Understanding Blockchain: Blockchain Blocks

In our previous article about Blockchain Technology, we have discussed the Distributed Ledgers where transactions in a platform is validated, recorded, and monitored by all participants in a decentralized, self-regulating manner, as opposed to traditional systems where a central entity performs all of the aforementioned functions. However, the challenges associated with distributed ledgers revolve around the act of broadcasting transactions, validating transactions, and ultimately upgrading all public ledgers. This is the original problem addressed in the original Bitcoin paper through the use of Blockchain Technology.

Before we can start discussing the elegant solution to this problem, we need to first understand how transaction data is recorded in the Blockchain. As part of our commitment to educate our clients on emerging technologies, our cybersecurity solutions experts will discuss the basics of Blockchain Technology in this article, with particular emphasis on Blockchain Blocks.

Houston Cybersecurity Solution: Blocks of Data in the Blockchain

To facilitate our understanding of how transaction data are recorded in the Blockchain, let us create a set of scenarios to illustrate multiple sets of transactions.

A group of friends from our previous article composed of Bettina, Joshua, Miguel, and Xena, is now joined by new friends Cookie, and Pizza. The original four friends, having experienced implementing distributed ledger to monitor contributions to an account, decided to adapt the same technology for facilitating transactions within their group (e.g. splitting dinner bills, borrowing and repaying money, and more). To illustrate, the group of friends dined in a restaurant and the bill amounting to 150 dollars was paid for by Miguel but they all agreed to an even split. This set of transactions should appear in all of the friends’ personal ledgers as:

• Miguel paid restaurant 150 dollars; he is owed 125 dollars
• Bettina owes Miguel 25 dollars   
• Joshua owes Miguel 25 dollars
• Xena owes Miguel 25 dollars
• Cookie owes Miguel 25 dollars
• Pizza owes Miguel 25 dollars

In the Blockchain, a group of transactions are validated and recorded in what is called a Block. You can imagine the 1st set of transactions of the group of friends as the 1st Block. The friends usually meet as a group during lunch. Over lunch these are the new transactions that took place.

• Bettina paid Miguel 25 dollars; Bettina no longer owes Miguel
• Joshua paid Miguel 25 dollars; Joshua no longer owes Miguel
• Pizza borrowed 25 dollars from Miguel; Pizza owes Miguel 50 dollars

There were three transactions in this 2nd Block. After this block has been validated (each friend consulted the 1st block to check that they each owe Miguel 25 dollars) and recorded (the act of writing the set of transactions in their ledgers) the new transactions. The ledgers should now reflect that Xena and Cookie owes Miguel 25 dollars while Pizza owes him 50.

On the next day, only Miguel and Cookie were able to meet—the other friends were too busy with work and had to take a working lunch. Another complication is that both Miguel and Cookie forgot to bring the ledgers. Miguel misremembered that Cookie owes him 50 dollars (it was Pizza) but Cookie insists that it’s only 25 dollars. In the end, they agreed to Cookie paying Miguel 25 dollars in the meantime and confirming their accounts with their friends the next day. And because both Cookie and Miguel forgot their ledgers they each created a new ledger.

The 1st ‘Block’ of Miguel’s new ledger (in quotation because it is not yet validated) shows:

• Cookie paid Miguel 25 dollars; Miguel thinks Cookie owes him 25 dollars

While Cookie’s 1st ‘Block’ shows:

• Cookie paid Miguel 25 dollars; Cookie thinks he no longer owes Miguel

Come next day, the group rules in favor of Cookie after consulting their ledgers, thus forming a 3rd Block that has this transaction: a) Cookie paid Miguel 25 dollars; Cookie no longer owes Miguel. All members of the group then update their ledgers with the validated 3rd block. From this scenario, we can say the following about Blocks in Blockchain Technology.

• Transactions are validated and recorded in the Blockchain in tranches called Blocks.
• The current block references the previous block which references its previous block and so on, forming a chain of blocks that is the history of all transactions. This chain of blocks is the basis for establishing the validity of future transactions.
• In the last scenario Miguel’s ledger only has two Blocks (his last ‘block’ was invalidated) while the rest has three (including Cookie’s 1st ‘block’ which was validated by the previous 2 Blocks). In case of conflicting block chains, the longer block chain takes precedence.
• Since the current Block references the previous Block and will be referenced by a future, tampering a Block requires editing all previous blocks and editing future blocks as they are created, which is virtually impossible.

Now that we have a basic understanding of how transaction data is recorded in the Blockchain, we can now discuss consensus mechanisms by which participants in the Blockchain agree on the current status of the public ledger. In our next article, we will discuss Proof of Work, which is the consensus mechanism employed by Bitcoin and most cryptocurrencies using cryptography.

Understanding Blockchain Technology with Your Trusted Houston Cybersecurity Solutions Experts

Blockchain Technology is being used now primarily as ledgers of payments, but it can also be used to transparently record other sets of data, which by extension also gains the properties of Blockchain, that is to say immutable, virtually impossible to hack, and decentralized. Depending on how it will be utilized, this can have significant implications on different fields especially Cybersecurity Solutions.

Here in BHT Solutions, we dare to think differently to provide user-centric IT solutions tailored to our clients’ unique business needs. A large part of our outside-the-box thinking is looking to emerging technologies and understanding how its fundamentals can impact our field of cybersecurity solutions. Call us now to schedule a free 1-hour consultation.