How Blockchain Works?

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Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.  

If you have been following banking, investing, or cryptocurrency over the last ten years, you may be familiar with “blockchain,” the record-keeping technology behind the Bitcoin network. And there’s a good chance that it only makes so much sense. In trying to learn more about blockchain, you've probably encountered a definition like this: “blockchain is a distributed, decentralized, public ledger."

“Blocks” on the blockchain are made up of digital pieces of information. Specifically, they have three parts:

1. Blocks store information about transactions like the date, time, and dollar amount of your most recent purchase from Amazon. (NOTE: This Amazon example is for illustrative purchases; Amazon retail does not work on a blockchain principle as of this writing)
2. Blocks store information about who is participating in transactions. A block for your splurge purchase from Amazon would record your name along with Amazon.com, Inc. (AMZN). Instead of using your actual name, your purchase is recorded without any identifying information using a unique “digital signature,” sort of like a username.
3. Blocks store information that distinguishes them from other blocks. Much like you and I have names to distinguish us from one another, each block stores a unique code called a “hash” that allows us to tell it apart from every other block. Hashes are cryptographic codes created by special algorithms. Let’s say you made your splurge purchase on Amazon, but while it’s in transit, you decide you just can’t resist and need a second one. Even though the details of your new transaction would look nearly identical to your earlier purchase, we can still tell the blocks apart because of their unique codes.

A QUICK OVERVIEW

1. Digital assets are distributed instead of copied or transferred.
2. The asset is decentralized, allowing full real-time access.
3. A transparent ledger of changes preserves integrity of the document, which creates trust in the asset.

How Does Blockchain Work?

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The whole point of using a blockchain is to let people — in particular, people who don't trust one another — share valuable data in a secure, tamperproof way.

— MIT Technology Review

Blockchain consists of three important concepts: blocks, nodes and miners.

How Blockchain Works

When a block stores new data it is added to the blockchain. Blockchain, as its name suggests, consists of multiple blocks strung together. In order for a block to be added to the blockchain, however, four things must happen:

1. 1. A transaction must occur. Let’s continue with the example of your impulsive Amazon purchase. After hastily clicking through multiple checkout prompt, you go against your better judgment and make a purchase. As we discussed above, in many cases a block will group together potentially thousands of transactions, so your Amazon purchase will be packaged in the block along with other users' transaction information as well.
2. 2. That transaction must be verified. After making that purchase, your transaction must be verified. With other public records of information, like the Securities Exchange Commission, Wikipedia, or your local library, there’s someone in charge of vetting new data entries. With blockchain, however, that job is left up to a network of computers. When you make your purchase from Amazon, that network of computers rushes to check that your transaction happened in the way you said it did. That is, they confirm the details of the purchase, including the transaction’s time, dollar amount, and participants. (More on how this happens in a second.)
3. 3. That transaction must be stored in a block. After your transaction has been verified as accurate, it gets the green light. The transaction’s dollar amount, your digital signature, and Amazon’s digital signature are all stored in a block. There, the transaction will likely join hundreds, or thousands, of others like it.
4. 4. That block must be given a hash. Not unlike an angel earning its wings, once all of a block’s transactions have been verified, it must be given a unique, identifying code called a hash. The block is also given the hash of the most recent block added to the blockchain. Once hashed, the block can be added to the blockchain.

Blockchain vs. Bitcoin

1. The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. That concept can be difficult to wrap our heads around without seeing the technology in action, so let’s take a look at how the earliest application of blockchain technology actually works.

   Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with. But it wasn’t until almost two decades later, with the launch of Bitcoin in January 2009, that blockchain had its first real-world application.

   The Bitcoin protocol is built on the blockchain. In a research paper introducing the digital currency, Bitcoin’s pseudonymous creator Satoshi Nakamoto referred to it as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

KEY TAKEAWAYS

1. • Blockchain technology underlies cryptocurrency networks, and it may also be used in a wide variety of other applications as well.
   • Blockchain networks combine private key technology, distributed networks and shared ledgers.
   • Confirming and validating transactions is a crucial function of the blockchain for a cryptocurrency.

