Blockchain Fundamentals — Spark* Your Knowledge
Summaries of topics (19/09–22/09)
Date of Activity: 19 September 2022 (Monday)
Topic: Exploring the Bits of Blockchain Technology
Author: Tanmayee Choudhury
If you are reading this, it’s likely that you are familiar with blockchain technology, a term that is frequently used in the Web 3 industry. Despite the fact that we have all heard of it, what is blockchain technology and how does it work? In this article, we will discuss that and also take a look at why it is revolutionary, its limitations and what opportunities rise from this technology.
The blockchain is a shared ledger that contains a chronological public record of all transactions involving cryptocurrencies like Bitcoin or Ethereum but what are some of the key concepts of blockchain technology? First off, the blockchain is not owned by any one person or entity; rather, anybody with an internet connection can utilise it and contribute to its upkeep and verification. A blockchain can be created and accessed in a variety of ways, too. Anyone can join the blockchain as a read-only user or legitimately alter it by adding new blocks, for example. These blockchains provide all network users equal and unrestricted access and rights. Thirdly, the append-only data structure used by the blockchain not only allows for the inclusion of new transactions and data but also guards against the deletion of older data. As a result, a reliable and permanent record of the information and transactions involving the various parties is produced, increasing accountability and transparency.
A blockchain functions primarily thanks to four components: a distributed ledger, a block data and hash function, proof-of-work (PoS), and mining. A distributed ledger allows a group of users called nodes, to record transactions in a ledger that is only visible to that group, ensuring that once a transaction is published it cannot be modified. On the other hand, blockchains can only include verified transactions thanks to block data and hashing, which stops fraudulent transactions and double spending of the currency. Data that has been encrypted via algorithmic hashing will not look anything like the original data; instead, the outcome will be a hash, which is just a collection of numbers and characters. PoS is a method that delays the production of new blocks and is protected by miners (special nodes), who add transactions to the already existing blockchain record of transactions shared among all users of a blockchain.
We strongly believe that blockchain technology is revolutionary since every transaction will be recorded and distributed on a public ledger for anyone to see and be able to track back to its original source. This technology offers greater transparency and improved traceability to reduce fraud. Since transactions must be approved before being recorded, it has increased security. Other than that, there is no need for intermediaries or third parties to provide guarantees, which lowers expenses. Having said all of that, this technology has certain drawbacks as well. For instance, blockchains have an environmental cost since they use a lot of computational power to perform complicated algorithms to verify that a user has permission to write to the chain. Another limitation is its lack of regulation. Scams and market manipulation are frequent because there are few to no controls. Finally, due to their complexity and use of encrypted transaction processing, blockchains can also be slow.
In terms of technology breakthroughs, the development of blockchains represents another significant step forward, although it still has some drawbacks. Despite this, there are more and more high-paying positions in a variety of businesses available in this relatively young field. Although it will take some time for it to be adopted by major companies, individuals who are eager to learn will eventually benefit from this growing industry.
Date of Activity: 20 September 2022 (Tuesday)
Topic: How does a blockchain work?
Channel Name: Simply Explained
A blockchain is, as its name suggests, a chain of information-containing blocks. This method was first designed to timestamp digital documents so that they could not be backdated or altered, and it was first reported in 1991 by a group of researchers but it remained largely underused until Satoshi Nakamoto modified it in 2009 to launch Bitcoin. The use of blockchains is growing rapidly today, but how secure are they and what safeguards are in place to protect them? All of that will be discussed in this article.
By creating blocks and employing hashes, a blockchain is kept secure. Basically, each block consists of some data, its own hash, and the hash of the block before it. Depending on the type of blockchain, a block may include different types of data. A block also has a hash, which, like a fingerprint, uniquely identifies the block and all of its contents. A block’s hash is calculated when it is formed, and if changes are made inside the block, the hash will change. This feature is useful for users who want to track down changes to blocks. The hash of the preceding block is the third component in each block. This effectively produces a chain of blocks, which increases the security of the blockchain and hinders manipulation to a certain degree.
Hashing alone, however, cannot stop tampering. Modern computers are extremely quick and can calculate millions of hashes in a single second. In order to restore the validity of a blockchain, one can effectively modify a block and recalculate all the hashes of previous blocks. Proof-of-work (PoS), a mechanism that slows the production of new blocks, enters the picture at this point. For instance, calculating the requisite PoS and adding a new block to the chain both take roughly 10 minutes in the case of Bitcoin. This approach makes it incredibly difficult to manipulate the blocks because doing so requires recalculating the PoS for all subsequent blocks.
