What is Blockchain?

Blockchain isn’t new. Learn about blockchain and how governments & companies can use a ledger system that was first used 1500 years ago.

Marie Gonzalez · January 1, 2020

What is Blockchain?

In trying to learn more about blockchain, you’ve probably encountered a definition like this:

“Blockchain is a shared, immutable ledger for recording transactions, tracking assets and building trust. Discover why businesses worldwide are adopting it.” 

— IBM.com

Whether blockchain or distributed ledger technology is a new concept to you or you have some familiarity with it, we doubt that this definition provides the kind of insight you are hoping for.

The good news is, blockchain is actually very easy to understand. After all, the concept of a distributed ledger dates back to 500AD.


Distributed ledgers are not new

~1,500 years ago, the inhabitants of the tiny Yap Island in Micronesia lacked resources like gold or silver on which to base their currency. What they did have were Rai stones, donut-shaped discs that could be several feed wide and weigh up to 8,000 lbs (3,500 kg).

Unlike currencies in other parts of the world, the size and weight of Rei stones presented some difficulty when transacting. Imagine wanting to purchase something and having to physically deliver an enormous stone as payment.

So how do you keep track of who owns which stone when they’re placed randomly around the island and the owner never actually physically possesses them?

“As a result, if a Rai were gifted or exchanged, the new owner(s) of a disk may not have lived in close proximity to it. To ensure that ownership was known and indisputable, an oral ledger was used within communities to maintain transparency and security.” —Archaeologist Scott Fitzpatrick of the University of Oregon explains in a new study exploring the similarities.

Every villager knew who owned each stone and the history of that stone. Additionally, when a transaction took place, it was announced to all of the people in the village so that they could each update their mental record.

“Like all breakthroughs, Blockchains are a profoundly new way of doing old things. But there is always something of the old in the new.”

Natalie Smolenski, cultural anthropologist

Because all of the villagers were told, even if one villager was gone fishing or gathering, he would be updated by the other members of the village and could assume with certainty that he was being told the truth because no single record keeper could change the record or make a false claim without everyone else.

Additionally, if a village falsely alleged that a stone belonged to them, the villagers could easily refute the claim by comparing their mental ledgers.


So what does this all have to do with blockchain?

Well, if it looks familiar at all, it’s because in principle, the blockchain performs the same function. 

Blockchain technology, as we know it today, involves a public transaction ledger — called the blockchain — which records all transactions. However, similar to the Rai stones, no actual items are exchanged. 

When a transaction is recorded to a blockchain, an entry is written in the blockchain describing the exchange and the record becomes public knowledge across the network. The entire network now recognizes the recipient as the new owner and only the new owner could initiate a new transaction.

“It is very hard to maintain a mental distributed ledger beyond the confines of a small group of people who know each other well. But Blockchains allow people who don’t know each other at all to quickly agree upon a shared version of truth.” 

— Natalie Smolenski

If one computer on the network crashes, the network will continue to operate. If one computer’s record is hacked and or modified, the rest of the computers on the network will identity the corrupted ledger as just that, corrupt.

Just like the system on Yap Island, the blockchain provides security, redundancy, immutability, fault tolerance, and decentralization.


Is this Bitcoin?

No. As we see it, Bitcoin is the first commercial-grade application deployed at scale using blockchain.

Multiple attempts were made prior to 2008 to create digital currencies. However, the Bitcoin network was made possible by the invention of blockchain technology.

However, Bitcoin is limited to just monetary transactions, whereas blockchain is a record system that can be used to record any asset.


How does blockchain work?

As we just learned, the information on a blockchain can denote anything from the transfer of money, asset ownership, a transaction, someone’s identity, an agreement between two parties, or even how much electricity a lightbulb has used. 

A combination of digital information is called a “block.” The block stores information about these transactions such as the participants, time, data, and type of transaction that took place. Each block has a unique identification code called a “hash.” Think of a hash like a tracking code. It‘s just a way for us to tell blocks apart. 

Similar to multiple villagers coming together to agree that a transaction is valid, adding a transaction to the blockchain ledger requires a confirmation from several servers or computers on the network. Once the agreement, known as a consensus, is reached, the block is stacked on top of the last block, forming a “chain” that can never be disputed, deleted or altered.


Blockchain is not a shared database. Blockchains allow users to create and read only. Distributed ledgers do not allow updating or deleting.


Is this a Shared Database?

No. Blockchain technology stores multiple copies of the ledger on multiple computers. Shared databases store one copy on one shared server. 

Additionally, blockchain’s do not allow users to update or delete records. 

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