The first mention of blockchain technology was in 1991 by research scientists Stuart Haber and W. Scott Stornettasd. The purpose was to timestamp digital documents so that they couldn't be tampered with or changed unethically. The first actual big use of Blockchain technology was by an anonymous person named Satoshi Nakamoto, a person who went on to create the Bitcoin protocol using the same technology. Blockchain is like a ledger. A bank also has a ledger with all the history of the payments done and received. Blockchain is something like the ledger that banks have and has wide-ranging applications. What proves a person has received a certain amount in his bank account? It is the ledger that provides data that XYZ person received the XYZ amount. Satoshi Nakamoto wanted to build a decentralized banking system, where the ledger wasn't maintained by banks but the common people. The objective was to make anonymous transactions and remove the role of central banks from the digital banking system. The first attempt to build a decentralized banking system was done by a .com company E-Gold. They wanted to create an encrypted anonymous digital currency that was based on a fixed supply of 71 million dollars worth of gold. E-gold was the precursor to bitcoin, and it took off. By 2006, with just 71 million dollars in circulation, E-Gold was processing more than 2 billion dollars worth of transactions. E-gold was used to make anonymous payments by criminals, and drug cartels. So the government began cracking down on E-gold and within a few years, it was non-existent. Here E-Gold was a corporation that was bound by laws and could be targeted. E-Gold was the company maintaining the ledger, and aiding transactions. So Satoshi Nakamoto had to find another way to build a decentralized banking system. So bitcoin was made as a protocol and not as a corporate company that could be targeted and shut down. And the ledger now had to be maintained by someone else, and it had to be safe. The answer to this question was a Blockchain network. The founder of bitcoin also chose to go anonymous by the name Satoshi Nakamoto. Bitcoin was born with no corporate form because it would create a lot of loopholes and links with the government, and with no founder.
What makes a blockchain network self-sustainable?
A blockchain is a distributed ledger that is completely open to anyone, and once data is recorded in it, it is nearly impossible to change what has been recorded. As the name suggests a blockchain is a series of interlinked blocks. Each block contains 3 elements- data, a hash of the block, and a hash of the previous block. Once a block is filled subsequent blocks are built. In something like Bitcoin, the data in each block would be something like XYZ transferred X amount to ABC person. Except that people's names aren't used but bitcoin wallet addresses are used which is a combination of letters and numbers. So if a person is able to tamper with the data in the blockchain he can steal money from every other person who has bitcoin. All he has to do is add new data that says people transferred money to his wallet, and all the money would be his, but this is not possible for a few reasons.
The Hash in the blockchain is something like an address. We could compare it to a fingerprint too. They are a combination of letters and numbers. When the data inside a block changes the hash key changes. A blockchain is made of thousands of interlinked blocks containing the hash of the previous block. Except for the first block, all other blocks have the hash of the previous block. The first block is called the Genesis Block. A certain set of data can generate only one unique hash. So if the data in a block is tampered with, then the hash of the block changes, and if the hash of the block changes, subsequent blocks built using the hash of the previous block will render invalid, because the hash has changed, but the subsequent block has a different hash in the place of PREVIOUS BLOCK'S HASH. So it is something like "error 404 URL not found". Each blocks points at the previous block using the previous block's hash, but if the previous block's hash is changed it no longer can point at it, so there is a breakage in the link, and the chain breaks. So a change made in one block will make all following blocks invalid.
This is how blockchains prevent data from being tampered with. But this is not enough. .. Today's computers are fast enough to make a change in one block, calculate the hundreds and thousands of hashes of the subsequent blocks, and make changes to all of the blocks following it and make the edited block valid again. So to prevent supercomputers from exploiting this there is something called as proof of work mechanism. This mechanism slows down the creation of new blocks. In the case of Bitcoin, it takes about 10 minutes to 20 mins to make a new block. A proof of work is a mechanism in which a person needs to solve a complex cryptographic calculation in order to make a change in the block or to create a new block. These calculations can be done by powerful computers. To solve the equation or the problem the computers start guessing the answers. Bigger computers have bigger guessing power or in other words guessings per second. Once he(hacker trying to tamper with the data) finds the answer to the problem/successfully solves the equation he is allowed to make a change in the block. But then he will have to edit all the subsequent blocks too in the same way. He/ she has to perform various complex calculations for each change he has to make. And with Bitcoin, the problems/calculations become more and more complex as the number of blocks increases. in other words, the more changes are made, his computers will have to solve more and more compex problems to make subsequent changes in the subsequent blocks that have become invalid due to the previous change. So the proof of work mechanism consumes time and energy in the form of electricity consumed by the supercomputers. For each block, it is going to take 10 to 20 mins, and then he will have to change hundreds and thousands of subsequent blocks. Currently, bitcoin has about 18 million blocks, so if he makes a change in the 10 millionth block, he has to make changes accordingly in about 8 million subsequent blocks. And each change is going to take 10 mins. He would probably be dead by the time all the changes are made.
But what if he makes a change in the most recent block(the 18 millionth block in the case of bitcoin), by this, he will not have to make any changes in the subsequent blocks as there are no subsequent blocks. To prevent this, blockchain incorporates democratic ideals too. A blockchain is distributed all around the network, and everyone is allowed to join the network. Each member of the network will have one copy of the blockchain, so when a change is made in one blockchain, it has to be replicated in other nodes too. When a block has to be added or a change has to be made, each node verifies the data in the block and checks if everything is in order. When a new block is created, the block is sent to everyone on the network, then each node(member) verifies if the data has not been tampered with and then agrees to add it to their own copy of the blockchain. Here all the members or nodes in the network create a consensus to add the block. To create a block, the majority of the members in the network have to agree to the change being made in the blockchain. So if a hacker wants to tamper the data in a blockchain network, he first has to make a change in a block, recalculate hashes of subsequent blocks, make changes accordingly in all the following blocks, and then achieve a majority in the network and make the same change with every other copy of the blockchain network on the planet. Achieving a 51% majority in the network is again impossible. So he just can't make a change on one blockchain and hack it successfully, he has to hack one blockchain which takes years because of the proof of work mechanism which delays the rate at which changes are made, and then he has to do the same with every other blockchain copy on the entire internet. This is what makes the blockchain system decentralized and safe. We will delve deeper into the proof of mechanism and different types of blockchain networks that exist today in my following articles.