Introduction to Blockchain Technology. Tiana Laurence

      1 Introduction to Blockchain Technology

      Blockchain has become an omnipresent term that encompasses a social promise and a new technology. Originally proposed as a solution for Bitcoin’s cryptocurrency record keeping system, blockchains are now used to store the records of all types of applications.

      Blockchain means something more in many people’s minds. The promise many associate with blockchain applications is that they will collapse all centralized systems. Centralized systems are everywhere people need to trust a counterparty and don’t have the resources themselves to do so independently.

      An easy way to identify a place where blockchain technology may be applied is to look for areas where a middleman is needed to facilitate trust. Trust is essential for things such as the transfer of money, voting, land records, IP rights, and identity. Blockchain software can be programmed to take the place of the middleman by becoming the trusted record keeping system.

      In this chapter, you will learn the basics of blockchain software. This includes the vital concepts that govern most blockchains, economic models, and network structures. It will help you lay a strong foundation for understanding how the technology works and what it is capable of doing.

1.1 Key blockchain concepts

      Blockchain technology has come a long way since the initial vision published by Satoshi Nakamoto in the Bitcoin white paper in 2008. Buzz words like “bitcoin”, “blockchain”, and “cryptocurrency” are everywhere. Companies and governments have started to use blockchain technology in earnest and will increasingly do so for the foreseeable future.

      Since its initial conception, blockchain has encompassed both a social promise and new technology. Originally proposed as a solution for Bitcoin’s cryptocurrency record-keeping system, blockchains are now used to store the records of all types of applications.

      Core services you may depend on every day such as the transfer of money, payments, voting, land records, IP rights, and identity all rely on intermediaries. Blockchain software has begun taking the place of these antiquated systems. The software becomes the trusted record-keeping systems, and the rules programed into the software become the intermediaries.

      It is important to note that blockchains can be used for more than just recording the transfer of value between two parties. The primary benefits of cryptographic identity, historical and chronological provenance, and the transparency of the networks complete history work exceptionally well for many industries that require two parties to trust each other.

      Pigeonholing blockchain technology solely for financial transactions is a very limited perspective. Before you can fully grasp the potential applications of blockchains as part of a technology stack, it’s important to understand how the technology works. In the following section you will learn about the key concepts that make blockchain technology revolutionary.

What is a blockchain?

      Blockchain technology structure was first described in the Bitcoin white paper as a peer-to-peer distributed time-stamp server. The author, Satoshi Nakamoto (possibly a fictitious name), wanted to create a peer-to-peer electronic cash system that did not need a network of banks to operate. Satoshi described “blocks” and “chains” as a way of organizing and securing records, such that once entries had been made into a shared database, they could be proved mathematically correct and to have remained unchanged.

      Satoshi’s description of blocks are groups of transactions that have occurred over a period of time. A transaction, in the case of Bitcoin, represents the transfer of some cryptocurrency, known as bitcoin, from one user to another.

      For example, Sally sends you a bitcoin, you receive it, and the transfer of the bitcoin between the two of you is recorded as a “transaction”. Bob, Joe, Mark, and Tammy

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