April 25, 2023

What the heck is... Blockchain?

What the heck is... Blockchain?

For every Web3 developer building the next world-changing app, there's a marketer or communications professional working alongside them to make sure that the world-changing app not only makes it out into the world but is also understood by the world. Ask any non-technical professional in this field what the most challenging part of their job is and you’ll often hear, “Understanding what the heck has got our developers so excited.”In this fast moving industry, keeping your knowledge up to date is at a premium & it’s not uncommon to leave a conversation feeling like you knew less than what you thought going in. To help you understand what the heck your passionate crypto friends are talking about, we're launching this series of short articles to explain common Web3 concepts in simple & clear language.

Today, we're tackling blockchains.

What is a blockchain?

At its core, blockchain is a technology that enables the secure sharing of information. Data, of course, is stored in a database. Transactions are recorded in an account book called a ledger. A blockchain is a type of *distributed* database or ledger which means the power to update a blockchain is distributed between the nodes, or participants, of a public or private computer network. This is known as *distributed ledger technology*, or DLT. This means that, unlike a traditional database that is typically managed by a single entity, a blockchain is maintained by a network of participants who work together to validate and store data in blocks. In a public blockchain network, the first node to credibly prove the legitimacy of a transaction receives an economic incentive for doing so. How these incentives are determined is based on whether a blockchain is classified as a Proof of Work (PoW) or Proof of Stake (PoS) network (more on this later). A blockchain has three central attributes:

- First, it must be cryptographically secure. This means that in order to access or add data to the database, you need two cryptographic keys: a public key, which is the address in the database, and the private key, which is a personal key that must be authenticated by the network.

- Second, a blockchain is a digital log or database of transactions, meaning it happens fully online.

- Third, a blockchain is a database that is shared across a public or private network. The Bitcoin blockchain and Ethereum blockchains are well-known examples of a public blockchain network, where anyone can open a wallet or become a node on the network.

Conceptualized version of a block in a blockchain.

How does a blockchain work?

When data on a blockchain is accessed or altered, the record is stored in a “block” alongside the records of other transactions. These blocks of encrypted data are permanently “chained” to one another, creating a perfect audit history that allows visibility into past versions of the blockchain. When new data is added to the network, the majority of nodes must verify and confirm its legitimacy, and when a consensus is reached, a new block is created and attached to the chain.The network nodes who maintain the blockchain are responsible for validating and storing the data. In a PoS system, the network participants who hold the most tokens (or "stake") in the network have a greater probability to validate transactions and earn rewards.Unlike proof of work (PoW) systems, where miners compete to solve complex mathematical problems in order to validate transactions and earn rewards, in a PoS system, the probability of a node being chosen to validate a new block of transactions is proportional to the amount of stake it holds. This means that the more stake a node holds, the more likely it is to be chosen to validate a new block.In order to participate in the validation process, a node must first lock up a certain amount of its stake as collateral. This is to prevent malicious behaviour, such as double spending or withholding valid transactions. Once the node has been chosen to validate a new block, it will receive a reward proportional to the amount of stake it has locked up.

Overall, PoS systems are designed to be more energy-efficient and scalable than PoW systems, as they do not require miners to compete to solve complex mathematical problems in order to validate transactions.Each block in a blockchain contains a number of transactions, and once a block is full, it is added to the chain of blocks, creating a complete record of all the transactions that have occurred on the network. If a transaction record includes an error, a new transaction must be added to the blockchain to correct the error, and both transactions remain visible.

“Blockchain technology empowers individuals and businesses alike by providing a decentralized, secure, and transparent digital infrastructure that fosters trust, innovation, and inclusivity.”

Artist rendition of a blockchain network.

What are the benefits of blockchain technology?

While there could be a whole article written on the benefits of blockchain technology, here are the key advantages:

1. Decentralization: A blockchain is a decentralized system, which means that it is not controlled by a single authority or organization. This makes it resistant to tampering or censorship, as any changes to the blockchain must be agreed upon by the majority of the network participants.

2. Security: Blockchain technology uses cryptography to secure the data stored on the network. This makes it extremely difficult for hackers to access or alter the data on the blockchain.

3. Transparency: Because all transactions on a blockchain are recorded and made publicly available, it is possible to track and verify the history of any asset or piece of information on the network.

4. Immutability: Once data has been added to the blockchain, it cannot be altered or deleted. This ensures the integrity and reliability of the data on the network.

5. Efficiency: By eliminating the need for intermediaries, such as banks or other financial institutions, blockchain technology can greatly reduce transaction costs and improve the speed and efficiency of transactions.

6. Inclusivity: Because anyone with an internet connection can participate in a blockchain network, it has the potential to increase financial inclusion and provide access to financial services to individuals and communities who may not have had access before.

Blockchain and Litentry: A Real World Example

Traditional blockchain systems offer transparency, but transactions can be traced back to individual addresses. While these addresses are pseudonymous, it's possible to link them to real-world identities through sufficient analysis, raising concerns about privacy, potential misuse of personal data, and exposure of sensitive information. Litentrv's IdentityHub addresses these concerns by providing a decentralized, secure, and privacy focused way to manage digital identity, built on the blockchain. Users can link multiple accounts from various platforms to the IdentityHub, enabling them to access different services and applications without sharing their personal information with each individual provider.

Operating on a decentralized network, Litentry leverages Polkadot blockchain technology to facilitate secure sharing of identity data between different applications and platforms. Once their accounts are linked, users can see their unified, composable, and verifiable digital identity on the IdentityHub, which can be used to access various services and applications without revealing the source accounts forming the identity - sharing only the necessary information for the interaction with verifiable credentials.

Using Litentry's IdentityHub, users can maintain control over their digital identities and easily grant or revoke access to their data as needed. This not only streamlines the user experience but also bolsters security and privacy, as users no longer need to share and keep track of all of the data they share with multiple providers Moreover, Litentry's blockchain-based infrastructure, combined with its Trusted Execution Environment (TEE) architecture, ensures user data remains secure, transparent, and immutable. This guarantees that users" digital identities are protected, and their data won't be tampered with or misused by malicious actors

By leveraging the cutting-edge power of blockchain technology. Litentry pioneers a secure and privacy-focused ecosystem that enables users to confidently and effortlessly manage their digital identities. Get ready to embrace the future of privacy-focused digital identity management with Litentry!

To get a first-hand look at the IdentityHub, sign up for early access now!