Features of Blockchain - for newbies

Blockchain has been "the theme" for some years now. You hear it again and again in connection with bitcoin or other emerging cryptocurrencies. Here I want to explain the essential characteristics of the blockchain and explained it in more detail.

Decentralized
Decentralization is one of the most important basic elements of blockchain technology. The system architecture of the blockchain does not have a central platform that takes over the control of the data. The verification and validation of transactions in the blockchain are built up in a peer-to-peer network, which enables direct collaboration between the individual participants. Furthermore, each participant in the network has a copy of the transactions (ledger) on his own computer, eliminating the need for a central database [1].

Source: [2]

Tamper-proof
Blockchain technology uses cryptographic encryption techniques to verify transactions performed and, in the case of cryptographic currencies, to regulate the creation of funds. The network is based on a decentralized structure that builds on the anonymity of the users, thus ensuring equality of participants and eliminating the possibility of manipulation by third parties through the proof-of-work approach. Furthermore, the individual blocks of the blockchain play an important role in manipulation security. Encryption using a hash function and the reference to the previous block makes it almost impossible to change a block in the chain without noticing this, since all subsequent blocks would also have to be adapted [1].

Anonymity
Basically, neither the users nor the miners have to legitimize themselves when participating in the blockchain network. The user does not have to register with his real name, but the participant receives a pseudo identity, which is expressed by an address, through the use of the network. Each participant can also create and manage multiple addresses and each of these addresses is managed by a different pseudonym. Only when an account can be assigned to a certain person does anonymity cease [1].

Transparency
The individual blocks in the blockchain contain the complete history of transactions of the individual sender and receiver addresses in the blockchain network. This history is publicly accessible for every participant in the network. This should provide transparency and traceability of the individual transactions. The important thing here is that nobody finds out who's behind the address. Should this happen, however, anonymity is no longer given [1].

Confidentiality
Confidentiality is applied in different areas of the blockchain. Bitcoins and other cryptocurrencies are therefore based on participants trust in the integrity and security of a decentralized computer network and not on the credibility of a central platform. Whereas in traditional currency systems, money is not subject to a quantitative limit, the maximum number of units that can be generated in a digital currency is limited by the system.
The ledger is also an important aspect of confidentiality. This includes all transactions and makes them publicly available. However, this still allows the confidentiality of individual transaction details, as these can only be done with the respective private key of the authorized person [3].

Referenzen:
[1] E. Sixt, Bitcoins und andere dezentrale Transaktionssysteme: Blockchains als Basis einer Kryptoökonomie. Wiesbaden, s.l.: Springer Fachmedien Wiesbaden, 2017.
[2] S. Roßbach, “Blockchain in wenigen Worten erklärt,” Frankfurt/Main, Sep. 7 2016.
[3] V. Brühl, “Bitcoins, Blockchain und Distributed Ledgers,” Wirtschaftsdienst, vol. 97, no. 2, pp. 135–142, 2017.

The original contribution is in German found on www.blockchainbasics.ch which was a school project for the MSc Business Information Systems at ZHAW School of Management and Law Program.