About Blockchain Technology
The Problem with Centralized Infrastructure
Today on the Internet, we must constantly trust one another with sensitive data, transactions, and records. Most of our interactions on the Internet run on centralized web servers, and massive amounts of user data often exist in a single database. Current databases are designed to be controlled by “trusted” admins who can read, alter, block, and even delete data. The centralized architecture of the Internet today is not only inefficient but vulnerable to censorship and targeted attacks by both hackers and internal bad actors.
The Trust Revolution: The First Blockchain
In 2009, Satoshi Nakamoto, an anonymous individual or group of individuals, developed and released the first blockchain. Interestingly, they never actually used the word “blockchain.” Only block and chain.
The puzzle for Satoshi was Internet commerce––how to securely facilitate digital transactions without third-party payment processors. Today, when someone swipes a credit card, their personal identifying information often passes through as many as five different entities––card associations, payment processors, clearinghouses––that demand transaction fees and that require users to trust the integrity of their systems. “We need a system,” Satoshi explained, “for participants to agree on a single history of the order in which [transactions] were received.”
Satoshi’s system was quite simple, but elegant in its simplicity. A network of users could chain blocks of transactions together using fairly common cryptographic functions and structures––hashes, Merkle trees, a secure hash algorithm, timestamping––and a lightweight network design. The network was decentralized and open source––that is, it was publicly available.