What really is a blockchain? In my journey to understand how fintech can enable a circular economy I came across this term often. If you do a google search or even ask ChatGPT, you will find lots of explanations of what a blockchain is.
Some things become apparent very quickly:
A blockchain is secure because it cannot be tampered with - but why?
A blockchain is decentralized and therefore better than a centralized system - but how?
A blockchain uses an intermediary to validate transactions - but then how is it different than a normal intermediary like a bank?
For every “situation” or “example” I encountered, I would find asking myself “but I can solve that without using a blockchain”. So here is my attempt to frame blockchain in a way that I can explain to my peers.
We have all learnt about Linked Lists in Computer Science Class. A linked list contains a sequence (chain) of nodes and each node points to the previous or the next node in the sequence. A node holds data or anything of value. In our CS class we learn about manipulating the linked list by operations such as insert, update or remove. So in a normal linked list structure we can:
Add or insert a new node
Change the node positions, i.e. changing the positions of the nodes in the list
Update the data in the node
Remove a node from the list
However, what if there was a “special” kind of linked list with four variances from a normal linked list:
Only allow insert operations - meaning that we can no longer remove any nodes or change the positions of the nodes in the list. In this specialized list, we can only insert nodes to the end of the list.
Each node in the list must at least have a unique key (alphanumeric characters) that identifies the node in the list.
Instead of holding a reference to the next node or the previous node, each node stores the unique key of the previous node
Each node in the list also maintains a copy of the entire list
So now we have a list of nodes with each node having a unique key and then also keeping the unique for the previous node in the list as well as maintaining copy of this sequence.
Now replace the word “list” with chain, the word node with “block” and the word “unique key” with “hash” i.e. we have a chain of blocks with each block having a unique hash! And that in a nutshell is a blockchain.
A blockchain is a special kind of linked list that only supports insert operations to introduce new blocks (nodes) in the list. Each block has a unique hash (key) and also stores the hash for the previous block in the chain. Each block also maintains a copy of the chain.
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