   

Progression of Data, from data to information to knowledge to insight to action

Progression of Data, from data to information to knowledge to insight to action:

The Data-Information-Knowledge-Wisdom (DIKW) hierarchy, or pyramid, relates data, information, knowledge, and wisdom as four layers in a pyramid. Data is the foundation of the pyramid, information is the next layer, then knowledge, and, finally, wisdom is the apex. DIKW is a model or construct that has been used widely within Information Science and Knowledge Management. Some theoreticians in library and information science have used DIKW to offer an account of logico-conceptual constructions of interest to them, particularly concepts relating to knowledge and epistemology. In a separate realm, managers of information in business process settings have seen the DIKW model as having a role in the task meeting real world practical challenges involving information.


Data is conceived of as symbols or signs, representing stimuli or signals. Information is defined as data that are endowed with meaning and purpose. Knowledge is a fluid mix of framed experience, values, contextual information, expert insight and grounded intuition that provides an environment and framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations it often becomes embedded not only in documents and repositories but also in organizational routines, processes, practices and norms. Wisdom is the ability to increase effectiveness. Wisdom adds value, which requires the mental function that we call judgment. The ethical and aesthetic values that this implies are inherent to the actor and are unique and personal.
Knowledge Pyramid, Wisdom Hierarchy and Information Hierarchy are some of the names referring to the popular representation of the relationships between data, information, knowledge and wisdom in the Data, Information, Knowledge, Wisdom (DIKW) Pyramid.
Like other hierarchy models, the Knowledge Pyramid has rigidly set building blocks – data comes first, information is next, then knowledge follows and finally wisdom is on the top.
Each step up the pyramid answers questions about the initial data and adds value to it. The more questions we answer, the higher we move up the pyramid. In other words, the more we enrich our data with meaning and context, the more knowledge and insights we get out of it. At the top of the pyramid, we have turned the knowledge and insights into a learning experience that guides our actions.

Information is the next building block of the DIKW Pyramid. This is data that has been “cleaned” of errors and further processed in a way that makes it easier to measure, visualize and analyze for a specific purpose.
Depending on this purpose, data processing can involve different operations such as combining different sets of data (aggregation), ensuring that the collected data is relevant and accurate (validation), etc. For example, we can organize our data in a way that exposes relationships between various seemingly disparate and disconnected data points. More specifically, we can analyze the Dow Jones index performance by creating a graph of data points for a particular period of time, based on the data at each day’s closing.
By asking relevant questions about ‘who’, ‘what’, ‘when’, ‘where’, etc., we can derive valuable information from the data and make it more useful for us.
But when we get to the question of  ‘how’, this is what makes the leap from information to Knowledge
“How” is the information, derived from the collected data, relevant to our goals? “How” are the pieces of this information connected to other pieces to add more meaning and value? And, maybe most importantly, “how” can we apply the information to achieve our goal?
When we don’t just view information as a description of collected facts, but also understand how to apply it to achieve our goals, we turn it into knowledge. This knowledge is often the edge that enterprises have over their competitors. As we uncover relationships that are not explicitly stated as information, we get deeper insights that take us higher up the DIKW pyramid.
But only when we use the knowledge and insights gained from the information to take proactive decisions, we can say that we have reached the final – ‘wisdom’ – step of the Knowledge Pyramid.

Wisdom

Wisdom is the top of the DIKW hierarchy and to get there, we must answer questions such as ‘why do something’ and ‘what is best’. In other words, wisdom is knowledge applied in action.
We can also say that, if data and information are like a look back to the past, knowledge and wisdom are associated with what we do now and what we want to achieve in the future.

Data

1. information, often in the form of facts or figures obtained from experiments or surveys, used as a basis for making calculations or drawing conclusions
2. information, for example, numbers, text, images, and sounds, in a form that is suitable for storage in or processing by a computer

Information

1. definite knowledge acquired or supplied about something or somebody
2. the collected facts and data about a particular subject
3. a telephone service that supplies telephone numbers to the public on request.
4. the communication of facts and knowledge
5. computer data that has been organized and presented in a systematic fashion to clarify the underlying meaning
6. a formal accusation of a crime brought by a prosecutor, as opposed to an indictment brought by a grand jury

Knowledge

1. general awareness or possession of information, facts, ideas, truths, or principles
2. clear awareness or explicit information, for example, of a situation or fact
3. all the information, facts, truths, and principles learned throughout time
4. familiarity or understanding gained through experience or study

Wisdom

1. the knowledge and experience needed to make sensible decisions and judgments, or the good sense shown by the decisions and judgments made
2. accumulated knowledge of life or in a particular sphere of activity that has been gained through experience
3. an opinion that almost everyone seems to share or express
4. ancient teachings or sayings

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