What is blockchain?

Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.

A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. The decentralised database managed by multiple participants is known as Distributed Ledger Technology (DLT).

Blockchain is a type of DLT in which transactions are recorded with an immutable cryptographic signature called a Hash

Let’s Build the Tiniest Blockchain

Although some think blockchain is a solution waiting for problems, there’s no doubt that this novel technology is a marvel of computing. But, what exactly is a blockchain?

Blockchain a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.

In more general terms, it’s a public database where new data are stored in a container called a block and are added to an immutable chain (hence blockchain) with data added in the past. In the case of Bitcoin and other cryptocurrencies, these data are groups of transactions. But, the data can be of any type, of course.

Blockchain technology has given rise to new, fully digital currencies like Bitcoin and Litecoin that aren’t issued or managed by a central authority. This brings new freedom to individuals who believe that today’s banking systems are a scam or subject to failure. Blockchain has also revolutionized distributed computing in the form of technologies like Ethereum, which has introduced interesting concepts like smart contracts.

I’ll make a simple blockchain in less than 50 lines of Python 2 code. It’ll be called SnakeCoin.

We’ll start by first defining what our blocks will look like. In blockchain, each block is stored with a timestamp and, optionally, an index. In SnakeCoin, we’re going to store both. And to help ensure integrity throughout the blockchain, each block will have a self-identifying hash. Like Bitcoin, each block’s hash will be a cryptographic hash of the block’s index, timestamp, data, and the hash of the previous block’s hash. Oh, and the data can be anything you want.

  import hashlib as hasher

class Block:
  def __init__(self, index, timestamp, data, previous_hash):
    self.index = index
    self.timestamp = timestamp
    self.data = data
    self.previous_hash = previous_hash
    self.hash = self.hash_block()
  
  def hash_block(self):
    sha = hasher.sha256()
    sha.update(str(self.index) + 
               str(self.timestamp) + 
               str(self.data) + 
               str(self.previous_hash))
    return sha.hexdigest()

Awesome! We have our block structure, but we’re creating a blockchain. We need to start adding blocks to the actual chain. As I mentioned earlier, each block requires information from the previous block. But with that being said, a question arises: how does the first block in the blockchain get there? Well, the first block, or genesis block, is a special block. In many cases, it’s added manually or has unique logic allowing it to be added.

We’ll create a function that simply returns a genesis block to make things easy. This block is of index 0, and it has an arbitrary data value and an arbitrary value in the “previous hash” parameter.

import datetime as date

def create_genesis_block():
  # Manually construct a block with
  # index zero and arbitrary previous hash
  return Block(0, date.datetime.now(), "Genesis Block", "0")

Now that we’re able to create a genesis block, we need a function that will generate succeeding blocks in the blockchain. This function will take the previous block in the chain as a parameter, create the data for the block to be generated, and return the new block with its appropriate data. When new blocks hash information from previous blocks, the integrity of the blockchain increases with each new block. If we didn’t do this, it would be easier for an outside party to “change the past” and replace our chain with an entirely new one of their own. This chain of hashes acts as cryptographic proof and helps ensure that once a block is added to the blockchain it cannot be replaced or removed.

 def next_block(last_block):
  this_index = last_block.index + 1
  this_timestamp = date.datetime.now()
  this_data = "Hey! I'm block " + str(this_index)
  this_hash = last_block.hash
  return Block(this_index, this_timestamp, this_data, this_hash)

That’s the majority of the hard work. Now, we can create our blockchain! In our case, the blockchain itself is a simple Python list. The first element of the list is the genesis block. And of course, we need to add the succeeding blocks. Because SnakeCoin is the tiniest blockchain, we’ll only add 20 new blocks. We can do this with a for loop.

# Create the blockchain and add the genesis block
blockchain = [create_genesis_block()]
previous_block = blockchain[0]

# How many blocks should we add to the chain
# after the genesis block
num_of_blocks_to_add = 20

# Add blocks to the chain
for i in range(0, num_of_blocks_to_add):
  block_to_add = next_block(previous_block)
  blockchain.append(block_to_add)
  previous_block = block_to_add
  # Tell everyone about it!
  print "Block #{} has been added to the blockchain!".format(block_to_add.index)
  print "Hash: {}\n".format(block_to_add.hash) 

Let’s test what we’ve made so far.

