Let’s open the blockchain galaxy together
In the first part of the article, we have partially understood the concepts of “decentralization” and P2P-network.
Each article is linked, so if you haven’t already read the first article, read it before you start reading this publication — Part 1: Decentralization and P2P Networks
Pleasant reading :)
In the past, some of the deepest inventions that changed humanity were Joint stock company, double entry Accounting and the Internet (with information transfer).
Now the new era is a blockchain, artificial intelligence, big data, etc.
To plunge into the world of cryptocurrencies, it is necessary to understand the concept of blockchain technology, and then go to the cryptocurrency itself.
This blockchain is built according to certain rules is a continuous sequential chain of blocks that contain data.
Blockchain — distributed cryptographic Ledger, distributed among all nodes participating in the network, which records each successful transaction.
Blockchain technology is not a company and is not an application, but a completely new way of documenting data on the Internet. This technology can be used to develop applications with blockchain, such as social networks, messengers, games, exchanges, storage platforms, voting systems, forecast markets, online stores, payment systems and much more.
For the first time, the term appeared as the name of a fully replicated distributed database implemented in the “Bitcoin” system, which is why blockchain is often referred to transactions in various cryptocurrencies, but the technology of block chains can be extended to any interconnected information blocks. Bitcoin was the first application of blockchain technology in October 2008.
Replication — a mechanism for synchronizing the contents of multiple copies of an object (for example, the contents of a database). Replication is a process that involves copying data from one source to another (or many others), and Vice versa.
Distributed database (DDB) — a database whose component parts are placed in different nodes of a computer network according to a certain criterion.
Blockchain, which is used to be seen in cryptocurrencies, is based on a combination of three concepts that have existed for some time: peer-to-peer technology (P2P), cryptography and game theory.
▪ It’s amazing technology P2P: torrents use p2p technology for distribution of information across nodes. The block nodes in the network communicate through the p2p technology and locally store information about the block chain. Both concepts (blockchain and torrents) do not need a Central server to operate.
▪ Cryptography ensures transparency and confidentiality. A cryptographic hash function to encrypt a separate transaction. Blocks and transactions are cryptographically related, and therefore maintain the same chain. Miners check every transaction occurring in the network, so cheating is impossible.
▪ Game theory: there is a need for economic incentives to participate in the network. Miners (the miners) do not approve the transaction on the blockchain for free. Bitcoin blockchain pays miners, and thus they remain “motivated”.
The information recorded in the block chain can take any form, be it money transfer, ownership, transaction, someone’s identity, agreement between the two parties or even how much electricity the bulb used.
However, this requires confirmation from multiple devices, such as computers on the network. Once an agreement otherwise known as consensus is reached between these devices to store anything on the blockchain-it cannot be challenged, deleted or modified.
Instead of storing information in a single Central location, as traditional recording methods do, multiple copies of the same data are stored in different locations and on different devices on the network, such as computers.
This means that even if one store is damaged or lost, a few copies remain safe and in other places. Similarly, if one piece of information changes without the consent of the legitimate owners, there are many other copies (examples) where the information is correct, making the false entry obsolete.
Let’s look at the example of bitcoin:
Bitcoin (“bit” and “coin”) — a peer-to-peer payment system that uses the same unit to account for transactions and the same data transfer Protocol. Cryptographic methods are used to ensure the functioning and protection of the system. All information about transactions between the addresses of the system is available in an open form
Blockchain is a transaction Book that protects Bitcoin and allows all users to agree with those who own the number of bitcoins. Each new block requires writing the last transactions along with a string of letters and numbers known as a hash, which is based on the previous block and is created using a cryptographic algorithm.
Its sole purpose is to keep track of transactions that occur. Think about what accountant opening the table balance again and again checked all the rooms. Note that not every node needs to store an entire chain of chains, mainly miners and purse vendors need to store them locally. Users can simply trust other nodes and send transactions.
