Everyone has heard by now of Bitcoin, I am sure. Bitcoin is a distributed peer to peer currency, that is extremely robust, which uses mathematics to prove transactions. I am not going to get into how Bitcoin works, but rather try to explain the mechanism by which Bitcoin validates transactions, the block chain.

What is a block chain?

A block chain is exactly what it sounds like, a chain of blocks. Much like a chain, all of the blocks are linked together in order. The block chain starts at an initialization, or genesis, block and is chained to each block in order of block validation. What makes this chain order provable is each block being added to the block chain is cryptographically hashed with the contents of the transaction and the hash of the previous block, thereby linking the previous block and the current block in the block chain. Validation of any given block can be performed by hashing the previous block with the current block, and then hashing the previous block with the block before it, all the way down the chain until the initialization block. If any block has been altered, omitted or tampered with the validation of the entire block chain will fail.

This is a great way to provably show sequence of transactions, and prevent malicious tampering of blocks within the chain.

What is a block?

A block is a grouping of transactions. When transactions are performed they are put together in a block. Each transaction is cryptographically hashed, then grouped together as leaves in a binary tree. These leaves are taken, and grouped into pairs, whereby each of their individual hash’s are hashed together forming their parent node. Each parent node is then hashed with another parent node until a root node is created in the tree. This form of cryptographic hash tree is called a Merkle Tree. The Merkle Tree root node is a validation of all of the transactions that are within a block.

If any of the transactions within the block are tampered with, the Merkle Root will no longer validate the block, and the end user will know something isn’t right with this block. A provably tamper proof system.

What is a Transaction?

A transaction consists of, at is primitive, a sender, recipient, and an amount. Every sender/recipient must have a public/private key generated. The sender creates a transaction to the recipient, and then digitally signs that transaction, stating publicly and provably that the sender authorized that transaction to the recipient. This is like signing a contract, except much more provable, as only someone in control of the sender’s private key will be able to perform this task.

When a transaction is created, it is then broadcast to the Bitcoin peer to peer network where the transaction is put into a block as explained above, and then the block is appended to the block chain, forever more linking it to all previous and future transactions.

Who cares?

Well, for one, the virtual currency market cares about validation of transactions. But given this framework, this type of chaining of blocks and transactions is more widely scoped. I have heard of a few places that were looking into using a block chain for voting. In my opinion this would be a very good mechanism for voting, except that any vote by anyone would be publicly verifiable… Which some people might not want their identity linked to whom they feel like voting for at a given election.

Basically any immutable, secure and verifiable ledger could benefit from the work that has been put into the cryptocurrency realm.