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Let us start with a brief introduction to Blockchain and how does it work. Once you get a clear understanding, we will proceed to the next section — Different Blockchain technologies and how are they different.
Blockchain technology provided the basic foundation of a new era of decentralized internet by allowing digital information to be distributed. Blockchain is a distributed ledger technology based on which the information in a peer to peer network is securely registered. Though originally built for Bitcoin trading, the promise of Blockchain stretches far beyond cryptocurrency. Blockchain headlines may include titles of property, loans, identities, logistics–almost anything worthwhile. The technology is still fresh, but it can have an exciting and enormous potential impact on businesses.
Now, let’s talk about the distributed ledger. Well, A distributed ledger is a transaction database that is shared and replicated through multiple computers and locations — without central control. That group has an identical copy of the record, which is modified automatically when any changes have been made.
Several people can enter data in a Blockchain, and a user community can monitor the manipulation and updating of the information record. The information is not controlled by anybody. But the variations that make Blockchain technology special become apparent when you descend to the ground level.
The distributed database created by Blockchain technology has a fundamentally different digital backbone. This is also Blockchain technology’s most distinct and significant aspect. The’ master copy’ of the Wikipedia is updated on a server, and everyone sees the new version. With a blockchain, every network node comes to the same conclusion; each node automatically updates the record, for de-facto as the most common record instead of a master copy.
The outcome is a digital interaction framework that does not require a trusted third party. The function of securing digital connections is implicit — given by the elegant, simple, but robust Blockchain-technology network architecture.
Blockchain stores data through a network of peers. All participants can access the data and use consensus algorithms to verify or reject it. Approved information is entered as a set of “chain” in the ledger and stored in an unchanged chronological sequence. Information held on a Blockchain exists as a shared — and continuously reconciled — database. This is a way to use the network with clear advantages. The blockchain database is not kept in every single place, so it is public and easy to check the records it holds. For a hacker, there is no centralized version of that information Hosted at the same time by millions of computers, their data can be accessed by anybody online.
Three main technologies are available that combine Blockchain creation. None of them are new. Rather, the orchestration and application are new to them. These technologies are
1) private key cryptography,
2) a distributed network with a shared ledger and
3) an incentive to service the network’s transactions, record-keeping and security.
This Blockchain technology aspect mainly aims to create a secure digital identity guide. Identity is based on the possession of private and public key combinations. Two people wish to transact over the internet. Each of them holds a private key and a public key. The combination of these keys can be viewed as a dexterous consent form creating a digital signal that is extremely useful. In addition, it provides strong ownership control over this digital signature.
However, strong ownership control is not sufficient to secure digital relationships. Authentication must be coupled with a way of authorizing transactions and allowances (authorization) when authentication is overcome. It begins with a distributed network for Blockchains.
The advantage and necessity of a distributed network can be illustrated by the thought experiment’ if a tree falls into the forest. If a tree falls into the forest, we can be pretty sure the tree fell, with cameras to record its fall. Even if the detail is (why or how) vague, we have visual evidence. Much of the value of the bitcoin blockchain is that it’s a big network in which validators, like the analog cameras, reach a consensus that they’re also experiencing the same thing. They use mathematical verification rather than cameras.
When cryptographic keys are combined with this network, a super useful form of digital interaction emerges. The process begins with A taking their private key, making an announcement of some sort — in the case of bitcoin, that you are sending a sum of the cryptocurrency — and attach it to the public key.
The Network servicing protocol possibly challenge the tree falling into the forest thought experiment with the following question: why would there be a million computers with cameras waiting to record if the tree fell? In other words, how do you gain computer power to secure the network? It involves mining for free, public blockchains. Mining is based on a unique approach to an ancient economic issue–the common tragedy.
Blockchains provide a reward for one of the computers by giving the computer the processing power to support the network. The self-interest of an individual is used to serve the public need. The aim of the protocol is, for bitcoin, to remove the possibility of using the same bitcoin concurrently for separate transactions so that it would be difficult to detect. Bitcoin is trying to act as gold, a property, like this. To order for Bitcoins to hold and have an interest, they and their base units (Satoshis). To do this, the nodes in the network create and maintain a transaction history for each bitcoin by solving work proof of mathematical problems. For each blockchain, the verification process can be adapted. If enough nodes reach a consensus on how transactions should be checked, all required rules and incentives can be established.
Consortium blockchains: In a blockchain consortium, a community of companies, for example, manages the consensus process. The ability to read and transact the blockchain may be available or limited to participants. Blockchains are known as “permissioned blockchains” and are best suited to business use.
Semi-private blockchains: Semi-private blockchains are managed by one organization, which gives access for every user who meets predefined requirements. Although this form of blockchain approved is not necessarily decentralized, it appeals for business-to-business cases and government applications.
