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Most people know that cryptocurrencies such as Bitcoin use blockchain technology, but what exactly is blockchain? If you imagine Bitcoin as a car, then blockchain would be the combustion engine; i.e. blockchain is the underlying technology that drives the system.
You could think of blockchain as a database which records a single, trusted version of the digital history. We call this “database” a digital ledger. It’s important to have one version since it means data can’t be manipulated by bad actors for nefarious means. Blockchain allows digital data to be distributed but not copied or changed.
Every single person on the network has access to the ledger and can see all the transactions. This means there is no centralized copy that can be tampered with. All the data stored on the blockchain is also encrypted so while you can see the ledger, it’ll look like a bunch of numbers and letters rather than “John Smith spent 10 Bitcoin on 6 Tonnes of Saffron”.
The History of Blockchain
In 1991, W. Scott Stornetta and his colleague Stuart Haber published a paper that detailed how a digital hierarchy called a “block chain” could be used for digital time stamps for ordering transactions. The 1991 paper was titled “How to Time-Stamp a Digital Document.” The paper described how a client could send a document to a timestamping server, and this server would assign a timestamp. The server would also link the document to the previous document. The documents were connected through specific data and not the location of the document. This means that the data would become invalid if it was tampered with.
Stornetta and Haber went on to co-author a number of papers that were important in the field of cryptography. Because of this, Stornetta is often called the inventor, co-inventor, or founding father of blockchain.
It wasn’t until 2008 that blockchain technology would reach its full potential with the invention of Bitcoin. In 2008, Bitcoin’s presumed creator Satoshi Nakamoto published a whitepaper that described the use of blockchain technology in a peer to peer digital currency system in which the “double spending” problem would be solved. It’s not possible for double spending to happen on a blockchain when it is functioning correctly since the data is immutable.
Since Bitcoin, lots of other blockchain-based cryptocurrencies have popped up with the aim to expand and improve on Bitcoin’s technology. Around 2014, the focus shifted to look at other uses of blockchain other than cryptocurrency. Some countries are now looking into blockchain-based voting, blockchain-based medical records and so on.