[image]

There we go! Our blockchain works. If you want to see more information in the console, you could edit the complete source file and print each block’s timestamp or data.

That’s about all that SnakeCoin has to offer. To make SnakeCoin scale to the size of today’s production blockchains, we’d have to add more features like a server layer to track changes to the chain on multiple machines and a proof-of-work algorithm to limit the amount of blocks added in a given time period.

From now on, SnakeCoin’s data will be transactions, so each block’s data field will be a list of some transactions. We’ll define a transaction as follows. Each transaction will be a JSON object detailing the sender of the coin, the receiver of the coin, and the amount of SnakeCoin that is being transferred. Note: Transactions are in JSON format for a reason I’ll detail shortly.

{
  "from": "71238uqirbfh894-random-public-key-a-alkjdflakjfewn204ij",
  "to": "93j4ivnqiopvh43-random-public-key-b-qjrgvnoeirbnferinfo",
  "amount": 3
}

Now that we know what our transactions will look like, we need a way to add them to one of the computers in our blockchain network, called a node. To do that, we’ll create a simple HTTP server so that any user can let our nodes know that a new transaction has occurred. A node will be able to accept a POST request with a transaction (like above) as the request body. This is why transactions are JSON formatted; we need them to be transmitted to our server in a request body.

pip install flask # Install our web server framework first  

from flask import Flask
from flask import request
node = Flask(__name__)

# Store the transactions that
# this node has in a list
this_nodes_transactions = []

@node.route('/txion', methods=['POST'])
def transaction():
  if request.method == 'POST':
    # On each new POST request,
    # we extract the transaction data
    new_txion = request.get_json()
    # Then we add the transaction to our list
    this_nodes_transactions.append(new_txion)
    # Because the transaction was successfully
    # submitted, we log it to our console
    print "New transaction"
    print "FROM: {}".format(new_txion['from'])
    print "TO: {}".format(new_txion['to'])
    print "AMOUNT: {}\n".format(new_txion['amount'])
    # Then we let the client know it worked out
    return "Transaction submission successful\n"

node.run()

Awesome! Now we have a way to keep a record of users when they send SnakeCoins to each other. This is why people refer to blockchains as public, distributed ledgers: all transactions are stored for all to see and are stored on every node in the network.

But, a question arises: where do people get SnakeCoins from? Nowhere, yet. There’s no such thing as a SnakeCoin yet, because not one coin has been created and issued yet. To create new coins, people have to mine new blocks of SnakeCoin. When they successfully mine new blocks, a new SnakeCoin is created and rewarded to the person who mined the block. The coin then gets circulated once the miner sends the SnakeCoin to another person.

We don’t want it to be too easy to mine new SnakeCoin blocks, because that will create too many SnakeCoins and they will have little value. Conversely, we don’t want it to be too hard to mine new blocks, because there wouldn’t be enough coins for everyone to spend, and they would be too expensive for our liking. To control the difficulty of mining new SnakeCoins, we’ll implement a Proof-of-Work (PoW) algorithm. A Proof-of-Work algorithm is essentially an algorithm that generates an item that is difficult to create but easy to verify. The item is called the proof and, as it sounds, it is proof that a computer performed a certain amount of work.

In SnakeCoin, we’ll create a somewhat simple Proof-of-Work algorithm. To create a new block, a miner’s computer will have to increment a number. When that number is divisible by 9 (the number of letters in “SnakeCoin”) and the proof number of the last block, a new SnakeCoin block will be mined and the miner will be given a brand new SnakeCoin.

# ...blockchain
# ...Block class definition

miner_address = "q3nf394hjg-random-miner-address-34nf3i4nflkn3oi"

def proof_of_work(last_proof):
  # Create a variable that we will use to find
  # our next proof of work
  incrementor = last_proof + 1
  # Keep incrementing the incrementor until
  # it's equal to a number divisible by 9
  # and the proof of work of the previous
  # block in the chain
  while not (incrementor % 9 == 0 and incrementor % last_proof == 0):
    incrementor += 1
  # Once that number is found,
  # we can return it as a proof
  # of our work
  return incrementor