Private blockchains: Private blockchains are regulated by a single company that decides who can access them, give them transactions and take part in a process of agreement. Since it is centralized by 100 percent, private blockchains are useful for sandboxing but not for actual production.
Public blockchains: Anyone can read, transact or participate in the consensus process a public blockchain. May transaction is public and users can remain anonymous. They are not permitted. The Bitcoin and Ethereum public blockchains are prominent examples.
Now that we have a good understanding of Blockchain and how it works, we can now draw a comparison on the most widely use Blockchain technologies/frameworks (January 2020).
The Ethereum project was developed with a view to adding functions across one single leader, a pioneer in the concept of “intelligent contracts” which enables multi-purpose computing capability. Bitcoin technology could only store and record Bitcoin transactions before Ethereum development, as it was intended for one specific purpose. In the context, an intelligent contract is an executable code that can be executed when unique, pre-programmed conditions are fulfilled. Inputs to an intelligent contract can be made up of several conditions, but outputs almost always lead to the value (assets) being exchanged between accounts or data being stored in the chain. The design principles of Ethereum enable widespread blockchain architecture with a minimal feature set that ensures that everyone has free network access. In many respects, the method of Ethereum is close to that of the Linux kernel, whereby the core framework is straightforward and simple and developers build their systems using their own specialist features.
Ethereum also uses a consensus on proof of work, similar to Bitcoin, to protect its chain. Miners use computer or card graphics computers (hash power) to overcome a system-set predetermined puzzle. Each puzzle is set to take approximately 15 seconds to solve mining rigs. Miners solving the puzzle build a block (and therefore receive compensation) so that the miner is responsible for putting any pending transactions in a block. Therefore, transactions paying higher rates are preferred by miners compared to miners paying lower rates regardless of how long a transaction is pending. Blockchain projects face a common set of scalability trilemmas in the industry: two architectures must choose between decentralization, scalability, and security. If anyone can access a network, a network is called decentralized, scalable when it handles enough transactions and secure when attacks can be avoided. The current agreement between Ethereum and proof-of-work prioritizes decentralization and safety at the expense of scalability, with a capacity of only 7–9 tractions per second as of January 2020. It is believed to be verified and applied to the blockchain with at least 51 percent of the network. When two miners solve the puzzle concurrently by chance — effectively creating their own block — then the block spreading first through 51% of the miners on the network will be added. All other blocks are called’ uncle bricks’ and their transactions are invalid. This validation method allows for circumstances in which the network is divided into two majority groups and each group decides to add its own block. The chain is divided into two sections, commonly referred to as a fork.
Ethereum architecture has three key components: clients, miners, and EVM (Ethereum Virtual Machine). There must be an Ethereum client installed to connect to the EVM in order to interact with the main blockchain. Currently, there are 15 + clients available — all intended to translate high-level code into a high-level bytecode for the EVM. Within Ethereum, transactions are used to store information and alter the state of the network–a transaction takes the form of any update to the core blockchain. A transaction typically takes the form of an intelligent contract that tells the EVM what to do. When a user generates a smart contract, it is forwarded to the client (either the user-hosted or a trusted third party), adding it to the memory pool. When the miners build a new block, they pick transactions from the pool and confirm that the network status will be updated when the block is validated.
Safety of Ethereum can be divided into two parts: safety of the core chain and safety of an application. As a rule of thumb, a chain becomes safer when computational power (hash) is increased with regard to core chain security. This is because it is very difficult for any group to get 51 percent of the chain’s calculation strength. In the case of a miner with a computing capacity of 51% in the chain, they will compromise the protection of a reverse package by allowing the transactions to double spending, effectively by making the same collection of coins available for multiple transactions a double expenditure. The protection of the application involves two types of attacks: errors causing mischievous or catastrophic failure and malicious attacks. Bugs in application code can lead to potential attacks mainly due to the absence of security checks before an app is released. There are intentional assaults when an attacker tries deliberately to deceive the code. The DAO attack is a famous example when an attacker found a flaw in the software code and began draining the fund — the main Ethereum chains that process and implement encryption have no security issues. When cyber auditing companies emerge, malware threats on the application have decreased dramatically.
The core Ethereum chain processes a block of transactions every 10–15 seconds, but the industry generally requires a certain number of successive blocks as ‘confirmations.’ It roughly takes around five to six minutes to confirm (finalize) a transaction once users submit it to the chain (assuming that the transaction is paying fees that are on par with others in the ecosystem). Yet, the security measures taken by implementers can vary these confirmation times greatly.
In the next part of this blog, we will see other Blockchain technologies — EOS, Hyperledger, Bitcoin, NEO.