Why Blockchain? Definitions and analysis ok key features

Defining Blockchain precisely remains a complex task to date.
There are various possible definitions, each highlighting different aspects of this innovative technology. Blockchain encompasses several key innovations that are essential to understanding its functionality.

Here are some of the most widely accepted definitions:

• Blockchain is a shared and immutable ledger that facilitates the process of recording transactions and tracking digital assets. A physical asset, such as a house, car, cash, or land, can be represented through blockchain, as well as intangible assets, such as intellectual property, patents, copyrights, and trademarks.
• Blockchains consist of information recorded in blocks, each containing a specific set of data. When a new data set is added, it forms a new block that links to the previous one, creating a “blockchain.”
• Blockchain is a shared and “immutable” data structure. It is defined as a digital ledger whose entries are grouped into “blocks,” linked chronologically, and whose integrity is guaranteed by cryptography.
• Blockchain technologies are a set of technologies in which the ledger is structured as a chain of blocks containing transactions/information, and consensus is distributed across all network nodes. All nodes can participate in the transaction validation process and contribute to the distributed ledger, which is immutable, verifiable, and shared.

Let’s focus on the first sentence of the last definition:
“Blockchain technologies are a set of technologies” implies that there are different types of blockchains. Additionally, they have a “mother” technology known as DLT (Distributed Ledger Technology).

Blockchains are a subset of DLTs. To differentiate blockchain from other distributed technologies and databases, let’s list the key features that define a true blockchain (although the term is commonly used for technologies that do not meet all these criteria). For example, permissionless is one of these features, but the term “blockchain” is also used to refer to permissioned blockchains.

Here are the characteristics that a blockchain should have to be considered authentic, inspired by Bitcoin’s first successful blockchain:

1. Native digital asset
2. Consensus mechanism that aligns competing actors (nodes)
3. Permissionless structure
4. Transactions are uncensorable and irreversible
5. Adequate number of participating nodes
6. Trustless, transparent, and immutable
7. Democracy among validator nodes

These requirements, which may initially seem complex, will progressively become more understandable as you deepen your knowledge.

Database vs blockchain: the pursuit of stability and antifragility

Centralized – Decentralized – Distributed

A database is an organized collection of data and information.
The challenge with traditional databases is storing and managing large volumes of data while ensuring they remain easily accessible to users when needed.

Databases can be categorized into three types:

• Centralized: Data is stored on a single machine (server) that users connect to for information.
• Decentralized: Data is stored across multiple servers working together to provide information.
• Distributed: Data is stored across all nodes in the network, making each user equal with identical rights.

In centralized systems, if someone gains administrative access to the server, they could potentially add, modify, or delete data. These systems are vulnerable to Single Point of Failure (SPOF) attacks.

A properly distributed system eliminates the concept of a single point of failure. While it doesn’t make hacking impossible, it becomes highly improbable as compromising a distributed system requires attacking a significant number of nodes with substantial computational power.

One of blockchain’s most fascinating aspects is its antifragility. The term, coined by Nicholas Nassim Taleb, illustrates how blockchain becomes stronger as more blocks are added. The longer the chain, the harder it is to break or manipulate the data structure.

A key difference between centralized and decentralized systems is their stability and vulnerability to black swan events. Centralized systems may offer long periods of stability, but they are prone to catastrophic failures (e.g., data breaches or cyberattacks).

In contrast, decentralized systems experience small, continuous instability as nodes must regularly reach consensus on the network’s state. While soft forks may occur, these events do not disrupt the overall stability.

Bitcoin and blockchain technology

This introductory article explores the underlying technology and utility of cryptocurrencies, particularly Bitcoin as a store of value.
Note the distinction between bitcoin (lowercase) to refer to the native asset, and Bitcoin (uppercase) to refer to the decentralized infrastructure.

By understanding the basic principles of blockchain and Bitcoin, it becomes easier to grasp the revolutionary potential of this technology over time.