How Blockchain Technology Could Help People Take Control Over Their Own Data Part 3

Blockchains as chains of blocks. Cryptography hashes.

 

When the crisis started to worsen, the government of the United States, just like the governments of many other countries, has decided that it was better to save some companies from bankruptcy that it was to let them fail. The logic of the governments was simple: allowing powerful players to go out of business would place great stress on the economy and letting them stay in business would help the economy recover.

The governments provided companies with money through an economic process known as quantitative easing, which in simple terms means printing money. The government would take more debt and use the debt to bail out the companies. The debt would become a part of the total debt of the country, which means that it would be not just the companies and the banks paying it, but also regular citizens. In turn, this means that regular people who didn’t make any bad decisions or assumptions now had to pay for the mistakes of the few large players, meaning banks, insurance companies, and others, where people were making very large amounts of money prior to the crisis and were able to keep the money.

 

Blockchain technology: the same rules for everyone.

On a decentralized blockchain the scenario described above is not possible because there is no central authority that can decide to change the rules of the game. The software code of public blockchains is open source, which means that anybody can download it and check what’s in it. Then, users start participating in the life of a network and introduction of changes requires users freely deciding to download and start using new software. All the activities a blockchain network become a part of the blockchain.

 

Blockchains

The second part of the word “blockchain” is the word “chain.” It means that blocks (or pages of a ledger) are connected into a chain, similarly to how pages in a financial ledger are a part of one notebook.

Most blockchain networks, including Bitcoin, connect blocks into chains using cryptography hashes.

A cryptography hash is a function of a cryptography algorithm that generates a string of code for a set of data. It works similarly to the mathematical functions you use on a daily basis. For example, two plus two equals for mathematically speaking means that when you apply the mathematical function of addition to a set of two numbers – two and two – the result of is four. Just like that, when you apply a hashing function using cryptography algorithm SHA-256, that the Bitcoin network uses, to a set of data with transactions in a Bitcoin blockchain block, you get a hash.

For instance, block #531206 of the Bitcoin blockchain contains full information about 1594 transactions, including timestamps, addresses and amounts. You can see all this information by accessing the page of the block on the Bitcoin blockchain explorer (you can do the same for any block of the Bitcoin in existence by the time you are reading this article) located at https://www.blockchain.com/en/btc/block/0000000000000000000a1d6eb902bd457babb98402fa26ed381e65372edcdc76 yet the hash for the block is only 0000000000000000000a1d6eb902bd457babb98402fa26ed381e65372edcdc76, which is also the information you can see on the page.

 

Properties of cryptography hashes

Cryptography hashes have several important properties that make them an extremely secure tool. First, a set of data in a cryptography algorithm can have one and only one hash. Another way to say this is that a cryptography algorithm always generates unique hashes. If two or more people generate a hash using the same cryptography algorithm and obtain the same hash, it means that they used the same set of data. At the same time, hashes for even very similar sets of data look very different. Because of this, a cryptography hash is a great way to check the validity of data.

On blockchain networks such as Bitcoin, each next block of the blockchain contains a hash for the previous block. This is where the word “chain” comes into play because hashes are how blockchains connect blocks of the ledger into a chain. For example, block #531206 contains the hash for the block #531205, which is 000000000000000000095ec8cc210fd982aaefff131205769ed429b64ed36306. You can see this hash both on the page of the block 531206 (located here https://www.blockchain.com/en/btc/block/0000000000000000000a1d6eb902bd457babb98402fa26ed381e65372edcdc76 ) and on the page of the block 531205 (located here https://www.blockchain.com/en/btc/block/000000000000000000095ec8cc210fd982aaefff131205769ed429b64ed36306). The fact that a set of data can have only one hash is what makes blockchains immutable and so different from regular file storage that most companies use today. Let’s say somebody wanted to change information about one transaction in the block #531205 of the Bitcoin blockchain. If they were to do that, then the block would have a completely different hash from the hash of the block with the original data. Because the next block in the blockchain, block #531206, contains the hash of the original block, a block with the edited information would simply not fit into the blockchain. To change the data, the editor would need to change the block and all the blocks that came after it, and then also somehow change all the copies of the blockchain on all the computers all around the world.