@node.route('/mine', methods = ['GET'])
def mine():
  # Get the last proof of work
  last_block = blockchain[len(blockchain) - 1]
  last_proof = last_block.data['proof-of-work']
  # Find the proof of work for
  # the current block being mined
  # Note: The program will hang here until a new
  #       proof of work is found
  proof = proof_of_work(last_proof)
  # Once we find a valid proof of work,
  # we know we can mine a block so 
  # we reward the miner by adding a transaction
  this_nodes_transactions.append(
    { "from": "network", "to": miner_address, "amount": 1 }
  )
  # Now we can gather the data needed
  # to create the new block
  new_block_data = {
    "proof-of-work": proof,
    "transactions": list(this_nodes_transactions)
  }
  new_block_index = last_block.index + 1
  new_block_timestamp = this_timestamp = date.datetime.now()
  last_block_hash = last_block.hash
  # Empty transaction list
  this_nodes_transactions[:] = []
  # Now create the
  # new block!
  mined_block = Block(
    new_block_index,
    new_block_timestamp,
    new_block_data,
    last_block_hash
  )
  blockchain.append(mined_block)
  # Let the client know we mined a block
  return json.dumps({
      "index": new_block_index,
      "timestamp": str(new_block_timestamp),
      "data": new_block_data,
      "hash": last_block_hash
  }) + "\n"

Now, we can control the number of blocks mined in a certain time period, and we can issue new coins for people in the network to send to each other. But like we said, we’re only doing this on one computer. If blockchains are decentralized, how do we make sure that the same chain is on every node? To do this, we make each node broadcast its version of the chain to the others and allow them to receive the chains of other nodes. After that, each node has to verify the other nodes’ chains so that the every node in the network can come to a consensus of what the resulting blockchain will look like. This is called a consensus algorithm.

Our consensus algorithm will be rather simple: if a node’s chain is different from another’s (i.e. there is a conflict), then the longest chain in the network stays and all shorter chains will be deleted. If there is no conflict between the chains in our network, then we carry on.

@node.route('/blocks', methods=['GET'])
def get_blocks():
  chain_to_send = blockchain
  # Convert our blocks into dictionaries
  # so we can send them as json objects later
  for block in chain_to_send:
    block_index = str(block.index)
    block_timestamp = str(block.timestamp)
    block_data = str(block.data)
    block_hash = block.hash
    block = {
      "index": block_index,
      "timestamp": block_timestamp,
      "data": block_data,
      "hash": block_hash
    }
  # Send our chain to whomever requested it
  chain_to_send = json.dumps(chain_to_send)
  return chain_to_send

def find_new_chains():
  # Get the blockchains of every
  # other node
  other_chains = []
  for node_url in peer_nodes:
    # Get their chains using a GET request
    block = requests.get(node_url + "/blocks").content
    # Convert the JSON object to a Python dictionary
    block = json.loads(block)
    # Add it to our list
    other_chains.append(block)
  return other_chains

def consensus():
  # Get the blocks from other nodes
  other_chains = find_new_chains()
  # If our chain isn't longest,
  # then we store the longest chain
  longest_chain = blockchain
  for chain in other_chains:
    if len(longest_chain) < len(chain):
      longest_chain = chain
  # If the longest chain wasn't ours,
  # then we set our chain to the longest
  blockchain = longest_chain

We’re just about done now. After running the full SnakeCoin server code, run the following commands in your terminal. Assuming you have cURL installed.

Create a transaction.

curl "localhost:5000/txion" \
     -H "Content-Type: application/json" \
     -d '{"from": "akjflw", "to":"fjlakdj", "amount": 3}'
     

2. Mine a new block.

curl localhost:5000/mine

3. Check out the results. From the client window, we see this.

With a little bit of pretty printing we see that after mining we get some cool information on our new block.

{
  "index": 2,
  "data": {
    "transactions": [
      {
        "to": "fjlakdj",
        "amount": 3,
        "from": "akjflw"
      },
      {
        "to": "q3nf394hjg-random-miner-address-34nf3i4nflkn3oi",
        "amount": 1,
        "from": "network"
      }
    ],
    "proof-of-work": 36
  },
  "hash": "151edd3ef6af2e7eb8272245cb8ea91b4ecfc3e60af22d8518ef0bba8b4a6b18",
  "timestamp": "2017-07-23 11:23:10.140996"
}

And that’s it! We’ve made a fairly sized blockchain at this point. Now, SnakeCoin can be launched on multiple machines to create a network, and real SnakeCoins can be mined.