What is Blockchain?

When people first come across blockchain, they often ask, "What exactly is blockchain?" For those new to the concept, it can seem quite complex and intimidating. To make blockchain more accessible, let's start with a simple example that highlights its fundamental principles.


What is Blockchain? A Card Game Example


Imagine you and your friends love playing a card game together. Instead of relying on one person to keep track of the scores, you all decide to write down every move in your own notebooks. Each time someone makes a move, everyone records it simultaneously. This way, if anyone tries to cheat and change the scores, it won't match what everyone else has written down, and you'll immediately know something's off.


This simple example highlights several key points of Blockchain.


1.Digital Ledger

  • Think of blockchain as a digital notebook where every move in the card game is recorded. This notebook is shared and maintained by everyone playing the game.


2.Blocks:

  • Each round of the card game is like a "block" that records all the moves made during that round. Once the round is over, it's added to a sequence of previous rounds, creating a chain of rounds – hence the name "blockchain."
  • Each block contains three main components:
  1. Header: Contains metadata about the block.
  2. Set of Transactions: Records all the moves made during the round.
  3. Hash Pointer to the Previous Block: Links the current block to the previous one, ensuring the chain’s continuity.


3.Decentralization

  • Instead of one player keeping the score, everyone in the game has their own identical copy of the scorebook. This means no single player can cheat or change the scores without everyone else noticing.


4.Security

  • Each round (block) has a unique identifier and includes a link to the previous round. This chaining makes it nearly impossible to alter any round without changing all subsequent rounds, which would alert everyone.


5.Transparency and Trust

  • Since everyone has the same scorebook, everyone can see and verify the moves. This builds trust because it's hard for anyone to lie about what moves were made.


How Blockchain works?


Step1: Making a Move

  • When you play a card, this move is recorded in the current round’s block.


Step2: Verification:

  • Everyone’s notebooks (nodes) must agree on the validity of the moves. Imagine everyone quickly checking if the move follows the game rules.


Step3: Adding to the Chain:

  • Once everyone agrees the moves are valid (reaching consensus), the round is completed and added to the chain of previous rounds in everyone’s notebook.


Step4: Immutable Record:

  • Once a round is added, it can't be changed. If someone tries to alter a previous round, it would change that round’s identifier and break the chain, signaling a cheating attempt.


Summary


Using our card game example, we've gained a basic understanding of how blockchain works. Here are the key characteristics:


Immutability:

Once recorded, data cannot be changed, ensuring a permanent and tamper-proof record.

Decentralization:

Data is distributed across multiple nodes, removing the need for a central authority.

Security:

Advanced cryptographic techniques protect the data, making it highly secure.

Transparency:

All participants can view and verify transactions, promoting trust.

Consensus:

Players must agree on the validity of each move, just as blockchain nodes reach consensus on transactions.


Basic Technical Concepts of Blockchain


1.Hash

  • A blockchain hash is like a digital fingerprint for a block of data. Created through a cryptographic function, it processes the block's information and generates a unique string of characters. This unique identifier ensures that any alteration in the block’s data will result in a completely different hash, making tampering obvious. Hashes are crucial for linking blocks together in the blockchain, ensuring data integrity and security.


2.Decentralization

  • Traditional databases store data on centralized servers, making them vulnerable to attacks and failures. In contrast, blockchain data is distributed across millions of nodes (computers) in a network. Each node has a complete copy of the blockchain, ensuring no single point of failure exists. These nodes continuously sync and validate new transactions, maintaining the blockchain's integrity. Because each node has a full copy of the blockchain ledger, they can independently verify the authenticity of each transaction.


3.Consensus Mechanism

  • Consensus mechanisms ensure that all nodes agree on the state of the blockchain and maintain the network's security and integrity.
  1. Proof of Work (PoW): Miners solve complex mathematical puzzles to validate transactions and add them to the blockchain. The first miner to solve the puzzle adds the block to the blockchain and receives a reward. Example: Bitcoin.
  2. Proof of Stake (PoS): Validators are chosen to create new blocks based on the number of coins they hold and are willing to "stake" as collateral. This reduces the need for extensive computational power. Example: Ethereum.


Applications of Blockchain


1.Blockchain in Healthcare


  • Healthcare Supply Chain Transparency: Blockchain can provide end-to-end tracking of each package from the point of origin, including manufacturers, wholesalers, transporters, and more. By using blockchain, companies and consumers can verify the authenticity of medicines, check expiry dates, and access other critical information throughout the prescription drug supply chain.
  1. Process:     
  2. Manufacturer: Every drug is marked with a unique code, and the data is stored on the blockchain.
  3. Wholesaler: The origin of the drug is verified, and the transaction is added to the blockchain.
  4. Pharmacist: The pharmacist verifies the drug, and the transaction is added to the blockchain.
  5. Patient: The patient verifies the origin of the drug, and the transaction is added to the blockchain.


2.Blockchain in Finance

  • Blockchain acts as a public ledger that tracks the origin, movement, and transfer of valuable assets. Unlike traditional systems that rely on a central authority, such as banks, blockchain requires consensus from all participating nodes to validate a payment or transfer. This decentralized ledger technology is particularly appealing to the financial sector as it addresses key issues of security and efficiency currently faced by the industry.


If you want to learn more about blockchain and see its potential in gaming, come join The Confluence Discord. We are one of the largest blockchain communities and would love to hear your thoughts about blockchain. Plus, you can experience the application of blockchain in gaming firsthand.