Blockchain technology is to prevent double spending or, in other words, to prevent people from copying information.
Miners — People who run bitcoin peer-to-peer software randomly generate hashes, competing to create one with a value below a certain target complexity and thus complete a new block and get rewarded.
This difficulty means that it is impossible to fake a transaction if you have more computing power than anyone else on the Bitcoin network.
Blockchain is not limited to monetary applications. Borrowing the same ideas (though not using actual single-threaded network bitcoins), many new applications have adapted the bitcoin Protocol to perform different purposes: Namecoin to manage a distributed domain name; Bitmessage and Twister for asynchronous communication.
Asynchronous communication — a method of transmission in which the time interval between transmitted characters may vary. Is considered the most widespread form of transfer of data. The reason for this popularity is the use of standard telephone lines by this method. Asynchronous transfer transfers the data in a sequential stream. This type of communication is not synchronized, the transmitter transmits, and the receiver receives without device coordination. Approximately 25% of the traffic goes to the transmission of matching information.
Like many other peer-to-peer (P2P) applications, these platforms rely on decentralized architectures to build and maintain network applications managed by the community for the community.
Let’s analyze the example:
Imagine that there is a huge digital record. And anyone who has Internet access can view the information inside this entry.
This record does not have a governing body, staff, it is distributed to 1000 computers in different locations around the world in a distributed network. The network is constantly growing, as computer owners are rewarded in return for their power. All information in the record is permanent, it can not be changed and each of the computers stores a copy of the record to ensure continuity.
If You wanted to hack into the system, you would have to hack into every computer on the network — and this has proved impossible so far, despite many attempts, including in the US national security Agency. The collective power of all these computers is more than 500 of the best supercomputers in the world.
New information is added to the record every few minutes, but it can only be added when all computers signal their approval, which they do once they have satisfactory proof that the information they need to add is correct.
Everyone knows how the system works, but no one can change how it works. The process is fully automated. The process of acceptance or conduct of a person is not included in it.
If a company or government Department were responsible for recording, it would be vulnerable — if the company went into decline or, for example, the government Department closed. But there is no single point of vulnerability with a distributed record. It’s decentralized.
Sometimes some computers may be wrong, but it doesn’t matter. Copies on all other computers and their unanimous approval of the new information to be added will mean that the recording itself is secure.
Blockchain technology is mainly understood in the context of cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Dogecoin, etc.
This may have a negative impact on its potential, blockchain offers much more.
As a distributed accounting technology (DLT), it records transactions as an immutable digital time block with a timestamp that clearly indicates the senders and recipients of money. It has a number of different applications besides cryptocurrencies: for example, smart contracts can automate agreements in the public and private sectors, saving time and money for organizations of any size.
Of course, the sphere of Finance is where blockchain technology was invented. It inherently provides greater visibility, scalability, and efficiency at lower cost. Blockchain technology can significantly reduce long-term resource needs: to improve the quality of customer service and increasing work efficiency.
In the following articles we will analyze the concept of cryptocurrencies.
A quick reminder:
▪️ Blockchain is a public Ledger of any type of information.
▪️ Cryptocurrency is built on the blockchain technology.
▪️ The information recorded on the block chain is stored in different places at once, so it is always safe, it is called P2P network .
▪️ The identity of everyone who uses blockchain is hidden behind random numbers and letters using cryptography .
▪️ Blockchain keeps up to date through special computer programs that reward people who keep it up to date, these are known as consensus protocols .
▪️ The information is always correct because of the special codes that show if something has changed when it shouldn’t be, so you can always believe what you’re watching thanks to hashes .
▪️ Blockchain is special because it means you can deal with anyone you want without the need for a big company telling you who you can or can’t trust.
▪️ This makes it possible to create a new, defenseless system and a world.
▪️ Blockchain is distributed and decentralized , making it cheaper, faster and more reliable than any centralized system.