The blockchain is a distributed database in a network of computers that act as a transparent and unalterable ledger, where transactions are recorded with the agreement of all nodes and are linked and protected from tampering or changes through cryptography.
The transactions or data in the blockchain are recorded in a series of “blocks” that are strung together to form a “chain” that is also a timeline of the information being accumulated.
The blockchain is distributed or decentralized database, meaning there is no one node or central authority that controls or holds the information but the data is shared or spread simultaneously to computers that are in various locations.
To illustrate:
Maya gives Alex P1,000 to pay for a made-to-order dress that he will make. She affixes her digital signature to allow others in the network to verify that she made the transaction. The transaction is broadcast and recorded in all the computers of the network.
Alex, also affixing his digital signature, then pays Vicky P700 to supply the fabric, buttons, and other materials to make the dress.
The example above is simplified. The transactions in this case would have used a cryptocurrency or digital currency or some other digital asset.
Because it is in the blockchain secured via cryptography, Maya cannot spend again the P1,000 for another transaction nor can Alex nor Vicky claim that they have not received payment in the event of failure in any part of the system or even any or both of them want to spend again the amounts paid to them.
Being distributed, and immutable or unchangeable, are two key properties of the blockchain technology that makes it tamper-proof or extremely resistant to attacks. It does not have a single point of failure.
Blockchain is the underlying technology of cryptocurrencies and non-fungible tokens (NFTs) but also has numerous applications in business, health, and governance, among others.
Put another way, the blockchain technology allows one to trace, validate or verify transactions at any point in time without having to depend on, and trust a third party like a bank, a financial institution, or a regulatory agency to keep and handle the ledger, because they all are time-stamped and spread over a huge network of nodes or computers.
The blockchain technology was first mentioned in 1991 by researchers Stuart Haber and W. Scott Stornetta, who were seeking to invent a system where document time stamps could not tampered with.
In 2008, Satoshi Nakamoto, the pseudonymous creator of Bitcoin, in his/her/their white paper made what is considered the first real-world application of the blockchain. Nakamoto employed blockchain as the technology for recording payments or transfers of bitcoin.
HOW IS THE BLOCKCHAIN SECURED?
Each block contains a pointer or referred to as a “hash pointer” that points backwards, or to the previous block. A hash is alphanumeric code of fixed length that is used to represent transactions, messages and data of any size contained in each block.
The hash is generated at random using certain algorithms and is encrypted and impossible to predict.
The hash in the latest block contains references to the previous hash and thus are linked. Any attempt to tamper a block’s hash would necessitate changes in the previous one, which will require the editing one before it, and so on and so forth.
When the latest block is validated, all the blocks before it are therefore revalidated, making the chain even more impossible to edit.
The series of transactions, in the case of Maya, Alex, and Vicky, were broadcast and recorded with timestamps to all nodes and were agreed to be valid—including the order by which they occurred—by peers or the computers in the blockchain through consensus mechanisms like Proof of Work, Proof of Stake, Proof of Burn, and others.
Private blockchains, used by companies or institutions to ensure certain information remain private for competitive or regulatory reasons, use other means to validate transactions or data being entered, like identifying specific nodes or participants to do the validation.
BLOCKCHAIN IN THE PHILIPPINES
In their book, “Opening the Archipelago: The story of blockchain in the Philippines,” (Bookshelf PH, 2021), Henry Aguda, Cathy Bautista-Casas, and Nathan Marasigan, cited the immense benefits of blockchain in government and private enterprises in greatly improving efficiency, cutting red tape, expanding connectivity, and even speeding up delivery of aid during times of calamities.
“[Blockchain] will have address many challenges and pain points that are unique to the country, including the proliferation of fraudulent credentials, falsified documents, faulty record-keeping through provenance and immutability,” the authors said in the book.
They cited the Land Management Bureau fire in 2018 that would have minimal damage had its records been distributed and secured in a blockchain and not just confined in one area.
“Likewise, supply chain issues can easily be overcome, allowing donations and relief aid to get to their beneficiaries in times of calamity quickly,” they said.