- Everyone’s talking about Blockchain, but what is it?
Just now·4 min read
Block Chain is a de-centralized network through peer to peer interaction taken place on a series of Nodes around the world. Ok that was a mouthful, but what does that really mean. Block Chain is a the way of the future, not only when it comes to money, (Cryptocurrencies) but how information is used, operated, and stored. This is possible through a network of people who add their information to the ‘Block Chain’ where every person gets a ‘virtual ledger’, basically saying who has what.
Inside of each ‘block’, there is data, a hash, and the hash of the previous block in the chain. Ok, with that down, the data is whatever information or action you want the block to hold. Maybe it’s, transferring money, storing a political vote, or an NFT. The hash is the identifiable factor of the block, basically like its fingerprint. The hash is randomly generated, based on the data inside the block, making each block in the chain unique. Lastly, each block contains the hash of the previous block before it. This would mean tampering with the data inside one block would change its hash deeming all future blocks invalid.
However, computers have enough power these days where they can re-write all the hashes of the blocks following one they want to change. In a sense, they could change history. Nevertheless, blockchains have other security measures keeping them safe. They can do do this through Proof of Work (PoW) and Proof of Stake (PoS) mechanisms slowing the creation of new blocks.
PoW is a group mining system to validate and create a new block. On the other hand, Proof of Stake is a minting/forging system that allocates the job to different people for every new block.
PoW uses computer calculations on a software that all the different nodes of the system run on. This is where it gets its name ‘work’, by trying to solve a cryptographic hash function. The first one to complete it will get a small profit (ex. a small amount of Bitcoin). However, his method can ruin the decentralized nature of Block Chain, ending up with Mining Pools. These are pools of people using the same certain pieces of Computer Hardware to collectively ‘mine’ a block and to split the profits. While this may be helpful, it takes up a lot of energy usage and has caused a semi-conductor shortage. On the other hand, PoS is a system where users pledge a certain amount of money or crypto, where the more money entered by someone grants them a better chance of ‘minting’ the next block. It is like a security deposit for raffle tickets, where the more money you put in, the better the chance you will have to ‘mint’ the next block. (Side Note: By mint, it differs from mining because it isn’t many people trying to solve and validate a puzzle, but one person validating that everything in the block checks out.) However, PoS also isn’t perfect because people with more money can put a higher stake in the system, making them more likely to be picked. However, it is the better than the alternative, and the benefits of PoS for the lack of needing expensive mining equipment, and its energy effcient security, encourages more people to join in on the network, keeping the system decentralized.
According to the 51% Attack, if a group takes control of over 50% of the validating/hashing component of the blockchain, they can litterally re-write history without the need to have a group consensus because the majority would win in the scenario anyways. This has happened a few times. In entirety, Bitcoin SV (BSV), Bitcoin Gold (BTG), and Ethereum Classic(ETC) have all experienced the 51% attack, with scenarios getting as bad as 5 (BSV) per dollar.
The current blockchain may not work with the commericial uses that we have today. This is due, in part, to the transparency that could come within a business interaction. If part of the supply chain becomes transparent, then so will all the data of the partners and customers dealing with that business. This is not always ideal to some forms of business that ensure their customers’ security.
The scalability of the necessary computer hardware and software portions might serve up as a problem for the future. This is because each time new data is entered into the blockchain, each node needs a copy of the ledger, which makes it, in part, somewhat redundant, yet necessary. On the hardware side, the computers will have to be powerful enough to process a vast amount more of transactions and everything in general.
Uses of Blockchain
Even with it’s problems, it is necessary to have many different points to learn from and grow to become better. This applies to blockchain as well. We are right now just scratching the surface, so we are bound to find new places to improve upon. Nevertheless, we have already found many future applications for Blockchain, which include:
- Banking/Finacial services
Goverment and Poltical Records
Those are just to list a few, not including the big ones like Crypto and NFTs. A detailed description of these use-cases and many others can be found here.
- Date of publication:
- Fri, 11/12/2021 - 18:50
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