What Do We Mean By Blockchain?
At its base, “blockchain” simply refers to a type of data structure which is simple for anyone to verify and difficult for anyone to change.
Usually, when people say blockchain, they’re referring more generally to the ledgers, cryptocurrencies, or decentralized consensus mechanisms which serve as components in the systems around blockchain structures.
Please navigate with me to the original Bitcoin.it Wiki to review their description of blockchain data structures.
Origins: The 2008 Bitcoin Whitepaper
Satoshi Nakamoto’s Bitcoin whitepaper launched the toolkit for cryptoeconomics, and should be read by everyone who is serious about participating in, or studying, the blockchain field.
The innovations it interweaves include:
- A chain of immutable, timestamped data blocks which build upon one another (timechain)
- Use of competitive computing power (Proof of Work) to secure the network (in which many computers across the world confirm transactions, rather than a centralized authority)
- An antifragile distributed consensus-based network system (e.g. resistant to Sybil attacks)
In Fall 2020, UBC Bitcoin Club and Carpe Lunam Events created this set of short videos explaining each section of the Bitcoin whitepaper in ~5 min or less.
For now, it’s useful to understand that Bitcoin builds upon existing multidisciplinary pillars:
- the field of cryptography to ensure network security and pseudonymity of its participants (as well as the mechanism for reaching decentralized consensus);
- the field of distributed computing to allow that complex system of decentralized computers to communicate and share information effectively;
- the field of economics to represent how human markets behave, and set forth a hypothesis for how to organically instill value in a digital currency;
- the field of game theory to model potential behavior from bad actors and how to disincentivize it within the Bitcoin network;
- the field of archival science to identify the contrasting poles of human trust and transparent verifiability, and position Bitcoin’s network as closely to the latter as possible.
Taken all together, this original technical paper presents all the components necessary for Bitcoin’s multidisciplinary foundations and eventual global success story.
Bitcoin’s Success Story: Slow Then Fast
The snowball effect of community adoption: bitcoin helped people besides economists recognize that value is largely a matter of belief.
Early adopters had to demonstrate their belief in this “magical internet money’s” value in order for others to begin to place value in it (e.g. Laszlo Hanyecz’s Bitcoin Pizza).
After Bitcoin adoption began to pick up, people wanted to copy its success: this led to the age of “altcoins”.
This trend began with simply forking Bitcoin, or copying its codebase, then making changes or attempting to add new features.