Blockchain: How it Basically Works
As part of Integritee's efforts to publish a series of articles explaining the essence and mechanism of blockchain technology, this article will explain the basic concepts, including its main characteristics.
A blockchain is a digital aggregate of continuously connected blocks that serves as a ledger for recording information.
Blockchain differs from traditional paper ledgers and Excel sheets in several significant ways.
One of the first and best-known use cases for blockchain technology is cryptocurrency. But why has it become so popular and why have so many institutions and companies adopted it?
Let's take a look at the main characteristics of blockchain
Immutability - Information stored in a blockchain cannot be changed by anyone.
It is something that cannot be edited or deleted. Records on the blockchain are permanently immutable and, unlike traditional ledgers, no one can alter the information.
Transparency - The information can be accessed by anyone with access to the network, providing complete transparency.
Decentralized - Blockchains are decentralized by design because they are accessed and managed by distributed network participants. In other words, the blockchain is not controlled or managed by any one individual or entity.
Because most traditional systems are centralized, information (transaction records) are usually managed and controlled by a single entity. This means that users have absolutely no power over it.
Security - When you look at transactions on a blockchain, there is only a line with all letters and numbers mixed together.
In cryptography, this is called a hash, which consists of a unique ID number and is almost impossible to tamper with. Each transaction has its own unique hash.
Consensus-dependent - To process a transaction on the blockchain and create a new block, consensus is required from the network. Different projects use different consensus protocols, such as proof-of-stake and proof-of-work ; PoW is a mechanism that relies on different nodes communicating with each other and reaching consensus through an algorithm.
In this case, they do not need to trust each other to agree on the information provided; it is only the algorithm that must be trusted; PoS is a stake-based mechanism where the owner of the cryptocurrency is responsible for verifying block transactions by staking tokens.
Efficient - When considering broader areas such as logistics, supply chain, and medical aid, all existing time-consuming processes and hierarchical approvals are automated and eliminated from the process.
It also becomes faster and more efficient as information is consolidated into a centralized ledger.
All of these features work together to create a powerful solution. Blockchain, as a protocol layer and technology, will be integral to many future solutions.
The concept of the blockchain was first introduced by scientists Stuart Haber and Scott Stornetta in the early 1990s and described as a chain of blocks protected by cryptography. However, it was not until Bitcoin in 2009 that it was put into practical use.
In theory, almost anything is possible with the blockchain, and some of its ideas have already been put into practice. From decentralized transactions to medical assistance, the blockchain has countless uses.
The Beauty of Transparency
To understand the ripple effects of blockchain, it is important to grasp the concept of auditability. To audit is to make sure that something is working correctly the way it should. Auditing is usually done by an outsider. So what if every member of the network can verify (audit) the data transactions of the network in question?
This is what is happening as a fundamental feature in blockchain. Depending on the underlying protocol and security logic, the blockchain is inherently auditable and verifiable, eliminating the need to trust a higher power such as an institution or corporation.
Verifiable Privacy
A mechanism that allows users to verify that their data is being managed and stored as promised is very important. But what about confidentiality? There is currently a lot of demand for this aspect as well. Companies need access to their customers' and trading partners' data, but privacy must still be respected, and Integritee does exactly that, enabling access and insight into critical data without compromising confidentiality.
Integritee's solution combines the trust of blockchain technology (trusted public state by default), the confidentiality of Trusted Execution Environments (TEE) which ensures proper storage and management of sensitive data, and the sidechain Integritee can explore critical data in a variety of use cases, providing the convenience that blockchain creates without compromising the integrity and security of sensitive information.