on here, you can go and download. You can download, for instance, cryptocurrency — most of the cryptocurrencies, you can go download the ledger and see what all of the transactions are. So although we say that it's anonymous, somebody could track your purchases if they know your account number. If they can go in there and see what your account is, they can track all of your purchases. So it is open and public.

So there's just a brief look into blockchain and what blockchain is all about. We started out with just a brief mention around the history about why we use blockchain. We got into what a block is and how it uses hashes to create unique fingerprints from data — so we pump data into it, then create a hash out of that. And then a blockchain, of how we use those hashes throughout the blockchain to maintain that integrity. And that opens up some possibilities, like using a distributed ledger for things like cryptocurrency.