How Blockchain Works: Structure and Action - Identity Review | Global Tech Think Tank - Identity Review | Global Tech Think Tank

From cryptocurrencies, to games, to NFTs, to DeFi, blockchain is, of late, a word buzzing with use. However, discussions often leave unclear as to what it looks like, what it does, and how it really works. Below answers the burning questions: how precisely does the blockchain work, and is it the future of the internet? 

What is the Blockchain?

The blockchain consists of decentralized computers that work together to form a database or shared network. Bitcoin is one example of a blockchain, as it comprises multiple nodes of computers that run and verify Bitcoin transactions; similarly, Ethereum is an alternative blockchain. While companies like Amazon and Google store data on servers they control, the blockchain (of choice) is accessible by anyone; any person can verify transactions that occur while also plugging into the network from their own device as a node to support the network.

Behind Blockchain: A More Technical Description

Normal databases are structured in tables or, more recently, in tree formats. The blockchain is stored in blocks. 

Blocks are chunks of data that are associated with timestamps; when one block is fully utilized—meaning it is imbued with capacity data—it’s added to its respective network in a publicly verifiable manner.

Another benefit of storing data on the blockchain is its authenticity: in a non-distributed server setup (like the aforementioned at Amazon and Google), one entity controls all the data and acts as the source of truth. For example, if you were running a server to host a website, you could easily change the data without any accountability. Alternatively, the blockchain contains a copy of every block, which prevents any singular bad actor from corrupting or altering the data (there will, of course, always be a copy to go back to). For this reason, the blockchain is immutable. 

Are Blockchains the New Cloud-Computing?

Given its immutability and redundancy, it may appear blockchain technologies are inherently superior to centralized servers like GCP and AWS in terms of security. But as a result of the decentralized structures, the blockchain is often slow and expensive. Gas fees, for instance, are fees paid by users to subsidize the computer power required for a transaction. As there is no central authority managing server loads, the time of executing a transaction on certain blockchains can take up to days. Centralized databases, on the other hand, possess a chief administrator that can create, change, or delete records. Because the network is undistributed, requiring only the clients and the servers, its processing times are faster, and the structure is far easier to scale. 

The blockchain no less provides a myriad of benefits, especially in cases where the public needs to verify the authenticity of data and emphasize the need for privacy. It also provides room for creativity, with a variety of platforms using blockchain-based technologies to cultivate community and solve real-world issues. In spaces like insurance, fraud, and even financial transactions, this evolving structure could prove transformative to institutional interactions as we previously knew them. 


Jibran Khalil is a computer scientist and entrepreneur from the University of Texas at Austin. He is a Tech Innovation Fellow at Identity Review and creator of My Workout Group, an iOS app that uses social accountability to help people workout. 

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