One way to think of the blockchain is as a journal or diary shared by people all over the world. The journal starts out empty, but then someone can write the first entry on the first page, and once that happens, it will be synchronized to every other person’s copy of the journal so that they are all kept up to date.

Once the first page has been written and synchronized, any other person can write in the second page so that page shows up on everyone else’s journal. However, nobody should be allowed to write in the first page, because that page has already been taken and no journals can write over it (only clean pages are fair game). Further, pages in the journal cannot be skipped. Every page has a defined order, as well as a defined time that the entry was written, since every copy of the journal remembers the time at which it received the synchronized page.

Another interesting feature of the journal is that pages written to it can reference previous pages and claim ownership over them. For example, if page 310 of the journal had the lyrics to a poem, page 425 of the journal could reference that poem and claim to be part two of the poem written by the same author. Then page 445 could transfer ownership of the poem copyrights to someone else.

Now, in order for us all to believe that the poems were written by the same person, and that the transfer of ownership of the poems represents a valid transaction that was authorized by the original author, those pages of the journal all have to be digitally signed by the same identity. The journal accomplishes this by requiring that each page be digitally signed by an anonymous identity powered by mathematics and cryptography (known as a cryptographic identity or signing key).

Because each entry in the journal has an author, the journal is able to support some really interesting operations like the creation of assets and currencies and the transfer of ownership of said assets and currencies.

The Bitcoin Blockchain

The Bitcoin blockchain is a special journal that happens to be the first ever created and the most robust and secure. In this journal, each entry is actually a set of entries, written and signed by hundreds or thousands of different identities. Imagine each page with a bunch of notes on it, each with a different author and signature underneath the message, much like a page out of a signed yearbook. All of those different authors give their notes to one person, and that person collects the notes and includes it as a page in the journal. The person who aggregates these notes rotates. We’ll get to how these journal writers are selected later.

In exchange for doing the work of collecting notes and writing aggregate pages into the journal, each copy of the journal accepts a special footnote at the bottom of the new page that says that the author of the combined page of notes gets awarded a certain amount of imaginary tokens that correspond to a currency that can be transferred within the journal. These tokens are the official currency of the journal and are called bitcoins. And the author of the page that was just awarded the tokens can now transfer them to others by signing new notes on new pages.

Another distinction of the Bitcoin journal is that every note on a page is required to represent the transfer of some amount of bitcoins. The transfer amount must be a non-insignificant amount and another tiny amount must be allotted as a fee to the signer of the page that packages the notes.

All of this means that in order to include an entry in the journal, one needs to have some bitcoins. This has a few consequences. First, the Bitcoin journal ends up being primarily meant for the transfer of ownership of bitcoins. Second, there’s a nice property of spam protection of the journal, since it costs money to include an entry on a given page.

Journal Authors

One thing you might be thinking is how you can be one of the people who is allowed to collect notes from people and write a page in the journal, collecting money from those who presented their notes.

In the case of the Bitcoin blockchain, the “journal writers” are those who are able to solve a really hard computational puzzle in a short amount of time. This mechanism, known as “proof of work,” was created to ensure that nobody has monopoly power over the ability to write to the journal, and thus nobody can manipulate its contents or censor anyone from including information inside it. The journal does this by allowing anyone with enough computational resources to solve a puzzle and write pages, and by incentivizing people to compete over puzzle-solving by rewarding them with a certain amount of bitcoins for each write.

In Bitcoin terminology, the journal writers are known as “miners,” because they have variable success in solving the puzzles and receive payouts in the form of bitcoins, similar to how gold miners mine for gold.

And as it turns out, this mechanism of preventing abuse of the journal is the hardest problem to solve from a computer science point of view and represents the greatest innovation that Bitcoin brings to the table. This massive innovation breakthrough is what makes Bitcoin so secure and trustworthy.

Since the Bitcoin blockchain has no pre-defined set of authors, it makes it extremely difficult for the authors to collude or be manipulated by outside parties interested in compromising the system.

Permissioned Blockchains

Other journals known as permissioned blockchains or private blockchains decide to forego the security of resistance to manipulation and censorship by a cabal, and instead adopt a system with a pre-defined set of authors. Here, only these authors are able to write to the journal, but the public is still able to read the pages and include notes in the pages, unless of course all of the authors prevent them from doing so. This has it’s own set of advantages and disadvantages.

On the one hand, a permissioned system is less complex in that it doesn’t require the proof of work mechanism, and it doesn’t necessarily require a currency system as a form of spam protection. It also allows for a strong form of censorship and quick intervention by the majority of the controlling parties, if that is what is desired.

On the other hand, censorship can be a very bad thing for any system that is meant to be a global record. The system is now much more susceptible to manipulation by parties that want to exert pressure on the authors to either censor information or change the recorded truth by rolling back entries. In addition, a permissioned system cannot support permission-less innovation like a permission-less system can, which can be less attractive to developers looking to build blockchain-based applications.

Journal Transfers

Earlier I mentioned that in each authored page in the journal, a footnote is included that assigns a certain number of bitcoins to the author of the page. The author can then include a note in a future page that spends these bitcoins and transfers them to another cryptographic identity. But in order to do so, all copies of the journal will inspect the transfer note and look back in history to make sure that the bitcoins were not yet transferred and that the author that was originally awarded the bitcoins still has them in possession.

Note that the bitcoins are not transferred by simply deducting and increasing balances, as is the case with ledgers. Rather, the transfer is accomplished when the cryptographic identity that was assigned bitcoins at an earlier date references the specific coins received and signs a message that assigns them to a new cryptographic identity.

That means that bitcoin ownership really boils down to something like a title of ownership or a deed that references all previous owners since the inception of the coins, and includes signatures authorizing all transfers from owner to owner.

Balances for each cryptographic identity, meanwhile, are calculated by summing up all of the amounts that have been transferred to those identities over the course of time.

Why a Journal And Not a Ledger?

“Ledger” is a fine term to use, but in my view a journal is a much simpler concept for the average person to understand, because it is something we can all picture.

Further, in accounting, both journals and ledgers are used for recording information (much like a personal journal but for business transactions). However, the function of accounting journals more appropriately mirrors the way that the blockchain works. Accounting transactions are first recorded in the journal, then tallied up and summarized in accounts in general ledgers. Thus, accounting ledgers can be thought of as account-centered interpreted views of journals.

The takeaway: journals are for basic information input and ledgers are for interpretations and summarizations of the original input.

In the Bitcoin world, blockchains are for basic information input, so the Bitcoin blockchain can be thought of as the equivalent of an accounting journal. Meanwhile, Bitcoin wallets show account balances based on aggregated balances of addresses, so their interpreted views are more like accounting ledgers.

So What is a Blockchain?

We just likened blockchains to a journal that people can write in and have those entries be synchronized to other copies of the journal around the world, without anyone being able to tamper with the information. This is great for simple understanding, but we can go a bit further and derive a slightly more technical definition.

As it turns out, databases that keep a history of writes are essentially journals with more advanced writes and lookups, so a valid technical definition could be the following:

A blockchain is a distributed database, journal, or ledger for which many computers maintain identical copies and agree on the ordering of information without having to trust one another or any central party.

I hope this shed some light for you on how blockchains work and what makes them special. If this is your first introduction to the concept of a blockchain I would encourage you to read more and learn as much as you can. If not, I hope you enjoyed this comparison of the blockchain to a journal and if you like the idea, please spread it around.

Happy blockchain-ing.