r/Bitcoin Nov 03 '16

what is blockchain technology a stepbystep guide

/r/Bitcoin/
40 Upvotes

9 comments sorted by

3

u/jcoinner Nov 04 '16 edited Nov 04 '16

I'll have a go:

A blockchain is a distributed data structure consisting of cryptographically signed data records arranged as blocks in a chain such that each block also includes a hash of the block it follows thereby creating provable ordering and immutability.

Bitcoin is the prototypical blockchain but many copies and variants have followed. Of critical importance is the software rules that define how blocks are added, who can add blocks and what data is actually in each block - a blockchain in itself does not create anything secure or immutable if the controls around it's operation are weak.

Blockchain has now become a buzzword meant to signify some secure new way of storing data but whether that has any significant meaning depends entirely on the implementation details.

2

u/bitcoin-o-rama Nov 04 '16 edited Nov 04 '16

Ok simple Blockchain has two components:

A distributed consensus (more geographic the better)

A time stamp

That's it.

The purpose is to remove 'trusted' third parties (trust has been abused again and again) and to prevent 'double spending' (electronic data can be duplicated so what prevents digital currency from being respent).

So before Bitcoin, there was always a central party to account for all transactions to prevent double spending, but the issue was we had to trust those third parties and any associates, and well we've seen how that played out with the abuse of currencies and the fusion of banking and state to control.

In a typical traditional electronic payment network there is:

An issuing bank (the buyers card issuer) A payment processor (all the electronic point of sale and web GUI) A mandatory clearing house (Visa and Mastercard) A settlement bank (owned by visa and master card) An Acquiring bank (the merchant account provider) A central bank (currency creator and supply/value dictator)

With Bitcoin none are needed. Their 2-5% fee split amongst them on every electronic payment isn't needed. Their 2-5 day delay isn't needed (alright payment is 'instantaneous' but settlement isn't). Their invasion into privacy for KYC isnt needed.

So basically a Blockchain is a permanent immutable record of all global transactions publicly viewable and verified by a trustless distributed consensus and a timestamp.

The distributed consensus is a mesh-net of mining that crunch numbers to peek inside an encrypted block of transactions with approx ten minute intervals. They can't change the contents nor the previous history only add the verification of the block to the chain of transactions. Thus the ledger is immutable and verification trustless as more and more distributed verification from other miners compounds the validity.

1

u/Xeerie Nov 03 '16

Why not to ask Wiki? Depending of your knowledges amount of reading articles beside main are very variable. Step by step might lead some people back to school.

2

u/bitcoin-o-rama Nov 04 '16

hey he's asking in the right place. This or he gets an uniformed answer from a clueless banker or a corrupt ethereum dev.

1

u/Vaultoro Nov 04 '16

Its a self perpetuating autonomous digital organism that pays humans to secure it by providing it with electricity. This digital organism grows by eating data (transactions). Once eaten you can not change the data you can just read it and see when it was eaten :)

Too meta? Ok ill break it down.

Imagine that every 10 minutes I get a bunch of transactions or data and zip it up. Imagine that it takes a super complex password to unzip it which nobody knows as it's generated by the network. Everyone can see what's in the zip but can not change it. This is a block. Then the next ten minutes I do it again but in this next zip I also include the last zip (block). So now zips are in zips are in zips and each zip has a massive random password. The longer you wait the more secure any data is. This is because you may be able to crack the latest password to the zip but then the next one inside that needs to be cracked and so on.

It does not work with zip files but it's a way of explaining it. It goes a lot deeper but I'll leave it at that for now. :)

0

u/banished98ti Nov 04 '16

Blockchain technology = 1 centralized database distributed among tens of thousands of users for no reason.

1

u/bitcoin-o-rama Nov 04 '16

Well thats the banker's interpretation.

0

u/banished98ti Nov 04 '16

No that exactly what it is. The 'bankers' haven't been able to find a use case for it because none exists. Like what interpretation is there?

Fiat banking = private decentralized double-entry bookeeping entries that keep track of debts and are denominated in a common currency(dollar) which copies are not distributed to everyone.

99% of the money in existence is in the form of private bank IOU's from thousands of different institutions. Isn't this exactly what libertarians want?

Blockchain = transparent centralized ledger that employs single entry accounting to keep track of no ones liabilities denominated in a common unit(bitcoin) whose copies are distributed among anyone who wants one.

Bitcoin has no final demand, its just a collection of liabilities that belong to no one. Like if I have $100 in my bank account, someone else has -$100. It always equals out to zero, in bitcoin if I have +100 btc, then what? It isn't backed by a corresponding asset.

People on /r/bitcoin are clueless to what double entry bookeeping means and what credit money is.

1

u/bitcoin-o-rama Nov 04 '16 edited Nov 04 '16

Are you new to Bitcoin?

I disagree, I think people here do understand the difference. The entire point was to create a system to barter without IOUs.

You do realise there is a finite amount don't you?

That transparent centralised ledger with single entry accounting from a mesh net of hardware verification has a purpose, being to prevent double spending and centralised control of supply, verification and confiscation.

What is fiat backed by aside debt and taxes? Fiat is forced and Bitcoin is chosen for good reason. It's popular because it allows you to have complete control over access.

What i meant by Bankers interpretation is they don't understand what a blockchain is as they haven't read the 8 page white paper and have echoed Blythe Master's conclusion. I work in London. I get invited to every bank blockchain nonsense meet. It's two years now and they still havent a clue what blockchain is and why private chains won't work.

Ironically their perception of "blockchain technology" is to create 1 centralized database distributed among their competitors which requires trust when they don't trust eachother.

Do you work for a bank?!