Blockchain Explained 101

As originally published in CityAM (here) || 6 August 2019

“Now I have the tools to have a reasonable conversation with the rest of my organisation about Blockchain.”

What was the biggest aha moment? A simple way to explain Blockchain without getting buried in cryptography and deep tech. The example is easy to understand and share — and it is an explanation that a lot of blockchain pros will absolutely hate!

A Blockchain is an Excel sheet with protected cells and potentially some macros. Lots of unrelated people have identical copies of the Excel sheet. Any single individual can update the Excel sheet, but only one at a time. And that’s it.

So now let’s take that apart.

“A Blockchain is an Excel sheet…”

You may have heard Blockchain referred to as a ledger. Ledger’s contain information related to business transactions. In a Blockchain, you can record data related to verification, transfer and transformation of an asset. And you can query a blockchain to track and trace and asset. Each record in a blockchain will include a transaction ID, timestamp, source, destination and units of value transferred. You can put the same information into a single row in an Excel sheet. You can select several rows in the Excel sheet (several transactions) and agree that this group of rows be called a block.

“…with protected cells…”

An Excel sheet allows for cells to be protected using a password. This means that cells are still readable, but that you can no longer change, edit, delete or amend the contents of these cells. Blockchains work in much the same way in that once information has been written into the Blockchain you can no longer edit, delete or amend the information. In Blockchain core principles we refer to this as the data as being immutable.

“Lots of unrelated people have identical copies of the Excel sheet.”

This is not the same a Google Drive where many people have access to the same information. Instead, we are talking about multiple people having identical copies of the Excel sheet. In the same way, multiple people have a copy of the data in the blockchain. In Blockchain principles we describe this as being distributed. Unlike a classic database run by a single entity, like a bank, multiple people have a complete copy of all of the transactions in the blockchain.

The more people who have a copy of the blockchain, the more secure the blockchain. Why? Because it becomes increasingly difficult for the data to be corrupted either unintentionally or intentionally by a bad actor. Everyone can see everyone else’s copy of the blockchain and then come to a consensus as to the current state of the blockchain as well as the validity of any future transactions.

“Any single individual can update the Excel sheet, but only one at a time”

Anyone in the network has the right to add a new block of transactions to the Excel sheet. In blockchain principles, we refer to this as being decentralised. In a blockchain, there is no central authority with the exclusive right to update the information in the blockchain.

In order to prevent conflicts, only one individual is able to update the blockchain at a time and once they complete the process, they send an update to everyone who holds a copy of the Excel sheet so that they can update their own copy. The same is true in blockchain, anyone can add a new block of transactions and then advertise the update to the rest of the network.

“…and potentially with some macros.”

Some Excel sheets include macros. These are small pieces of software code. Macros operate on the contents of the Excel sheet. They have to be triggered to run and they may connect to various services in the outside world. Some Blockchains, not all, have the ability to support smart contracts. Smart contracts are small pieces of code which operate on the contents of the blockchain. They must be called explicitly and they may have connections to services in the real world. As many of the transactions on the blockchain are underpinned by business agreements, the code may reflect the terms, obligations and commitments written in a real-world contract and they may operate in an automated fashion — hence the name smart contracts.

So a blockchain is just a shared Excel sheet with protected cells which might have some macros.

You can even use this example to evaluate opportunities or projects within your enterprise. All you need to do is ask the question:

“Would I do that in an Excel sheet which I had to share with lots of people?”

It really focuses your attention on what data, how much data, and the value of sharing that data between multiple distrusting parties. With this in mind, many more productive conversations are possible within your enterprise.

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Troy Norcross

Troy Norcross

Strategy and Digital Innovation — Digital Marketing, Consumer Data and Digital Innovation — Oh yes and thoughts on all things food!