Whenever I'm trying to explain to friends or relatives the difference between a blockchain and a database, I quickly get into troubles.
After all, it is a challenge to define blockchain in such a way, that you can't do a quick search and replace "blockchain" with the word "database" and still make the sentence work. A blockchain is not a database with signatures.
So recently, I have discovered a video with Andreas Antonopoulos on Youtube in which he explains convincingly and in simple terms the difference between a blockchain and a database.
He starts off by pondering the essence of Bitcoin. Following Antonopoulos it's not blockchain. The essence of Bitcoin was the ability to operate in a decentralized way without having to trust anyone; to empower users to be able to use software to verify everything themselves without appeal to authority.
According to him, users don't trust the other nodes they're talking to; they assume they're lying. Users don't trust the miners; they don't trust the people creating the transactions; they don't trust anything other than the outcome of their own verification and validation. And through that, they end up with trusting something more important: the network effect.
Bitcoin introduced the concept of decentralized security through computation and in the words of Antonopoulos "this has not yet sunk in."
Bitcoin allows users to replace a security model that is based around concentric circles of access and control with an institution in the center with a security model that is inside out open and accessible to everyone -- a security model that is based on market forces and game theory.
Following Antonopoulos, it is the first market based security model, where a series of incentives and punishments ensure that the ultimate result is that users can trust the platform itself as a neutral arbiter that is not controlled by anyone without third parties, without intermediaries. Bitcoin therefore revolutionizes trust.
Now blockchain is not only about Bitcoin or currency – there are other applications. But first, Antonopoulos precises that there is a difference between a blockchain and an open blockchain. Companies may also make use of a blockchain, but that would be a private blockchain.
Antonopoulos is interested in the applications of open blockchains that enable users to run a decentralized, trustless system that does not rely on anyone as an intermediary of trust. He stresses that the disruption was here and that this was the essence of this technology.
That essence is also seen in other systems. Ethereum exhibits it for the application of smart contracts, but those smart contracts only work if users don't have to trust anyone to execute the smart contract correctly and users can only trust that that's going to happen if everyone can participate in an open manner and verify each other, if access to the underlying consensus algorithm and mining is open to everyone.
Characteristics of open blockchains
In conclusion, Antonopoulos identifies five characteristics that define open blockchains:
As the name already suggests, they're open;
They're borderless, they cut across territories;
They're transnational, because this is no longer about nation-states. This is about network centric trust. Without third parties, the network is the trusted party and only if users verify everything;
Neutrality, because it isn't serving the goals of any one organization or institution. It follows the consensus rules neutrally; everyone follows the consensus rules neutrally. There is no such thing as a good transaction or a bad transaction; a valuable transaction or spam transaction, an authorized transaction or an unauthorized transaction; a legal transaction or an illegal transaction. In these systems there is only a valid or an invalid transaction based on the consensus rules and it doesn't matter who the sender is, who the recipient is or what the value or asset or smart contract that's being executed is. Neutrality, radical neutrality;
And finally, censorship resistance. The ability to ensure that in order for the system to be open and borderless and transnational and neutral, it must be able to defend these properties by making it impossible for any actor or even several colluding actors from censoring, disrupting, blacklisting, restricting, ceasing, freezing transactions, users countries from participating in this network.
In sum, blockchains are open decentralized systems of trust that do not depend on institutions.