Presented by Gersande.
RESEARCH INSTITUTE OF THE FINNISH ECONOMY
ETLA is the leading private economic research organisation in Finland. From early on, ETLA has charted the effect of education and research on productivity and growth. More recently, ETLA has analysed factors that foster innovation and facilitate adoption of new technology, and thereby promote the development of a knowledge economy.
Their website: etla.fi .
In brief, the blockchain technology is a method by which parties previously unknown to one another can jointly generate and maintain practically any database on a fully distributed basis. In reality, the system works so that each party is distributed a copy of the database (or part of it) and may then make changes to the database subject to collectively accepted rules.
The changes made by the various parties are assembled and stored in a database at regular intervals as bundled packets called ‘blocks’. When new blocks are added to the original database, they form a blockchain, or an up-to-date database containing all the changes made.
To ensure that the other network users accept the proposed block as part of the shared blockchain, the proposing party must sign their block using a solution to a highly complicated mathematical problem specific to each individual block. The blocks are ‘stacked’ in such a way that any tempering with the data will change the problem to be solved within the blocks.
When the questions change, the solutions found to the preceding blocks no longer apply and the other nodes of the network reject the proposed fraudulent blockchain. During the time it takes for a fraudster to solve new problems, the rest of the network proceeds much further.
In other words, the method is based on a never-ending race between the individual versions of the database in which the winner is the version that has made the most progress.
The reliability of the method stems from the fact that working with the various versions calls for constant computational work. As long as more than half of the computing power of the network supports the ‘honest’ version of the database, even a large number of attackers cannot shake the distributed unanimity and consensus of the network.
So, in essence, a blockchain is a distributed digital sandglass where mathematical problems are the trickle. It allows for the creation of a jointly generated electronic time stamp that all participants can trust, even if they do not trust one another.