What is a blockchain?

Apr 28, 2024 1:13:57 AM

It is not easy to define the term blockchain and we will certainly find different definitions in the literature, all of them encompassing as many characteristics as possible. A definition that we believe to be among the most accurate ones can be stated as follows.

Blockchain is a ledger distributed in a peer-to-peer environment, updated by some consensus mechanism, which eventually allows the execution of smart contracts.

For those who are just entering the blockchain and the cryptocurrency ecosystem, it is possible that the above explanation has caused more confusion than clarification. Ledger? Peer-to-peer? Consensus mechanism? Smart contracts? At the moment, these are terms that can have an enigmatic meaning. The purpose of this module is to clarify each of these terms.

The Blockchain

The idea of a blockchain was introduced in 1991 by two scientists, Stuart Haber and W. Scott Stornetta, with the aim of being able to confidently establish the timestamp of a document, without the need of a certification authority. In an increasingly digital world, how to certify that a certain document, audio or video, was created on a certain date? That was the problem Haber and Stonnetta tried to solve.

The term blockchain, however, only became popular 18 years later, due to the emergence of Bitcoin. Proposed by a person under the pseudonym of Satoshi Nakamoto, Bitcoin was the first digital currency to solve problems that once seemed insurmountable, such as the double spending problem, in which a user can spend twice as much as they are entitled to.

Note that the problem of double spending is related to the problem that Haber and Stornetta set out to solve, which is to create a kind of unique certificate for a given document, without the existence of a certifying authority. Once it is possible to certify the origin and uniqueness of a document, it cannot be duplicated and therefore cannot be spent twice.

The multiple meanings of the term blockchain

It is customary to use the term blockchain to name different objects. There’s blockchain as the ledger, for example, and there’s blockchain as the technology behind the cryptocurrencies. There is still the possibility that we use the term blockchain to refer to a peer-to-peer network of computers, or a protocol.

We can say blockchain meaning the ledger, which is the ledger of transactions, or blockchain as the protocol behind networks such as Bitcoin or Ethereum.

The name Bitcoin itself also has multiple uses. We can use Bitcoin to denote the network of computers that hold the digital currency, or bitcoin to denote the currency itself. To alleviate this problem, it is customary to use bitcoin in lowercase to designate the currency and Bitcoin in uppercase to designate the network or protocol.

Unfortunately, the same cannot be done with the term blockchain. But don’t worry, by the end of this course it will be clear to you what we are referring to when we use the term blockchain. For that, we must better understand what a blockchain is.