Blockchain without the jargon
A blockchain is a ledger that many people keep at the same time. Anyone who changes something in it afterwards is spotted straight away.
Learning objective: After this lesson you can explain in your own words what a blockchain is and why entries in it can't be changed unnoticed.
Think of a village where everyone keeps an identical notebook. Every payment is called out loud, and everyone writes it down. If someone later forges a page in their notebook, it shows, because hundreds of other notebooks say something different.
Blocks and Fingerprints
A blockchain works the same way, only with computers. Entries are collected in blocks, and each block contains a kind of fingerprint of the previous one. If someone changes an old entry, the fingerprint changes and the whole chain after it no longer fits.
Who Adds the Next Block
So that not everyone writes at once, there's a rule about who may add the next block. With Bitcoin that takes a huge amount of computing work. In other systems you have to deposit your own money as a pledge and lose it if you cheat.
Security Through Openness
So the security comes from openness. Everyone sees everything, which is why cheating shows. But there's one thing a blockchain can't do: check whether what was entered is true in the real world.
The fingerprint is called a hash. A hash function turns any data into a string of fixed length. Change even one letter in the data and a completely different string comes out, and you can't work backwards from it. Because each block contains the hash of the previous one, a forger would have to recalculate every following block after a change.
Proof of Work
With proof of work, the work is finding a block whose hash is below a certain limit. That's only possible by trial and error, billions of times per second. Whether someone has found the solution, on the other hand, can be checked in an instant. Anyone wanting to forge the chain would therefore need more computing power than the rest of the network combined. With proof of stake, deposited money replaces the computing work. Anyone proven to cheat loses their pledge.
The Oracle Problem
An important limit is called the oracle problem. The blockchain guarantees that its entries fit together and haven't been altered. It doesn't know whether they're true. If someone records that they own a plot of land, the entry is tamper proof, but that doesn't make it correct. Any application meant to reflect something in the real world therefore needs a trustworthy source for its data. The trust problem isn't solved then. It just sits somewhere else.
Summary
- Each block carries the fingerprint of the previous one, so every change shows.
- The security comes from everyone seeing everything.
- The chain guarantees nothing was altered, not that it's true.
Did you get it?
Why can't an old entry be changed unnoticed?
Because each block contains the hash of the previous one. A change would make every following block invalid.
What's the difference between proof of work and proof of stake?
In one, computing work secures the chain, in the other, deposited money that you lose if you cheat.
What is the oracle problem?
A blockchain can make sure its entries weren't altered, but it can't check whether they match reality.
Check your understanding
Your task
Explain to a friend in three sentences why an entry in the middle of a blockchain cannot be changed unnoticed. You can use the image of the village with identical notebooks or find your own. Also write down what the blockchain cannot verify.
Sources and further reading
- Satoshi Nakamoto's original whitepaper, describing proof of work and the chaining of blocks via hash values. View source ↗