The Block Chain - An Introduction

Over the past several months, I've blogged and otherwise opined on the benefits and brilliance of Azure Key Vault, Azure Disk Encryption and a few other interesting topics. While I will continue to blog on these and other amazing Azure topics, I want to shift my focus for a time towards another deep passion of mine - the block chain and, most importantly, how it could work in your company or home. A reminder that my opinions are my own and don't reflect any policy or product position of my beloved employer! As I introduce these topics, I am going to speak from a position that I've been in for the previous few months - curious and not at all informed! Hopefully I can make some headway in describing it to my fellow block chain neophytes.

What the heck is a block chain? Well, most of the world is familiar with Bitcoin. It is a system that creates 'value' or 'money' that can be bought and sold on an open market. Bitcoin is based on a technology called a block chain. There are numerous implementations of a block chain - Bitcoin is one. How does it work? Well, computers all over the world harness their spare computing power (and in some case, all of their computing power) to "mine" for blocks. Blocks are just mathematical representations of really hard to find numbers - really big numbers, that are computationally related to one another. The computer that finds the next block, wins a Bitcoin. What one does with that digital coin, which gets deposited into their digital wallet, is really up to them, but suffice to say, it can be sold for services and goods. In addition to mining for blocks, computers that participate in the network also provide cryptographic proofs that some asset or bit has been sent to some other person in a way that cannot be easily forged and does so without a central authority. This authority'less proof, based on a peer to peer network, makes a block very VERY hard to forge. What makes a Bitcoin have value is the same as what makes the American dollar have value. Maddeningly goofy, yet perfectly true as taught by Dr. Applegate in my junior year of college in Macro Economics, the Bitcoin like the American dollar are not backed by anything - they have value because we value them. They have value because we say they do. But that isn't the most interesting part of Bitcoin - the most interesting part is how it runs - the block chain.

Now, for those that are legion in this topic, I recognize that my description above is comically over simplified, but the basics are mostly right from what I've learned. My interest in the block chain center around two clever and impressive traits of the block chain: the cryptographically/mathematically proven immutability of the database (the block chain ledger) which shoes who owns how much Bitcoin and all the transactions that have taken place, and the decentralized nature of the network using well known peer to peer protocols that afford us capability without centralization. The sheer number of use cases for this, well beyond financial instruments like Bitcoin are astounding. In fact, my interest in the block chain has nothing to do with financial instruments. I'd just as soon ignore them entirely and focus on the ledger and the peer to peer nature of the network. However, as is the case for Bitcoin and many derivative implementations of the block chain, there has to be SOME incentive to an individual (lots actually) to provide computing horsepower to secure the block chain and prevent any one person from controlling more than 50.1% of its computing power. Were someone to have that level of control, they could, in theory, falsify the block chain and thereby destroying the reputation and trust of the network. So, the financial incentive sticks around for a bit.

Where there are financial incentives, there are entrepreneurs, and where there are those folks, there are really freaking smart wizard like people that come up with strange new things to do with the technology. As I go through this series of blogs, I'll talk about each idea as laid out by their creators and share some thoughts on their state. As with any rapidly evolving technology matures, there are some tangent technologies that I'll also get in to which, while not strictly about the block chain, represent interesting overlays or supersets that could further expand on the promise that they all belay: immutable, trust less, storage of 'stuff.' We'll dive in next week!