Lately, Blockchain is one of those terms that get thrown around a lot. As with most new shiny things, we must educate ourselves to understand why there is so much hype and also where the Blockchain concept might be useful in the future.
One thing we must not confuse is the Blockchain itself and the use cases for Blockchain. Bitcoin and Ethereum ( for example ) are use cases enabled by the emergence of the Blockchain concept. Think of a Blockchain as an operating system like MacOS or Windows. Bitcoin is just an application running on that operating system. In the case of Bitcoin, the Blockchain is a mean to store and record Bitcoin transactions.
But, not everything that can record and store transactions is labelled Blockchain. A blockchain network has 4 key characteristics:
For a transaction to be accepted and recorded on the blockchain, all the participants must agree to follow the same rules. This is the consensus. If a transaction violates one of the rules the network agreed on, the transaction will be considered invalid. The consensus allows each participant to trust the network, because they know each transaction will follow rules they ratified when the network launched.
Participants know where the assets came from and how its ownership has changed over time. Each asset’s ( whatever it is, tangible, intangible, digital ) provenance must be tracable. If we have a blockchain designed to track a fish’s journey from the sea to a restaurant, I must be able to know where it was caught, by who, and when. I also must be able to know how many middlemen were involved during the fish’s journey. All the way to the moment the restaurant bought my fish.
No participant can modified a transaction after it has been recorded on the ledger. Doesn’t matter who you are, you just do not have the power to do that. If an error occurs, a new transaction must be used to reverse the error. At that point, both transactions will be visible on the ledger. The first transaction, considered an error, will always be visible once it is recorded.
In a blockchain network, there is only one source of truth. There is only one ledger for the whole network. To know who owns what, or to study a particular transaction, there is only one place to go.
This was a short article to quickly explain some of the characteristics a network must have to be labelled a blockchain. Not every network is a blockchain, nor every network can become a blockchain. Hope it was clear enough! Have fun!