Let me go to explain block chain as I understand it today. There are three important manifest aspects to block chain.

Immutable Records

This is something like sculpting on a stone slab with a chisel. A chiseled stone cannot be changed once a Mark Master Mason has marked it with his unique symbol. If anyone changes the content, the tampering can be easily recognized. Further if a change or a new information has to be added, editing in place is not possible therefore a new stone slab will be sculpted with new information, and will have the reference to the earlier stone slab. Something like this:

The little mark after the name of the mason (James Bond, Hercule Poirot etc.) is the unique mark of the mason.

Distributed Ledger

Multiple identical replicas of the ledgers are kept in different places. [Of course, in the above example it would be practically impossible to make replicas of the chiseled stones.] Before the widespread use of computers, hand transcribed & certified true copies or photostat copies of ledgers could be taken and stored in different locations. Later when computers arrived, copies could be stored on paper tapes or cards, floppy disks, magnetic tapes, or optical storage like CDs. However, these were primarily used for archival purposes.

Now, with the advent of networked computers, one can easily replicate the ledgers to be stored on different computers. The important aspect to note is that these copies of ledgers can be accessed rapidly.

The word “distributed” in distributed computing means something else to software engineers; they basically think of “distributed” as different parts of the program or algorithm executing on different computers. However distributed ledger generally means that the whole ledger replicated on different computers.

Consensus Approval

This is democratic voting. 51% or more voters decide the fate of the proposal. In this case the computers are voting via their algorithms.

Example

Now let us take an example with a pseudo-real-life scenario.

Monopoly Game – Normal – without the block chain:

Six friends are playing a game of Monopoly and a 7^th friend is the designated banker. The game is played like with the usual monopoly rules except one difference; players do not handle Monopoly-money, but the banker maintains the “accounts” i.e., balances for every player and status of properties. Every transaction like buy property, pay rent, pay $50 to get-out-of-jail, get $200 on “PASSING GO” etc. are validated, executed and recorded by the banker, who is the sovereign authority for all account ledgers.

• Let us say that “Player-A” wants to buy say, “Boardwalk (US Edition)” or “Mayfair (UK Edition)” she/he will request the banker to execute the transaction. The banker will check if the property is for sale and if Player-A’s ledger has enough money. If satisfied, the banker will do the needful and proceed to update the account balance & property card in the banker’s records.
• If the Player- A “PASSES GO”, the banker will add $200 to her/his account.
• and so on…

Monopoly Game – with the block chain:

Six friends are playing a game of monopoly but there is a neither a banker nor any monopoly-money.  Every player maintains the “account” balances of all the players, all properties and there is a notional virtual “bank” having infinite money.

• Let us say that “player A” wants to buy say, “Boardwalk (US Edition)” or “Mayfair (UK Edition)” she/he will send the intended transaction to the remaining 5 players who are tasked with validating the transaction. They look up their own records, validate that the property is not owned by anyone else, and that “Player-A” has enough money in the account to buy it. As soon as 3 out of 5 (i.e. 51%+) agree that the transaction can go through, the transaction is completed and all players update their copies of the records of Player A and the property card.
• If the Player A “PASSES GO”, a transaction of adding $200 to Player A’s account is sent for approval to the remaining 5 players, who have to ensure that the player A has already passed Go (there is no need to check the bank because it has infinite money). Once 3 out of 5 say “OK” to the impending transaction, all 6 update their own records of Player A.
• and so on …

When you “PASS GO” you get $200 out of thin air from the Monopoly’s non-existent virtual bank, just like Bitcoins 😊

Further pondering

Now-a-days, many software products aspire to use block chain, and the concept has been marketed very well. I have spoken to quite a few software startups and many of them want to use block chain but in my opinion, they don’t need it. It is similar to an “item-song” in a Bollywood movie :-); this song has nothing to do with the storyline of the movie. Using block chain is the “in vogue, chic, and trendy” thing to do these days. A lot of times product promoters, marketing and product positioning teams think that having “We use block-chain! No kidding…!” as a slogan will attract funding (or better funding) and/or more customers, and it may be actually true.

What I think is important are the “immutable records” i.e., written once, read many times (like a CD). These are essential for auditing purposes. If any record needs to be modified, a new record has to be created with the reference of the existing record so that the audit trail is preserved.

Another way to record the trail is to keep a “record of change” for every modification that happens. Traditional databases (MSSQL, Oracle DB, IBM DB2 etc.) can do this.

To make the whole ledger tamper resistant, one can keep multiple copies of the records (replicated ledger) and ensure that all copies are synchronized.

Let me ponder over where I could use parts of block-chain…

• An airline company may want to keep a track of where a particular aircraft traveled throughout the year (SEA to SFO to CDG to LHR to YVR… and so on…) and correlate it to maintenance costs or fuel costs. For this purpose, immutable records YES, distributed ledger (maybe) as a backup, but consensus voting NOT NEEDED.
• A democratic organization wants to provision e-voting in an election. A vote is recorded once and retrieved for counting purpose. All one needs is to ensure immutability. For this purpose, immutable records YES, distributed ledger (maybe) as a backup, consensus voting NOT NEEDED.

When it comes to “Consensus Voting” I have my doubts. Maybe 51% is not enough for some organizations, like banks – they may want a black-ball system where 100% ledger-keepers must validate proposed transaction. I have never been really convinced of 51% consensus voting in case of any transactions which have financial ramifications, e.g., movement of funds or inventory. I would go for 100% voting even if I have distributed the ledger on multiple computers.

51% attack is possible when a hacker gets control of 51% of the ledger-keepers and forces nefarious results. Many erudite software engineers have written on how to deal with the 51% attack. Navigate to  https://www.google.com/search?q=51+attack+blockchain and you will see a lot of information.

Let us say in the consensus voting, 54% say YES, and the rest 46% say NO or abstain, there should be a root-cause analysis done to see why these 46% did not say YES, which nobody seems to mention though…

The concept immutable records and distributed ledgers have existed for more than 30 years. Block chain concept tries to formalize the process in a consistent way.

If you have a hammer in your hand and walk around the house, many objects look tantalizingly like nails. Blockchain is one such hammer, and it is fashionable too, therefore the temptation to use it for anything can be overwhelming 😊.