Revivot - The Advantages of the Blockchain

      The three main properties of Blockchain Technology which has helped it gain
widespread acclaim are as follows:

1-Decentralization

2-Transparency

3-Immutability

1. Decentralization

     Before Bitcoin and Bit Torrent came along, we were more used to centralized services. The idea is very simple. You have a centralized entity which stored all the data and you’d have to interact solely with this entity to get whatever information you required.

Another example of a centralized system is banks. They store all your money, and the only way that you can pay someone is by going through the bank.

When you Google search for something, you send a query to the server who then gets back at you with the relevant information. That is simple client-server.

Now, centralized systems have treated us well for many years, however, they have several vulnerabilities:

·         Firstly, because they are centralized, all the data is stored in one spot. This makes them easy target spots for potential hackers. 

·         If the centralized system were to go through a software upgrade, it would halt the entire system 

·        What if the centralized entity somehow shut down for whatever reason? That way nobody will be able to access the information that it possesses

·         Worst case scenario, what if this entity gets corrupted and malicious? If that happens then all the data that is inside the blockchain will be compromised.

In a decentralized system, the information is not stored by one single entity. In fact, everyone in the network owns the information.

In a decentralized network, if you wanted to interact with your friend then you can do so directly without going through a third party. That was the main ideology behind Bitcoin. You and only you alone are in charge of your money. You can send your money to anyone you want without having to go through a bank.

2. Transparency

        One of the most interesting and misunderstood concepts in the blockchain technology is “transparency.” Some people say that blockchain gives you privacy while some say that it is transparent. Why do you think that happens?

A person’s identity is hidden via complex cryptography and represented only by their public address. So, if you were to look up a person’s transaction history, you will not see “Bob sent 1 BTC” instead you will see “1MF1bhsFLkBzzz9vpFYEmvwT2TbyCt7NZJ sent 1 BTC”.

So, while the person’s real identity is secure, you will still see all the transactions that were done by their public address. This level of transparency has never existed before within a financial system. It adds that extra, and much needed, level of accountability which is required by some of these biggest institutions.

Speaking purely from the point of view of crypt currency, if you know the public address of one of these big companies, you can simply pop it in an explorer and look at all the transactions that they have engaged in. This forces them to be honest, something that they have never had to deal with before.

However, that’s not the best use-case. We are pretty sure that most of these companies won’t transact using crypt currencies, and even if they do, they won’t do ALL their transactions using crypt currencies. However, what if the blockchain technology was integrated…say in their supply chain?

3. Immutability

        Immutability, in the context of the blockchain, means that once something has been entered into the blockchain, it cannot be tampered with.

Imagine how many embezzlement cases can be nipped in the bud if people know that they can’t “work the books” and fiddle around with company accounts.

The reason why the blockchain gets this property is that of cryptographic hash function "Hash Algorithm".

In simple terms, hashing means taking an input string of any length and giving out an output of a fixed length. In the context of crypt currencies like Bitcoin, the transactions are taken as an input and run through a hashing algorithm (Bitcoin uses SHA-256) which gives an output of a fixed length.

A cryptographic hash function is a special class of hash functions which has various properties making it ideal for cryptography. There are certain properties that a cryptographic hash function needs to have in order to be considered secure. You can read about those in detail in our guide on hashing.

There is just one property that we want you to focus on today. It is called the “Avalanche Effect.”

Even if you make a small change in your input, the changes that will be reflected in the hash will be huge.

The blockchain is a linked list which contains data and a hash pointer which points to its previous block, hence creating the chain. What is a hash pointer? A hash pointer is similar to a pointer, but instead of just containing the address of the previous block it also contains the hash of the data inside the previous block. This one small tweak is what makes blockchain so amazingly reliable and trailblazing.

Imagine this for a second, a hacker attacks block 3 and tries to change the data. Because of the properties of hash functions, a slight change in data will change the hash drastically. This means that any slight changes made in block 3, will change the hash which is stored in block 2, now that in turn will change the data and the hash of block 2 which will result in changes in block 1 and so on and so forth. This will completely change the chain, which is impossible. This is exactly how blockchain attain immutability.

Maintaining the Blockchain – Network and Nodes

        The blockchain is maintained by a peer-to-peer network. The network is a collection of nodes which are interconnected to one another. Nodes are individual computers which take in input and performs a function on them and gives an output. The blockchain uses a special kind of network called “peer-to-peer network” which partitions its entire workload between participants, who are all equally privileged, called “peers”. There is no longer one central server, now there are several distributed and decentralized peers.

Why do people prefer to use the peer-to-peer network?

     One of the main usages of the peer-to-peer network is file sharing, also called tormenting. If you are to use a client-server model for downloading, then it is usually extremely slow and entirely dependent on the health of the server. Plus, like we said, it is prone to censorship.

However, in a peer-to-peer system, there is no central authority, and hence if even one of the peers in the network goes out of the race, you still have more peers to download from. Plus, it is not subject to the idealistic standards of a central system, hence it is not prone to censorship.

The decentralized nature of a peer-to-peer system becomes critical as we move on to the next section. How critical? Well, the simple (at least on paper) idea of combining this peer-to-peer network with a payment system has completely revolutionized the finance industry by giving birth to crypt currency.

The use of networks and nodes in crypt currencies

The peer-to-peer network structure in crypt currencies is structured according to the consensus mechanism that they are utilizing. For cryptos like Bitcoin and Ethereum which uses a normal proof-of-work consensus mechanism (Ethereum will eventually move on to Proof of Stake), all the nodes have the same privilege. The idea is to create an egalitarian network. The nodes are not given any special privileges, however, their functions and degree of participation may differ. There is no centralized server/entity, nor is there any hierarchy. It is a flat topology.

These decentralized cryptocurrencies are structured like that is because of a simple reason, to stay true to their philosophy. The idea is to have a currency system, where everyone is treated as an equal and there is no governing body, which can determine the value of the currency based on a whim. This is true for both bitcoin and Ethereum.

Now, if there is no central system, how would everyone in the system get to know that a certain transaction has happened? The network follows the gossip protocol. Think of how gossip spreads. Suppose Alice sent 3 ETH to Bob. The nodes nearest to her will get to know of this, and then they will tell the nodes closest to them, and then they will tell their neighbors, and this will keep on spreading out until everyone knows. Nodes are basically your nosy, annoying relatives.

So, what is a node in the context of Ethereum? A node is simply a computer that participates in the Ethereum network. This participation can be in three ways. By keeping a shallow-copy of the blockchain aka a Light Client. By keeping a full-copy of the blockchain aka a Full Node.  By verifying the transactions aka Mining. However, the problem with this design is that it is not really that scalable. Which is why, a lot of new generation cryptocurrencies adopt a leader-based consensus mechanism. In EOS, Cardano, Neo etc. the nodes elect leader nodes or “super nodes” who are in charge of the consensus and overall network health. These crypts' are a lot faster but they are not the most decentralized of systems.