For a decade, the word Blockchain has been sounding everywhere, with more and more force, but what is it? Well MigraCoin is a venture born directly from the blockchain, so we can help you understand it.
More than a technology, it is an information processing paradigm or a data storage and management structure. We will give you a short, non-technical introduction to the world of blockchain.
Imagine that you are going to save an important document from your company or your family, and you decide to digitize it. If you save it to your hard drive, it’s possible that any technical failure will put the document out of your hands (or any team member or family) until you fix the failure. But how about you make a copy on the other members PC?
If you could connect them in such a way that each modification or change made by someone is immediately collated and verified by others in record time, you would ensure that everyone always had access to the latest version of the document. Also, you would get everyone to agree on its authenticity and its content; everyone has a true and exact copy.
Something similar is what Blockchain does but on a large scale (and with much greater technological and technical complexity). Blockchain can not only store a document, but any kind of record.
But while this sounds a lot like Google Drive or Dropbox, the analogy ends here. Because to start with, Google or Dropbox are centralized systems, and we are going to break that paradigm: blockchain is, first of all, a decentralized information management system.
The name blockchain refers to the scheme or the way in which we will all store the copies of the information and distribute them: we all will have an information package that we have decided to call a block.
What the protocol does next is encrypt the content of that packet with some cryptography technique (Bitcoin uses SHA256, but there are actually many more algorithms). This encryption is important, because it provides security to the information that we introduce within the blocks. The “crypto” part of the name of cryptocurrencies comes from those cryptography techniques that blockchain uses.
Once we have that block encrypted and we all have a copy, we start building a new block with whatever other information we need to share or store on our network. The question is, when do we know a block is finished?
The blockchain algorithm at that point has to decide when the block is ready. That’s when the SHA256 algorithm (or whatever you’ve chosen if you’re building your own blockchain from scratch) is used.
SHA256 requires the resolution of a polynomial operation. It literally poses a mathematical problem to the nodes of the network, and whoever manages to find the solution has the right to close the block.
To solve it, following the SHA256 algorithm, you must try the solutions one by one until you find the correct one. This act of exploring solutions, spending the computing power of our processors, is called mining.
This mathematical problem is not just any problem. The previous block created produces a number at the end, called the Hash. That hash of the previous block is one of the initial conditions to resolve the hash of the block that is currently being built.
In this way, the value of a block depends on the previous one: hence the name “chain” in blockchain.
All nodes use SHA256 (in the case of Bitcoin) to search for the solution. When they get it, they communicate it to the other nodes, and they go on to close the block, the network gives a reward in cryptocurrencies to the node that found the solution (it is the mining reward) and then we proceed to continue building the next block.
If two nodes find it at the same time, something that can happen on more than one occasion, then the network decides that the legitimate block will be the one found on the longest chain. And so we avoid a fork (having two blockchains when there should be only one!)
This algorithm, which mines, gives rewards and decides who has the right to close the block, is called Proof of Work (PoW). It’s simple, the proof of work is the act of calculating the hash of the block to chain it to the blockchain that we already have. But at the same time, this algorithm legitimizes the operations between the nodes.
What are we going to store in these blocks? At the beginning we were very vague about its content, but the truth is that a series of very precise data is saved. We all know that we are not talking about backing up the photos on our computer, but something a bit more sensitive.
In actual practice, what we keep in the blocks of that chain are transaction records. If we transfer an amount of cryptocurrencies from one wallet to another (and we are paying our employee’s payroll with that, for example), the record of that operation is archived within the block, protected by the cryptographic techniques of the blockchain.
Once the block is closed, since all nodes have a copy, it is technically impossible to modify it. Unless someone dedicates himself to attacking all the network nodes at the same time (and good luck trying to find a solution for SHA256 in time!), the operation will be executed and will not be reversible.
There is no central authority to attack. There are hundreds, maybe thousands of nodes, decentralized and asynchronous. We have created the equivalent of a financial and banking system, but without a bank, rather it is legitimized by all members of the community, by nodes and wallet owners. And in addition, eliminating the main problem of banks: security.
Blockchain is then an expression, from the beginning, of the community.