Explaining Blockchains – without understanding them.

I tweeted this the other day, after reading about Microsoft’s Project Bletchley:

I’ve been asked how I can tweet something as specific as this, when in a subsequent tweet, I noted:

[I readily admit I didn’t understand the announcement, or what it’s /supposed/ to be for, but that didn’t stop me thinking about it]

— Alun Jones (@ftp_alun) June 17, 2016

Despite having  reasonably strong background in the use of crypto, and a little dabbling into the analysis of crypto, I don’t really follow the whole “blockchain” thing.

So, here’s my attempt to explain what little I understand of blockchains and their potential uses, with an open invitation to come and correct me.

What’s a blockchain used for?

The most widely-known use of blockchains is that of Bit Coin and other “digital currencies”.

Bit Coins are essentially numbers with special properties, that make them progressively harder to find as time goes on. Because they are scarce and getting scarcer, it becomes possible for people of a certain mindset to ascribe a “value” to them, much as we assign value to precious metals or gemstones aside from their mere attractiveness. [Bit Coins have no intrinsic attractiveness as far as I can tell] That there is no actual intrinsic value leads me to refer to Bit Coin as a kind of shared madness, in which everyone who believes there is value to the Bit Coin shares this delusion with many others, and can use that shared delusion as a basis for trading other valued objects. Of course, the same kind of shared madness is what makes regular financial markets and country-run money work, too.

Because of this value, people will trade them for other things of value, whether that’s shiny rocks, or other forms of currency, digital or otherwise. It’s a great way to turn traceable goods into far less-traceable digital commodities, so its use for money laundering is obvious. Its use for online transactions should also be obvious, as it’s an irrevocable and verifiable transfer of value, unlike a credit card which many vendors will tell you from their own experiences can be stolen, and transactions can be revoked as a result, whether or not you’ve shipped valuable goods.

What makes this an irrevocable and verifiable transfer is the principle of a “blockchain”, which is reported in a distributed ledger. Anyone can, at any time, at least in theory, download the entire history of ownership of a particular Bit Coin, and verify that the person who’s selling you theirs is truly the current and correct owner of it.

How does a blockchain work?

I’m going to assume you understand how digital signatures work at this point, because that’s a whole ‘nother explanation.

Remember that a Bit Coin starts as a number. It could be any kind of data, because all data can be represented as a number. That’s important, later.

The first owner of that number signs it, and then distributes the number and signature out to the world. This is the “distributed ledger”. For Bit Coins, the “world” in this case is everyone else who signs up to the Bit Coin madness.

When someone wants to buy that Bit Coin (presumably another item of mutually agreed similar value exchanges hands, to buy the Bit Coin), the seller signs the buyer’s signature of the Bit Coin, acknowledging transfer of ownership, and then the buyer distributes that signature out to the distributed ledger. You can now use the distributed ledger at any time to verify that the Bit Coin has a story from creation and initial signature, unbroken, all the way up to current ownership.

I’m a little flakey on what, other than a search in the distributed ledger for previous sales of this Bit Coin, prevents a seller from signing the same Bit Coin over simultaneously to two other buyers. Maybe that’s enough – after all, if the distributed ledger contains a demonstration that you were unreliable once, your other signed Bit Coins will presumably have zero value.

So, in this perspective, a blockchain is simply an unbroken record of ownership or provenance of a piece of data from creation to current owner, and one that can be extended onwards.

In the world of financial use, of course, there are some disadvantages – the most obvious being that if I can make you sign a Bit Coin against your well, it’s irrevocably mine. There is no overarching authority that can say “no, let’s back up on that transaction, and say it never happened”. This is also pitched as an advantage, although many Bit Coin owners have been quite upset to find that their hugely-valuable piles of Bit Coins are now in someone else’s ownership.

Now, explain your tweet.

With the above perspective in the back of my head, I read the Project Bletchley report.

I even looked at the pictures.

I still didn’t really understand it, but something went “ping” in my head.

Maybe this is how C-level executives feel.

Here’s my thought:

Businesses get data from customers, users, partners, competitors, outright theft and shenanigans.

Maybe in environments where privacy is respected, like the EU, blockchains could be an avenue by which regulators enforce companies describing and PROVING where their data comes from, and that it was not acquired or used in an inappropriate manner?

When I give you my data, I sign it as coming from me, and sign that it’s now legitimately possessed by you (I won’t say “owned”, because I feel that personal data is irrevocably “owned” by the person it describes). Unlike Bit Coin, I can do this several times with the same packet of data, or different packets of data containing various other information. That information might also contain details of what I’m approving you to do with that information.

This is the start of a blockchain.

When information is transferred to a new party, that transfer will be signed, and the blockchain can be verified at that point. Further usage restrictions can be added.

Finally, when an information commissioner wants to check whether a company is handling data appropriately, they can ask for the blockchains associated with data that has been used in various ways. That then allows the commissioner to verify whether reported use or abuse has been legitimately approved or not.

And before this sounds like too much regulatory intervention, it also allows businesses to verify the provenance of the data they have, and to determine where sensitive data resides in their systems, because if it always travels with its blockchain, it’s always possible to find and trace it.

[Of course, if it travels without its blockchain, then it just looks like you either have old outdated software which doesn’t understand the blockchain and needs to be retired, or you’re doing something underhanded and inappropriate with customers’ data.]

It even allows the revocation of a set of data to be performed – when a customer moves to another provider, for instance.

Yes, there’s the downside of hugely increased storage requirements. Oh well.

Oh, and that revocation request on behalf of the customer, that would then be signed by the business to acknowledge it had been received, and would be passed on to partners – another blockchain.

So, maybe I’ve misunderstood, and this isn’t how it’s going to be used, but I think it’s an intriguing thought, and would love to hear your comments.