The 3 D’s of Blockchain
With the newspapers and apps flashing daily news on blockchain related startups, the technology, and its future, one keeps wondering what all the fuss is all about. Blockchain sounds like a simple term until the words like “decentralized”, “cryptocurrency”, etc. start making you stop reading further. These are mere buzzwords to make things seem fancy, but it is not that difficult if you go underneath it.
In real life, consider every activity of yours as data. Each such data is somehow encrypted (or encoded) to get some other values. All such values together can be thought of as a block. Now go on adding blocks to each other, much in the way you did for your Lego pieces as a kid and voila! It becomes a blockchain!
The encryption applied gives us a term called hash. Each block, also referred to as a node makes contains the data to be stored, the hash of the previous node, including of course the hash of the present data. All said and done, there are three D’s that are the pillars of this technology.
A blockchain is a decentralized form of data storage. This means that no person is the absolute owner of the blockchain. All the information is stored in such a way that no person can tamper the blockchain without changing all the subsequent blocks in a chain in the network. This basically makes tampering of data near impossible, unless any single user controls over 51%! (See this!)
Blockchains store information across a network of computers, meaning it is distributed. No single system controls the entire blockchain, however, everyone can use it and in turn help run it. Distribution also, refers to distribution of electrical power used in storing and mining data. It is different from decentralized as the latter deals with ownership of data, while former refers to the physical aspect of the blockchain. Thus a distributed feature ensures that the blockchain is very difficult to corrupt or take down for any single system.
Digital Currency (Cryptocurrency)
The users hold bundles of data of others in terms of blocks. The users ensure transactions are added block by block by validating transactions in exchange for a little fee. This virtual fee is paid in terms of a virtual digital currency so that irrespective of individual currencies, any user can validate a transaction in any part of the world.
It cuts through the barriers of the green money and hence all of the users will lose minimum excess amount while paying or receiving, which is, in fact, the virtual fee mentioned previously. This fee is called as a reward for a miner (validator) for using his computing resources to help in running the blockchain. This currency is called a digital cryptocurrency. Bitcoin and Ethereum are famous digital currencies.
There are a lot many terms that I have missed and are very important to define a blockchain. But for me, it is these three D’s that make it so awesome yet simple for a layman to understand.