You're probably like me. You were at a dinner with friends and someone asked you about blockchain and what's the purpose of it. You just blanked completely and spouted off some nonsense about value ownership and walled gardens and the Federal Reserve. By the time you were done, noone ever respected your opinion again.
Wait, this didn't happen to you?
Well... it could! There's so much hype around blockchain and often not a lot of clear explanation about what makes it a foundational technology in the next phase of internet. Which is why we want to provide a thorough explanation of the value of blockchains, beyond cryptocurrency.
What do I get out of a blockchain that I don't get from a database? Why is this important?Let's dive in.
Blockchains provide a durable source of truth
Data on the blockchain is a public record that is tamper-proof and will be around as long as the blockchain network is still running.
To understand this, we need to understand what a blockchain is.
A blockchain network, also called a distributed ledger, is a network of computers that are constantly figuring out how to agree on the state of the world. This state is the "truth" we're talking about. It could be a list of account balances for example. Under the hood, the blockchain network is negotiating agreement on a particular data structure. This data structure is a blockchain.
The blockchain is a (gasp) chain of blocks. Each block is an ordered collection of transactions that modify the state of the world in some way. For example, a transaction could move Bitcoin from account A to account B, thus modifying account balances.
The negotiation procedure is called a consensus mechanism. When you write a transaction, you talk to a single computer on the network. It then needs to broadcast this transaction to the rest of the network. The network needs to decide on which of these transactions to include. Whatever mechanism gets used (proof of work and proof of stake being two examples,) a single computer is given the power to decide what transactions are included in the next block.
Once this is decided, the block is written to the blockchain. Each block is cryptographically secured by a hash that not only includes the data in the current block, but also the hash of the previous block.
This means that the older a transaction is, the more difficult it will be to change that data. You not only need to modify the block that the transaction happened on, but EVERY subsequent block after that.
So your data ages like wine. The older it becomes, the more durable and secure it is.This is in stark contrast to a database, where there is a central authority that can make arbitrary changes to the data no matter how old it is.
How to store permanent data when organizations are not permanent
There are times when two parties that don't quite trust each other need to coordinate on something. For example, a landlord and a tenant need to coordinate on a rental agreement. Or a carrier and shippers need to coordinate on a bill of lading.The web2 solution to this problem is to use a third party to coordinate. Docusign, for example, is a company that is this third party. As a landlord, I'll create a Docusign document for my tenant to sign. All this is stored on Docusign. This is far preferable to the non-digital case, where we create two easily falsifiable carbon copies of the agreement, but this still depends on the integrity of Docusign as an organization.If Docusign goes bankrupt, what happens to my data? If Docusign has a security breach, can I trust my data? Organizational entropy is a fact of life. Nothing is permanent
This was the reason why we built Dedoco. Large enterprises wanted to have control of their actual documents, but they wanted a third party as an intermediary to coordinate and store just the signatures. The insight here is to segregate the data into what that needs to be durable and what doesn't.The blockchain serves as the shared truth backbone that stores the data that needs to be durable.
The goal is that any one party is able to prove something (like a signature) with a combination of their private information and the shared information on the blockchain.For example, if I have a document pdf, and the hash of the document pdf on the blockchain, I can verify that this document was registered at a particular time on the blockchain.
This is why we're building the Trust Engine, an API for data-focused blockchain applications. We're focused on easing the challenges of interacting with the blockchain.Stay tuned for more blog posts.