Instead of utilising a centralised organisation to maintain the chain, blockchains use a peer-to-peer (P2P) network that anybody may join. A blockchain is a distributed ledger that is completely open to everyone. Anyone who joins this network receives a complete copy of the blockchain. This is the third way that blockchains are maintained secure, and the node can utilise it to confirm that everything is still in order. Everybody on the network will receive any new blocks that are created. Following a final check to ensure the block has not been tampered with, each node will add the block to their own blockchain if everything checks out. In contrast, if a block is discovered to have been altered, the nodes will reject the block.
In conclusion, in order to manipulate a blockchain, a person would have to change the PoS for every block and seize control of more than half of the P2P network. The good news is that nobody will be able to accomplish achieving all of that!
Date of Activity: 21 September 2022 (Wednesday)
Topic: What is a Blockchain? (A @FrancescoCiull4 thread)
A blockchain is a decentralised, distributed, and frequently open digital ledger. It is made up of a growing collection of records, or “blocks,” that are connected by cryptography. Blockchains are also referred to as an immutable, totally decentralised, peer-to-peer (P2P), and trustless data storage. Infrastructure, networking (node discovery, information propagation, and verification), consensus (proof of work/stake), data (blocks, transactions), and application (smart contracts/decentralized applications) are some of the layers that make up a blockchain.
Let’s start by defining blocks. A block contains transaction data, a timestamp, and a cryptographic hash of the block before it. In order to enter the block’s hash, the timestamp proves that the transaction data was there at the time the block was released. By using these “chains of blocks,” it is confirmed that each unit of value was only ever transferred once, eliminating the attribute of limitless replication from a digital asset.
Fortunately for us, blocks are very hard to be tampered with because changing the recorded data in one block will change all the ones after it. Other than that, nodes follow a protocol to communicate and validate new blocks while blocks are controlled by a P2P network for usage as a publicly distributed ledger. In spite of the fact that forks are possible and blockchain data can be altered, blockchains can be regarded as secure by design because they are an example of a distributed computing system with strong Byzantine fault tolerance.
In conclusion, blockchains are very resistant to changes and secure by design. It can be viewed as a value-exchange protocol because of its nature, and when properly configured to specify the exchange agreement, it produces a record that obligates both offer and acceptance while preserving title rights.
Date of Activity: 22 September 2022 (Thursday)
Topic: How Does the Blockchain Work? (Community Discussion)
Author: Michele D’Aliessi
The development of blockchain technology is arguably the greatest since the internet. Without the requirement for trust or a centralised authority, this tecnhology enables value exchange. What’s more intriguing is that using blockchain technology, one will be able to set terms for funds and transactions to be processed based on specific conditions by writing a few lines of code for a software running on the blockchain. The monies will be automatically sent to the recipient party if the requirements are satisfied. This function is quick, simple, and inexpensive in addition to being trustworthy. Although we won’t go into great detail about the technical aspects of the blockchain’s operation in this article, you will have a general understanding of its underlying logic and operations after reading it.
The most well-known and frequently discussed usage of blockchain technology is Bitcoin, a digital money that functions similarly to traditional currencies in the exchange of goods and services. The blockchain employs a ledger, a digital file that records all Bitcoin transactions, to keep track of how much each user has. A network of private computers called nodes, which collaborate to verify and reach consensus whenever a transaction is carried out, receive copies of the ledger. After the verification procedure, the money is transferred to a wallet where it can be stored and traded by the user. Each wallet is secured by a unique cryptographic technique that employs a private and public key pair that are separate yet related. If a public key is used to encrypt a message, only the holder of the corresponding private key will be able to decrypt and read the message. Additionally, if someone uses their private key to encrypt a communication, only the matched public key may decrypt it.
The ledger is maintained by each node in the blockchain, but how does a node know the balance of a particular account? The blockchain system, however, merely records confirmed and approved transactions; it makes no attempt to keep track of account balances. Thus, the ledger only records transactions that are broadcast within the Bitcoin network and does not record balances. This means a person must examine and confirm every transaction that has ever occurred on the entire network connected to their wallet in order to know the balance of their wallet. This “balance” verification is carried out via links or “inputs” to earlier transactions. The network’s nodes will cooperate to check the sum and make sure that these inputs haven’t been spent yet.
Let’s now talk about how secure your wallet is. Anyone with access to a VPN network, for instance, can join anonymously to the Bitcoin network and send or receive transactions that only show their public key. However, it is possible to link all of the transactions to the same owner if the same public key is used again. Fortunately, the Bitcoin network enables users to create an unlimited number of wallets, each with their own private and public keys. This enables them to accept payments on various wallets, and unless they send all of the received cryptocurrency to a single wallet, no one will be able to tell that they are the owners of all of these wallets’ private keys.
Blocks are used by the bitcoin network to organise transactions. Each block has a set number of transactions and a connection to the block before it. This is what sequentially places the blocks one after the other. Each block must include the solution to a challenging mathematical puzzle generated by an irreversible cryptographic hash function in order to be added to the blockchain. Such a mathematical puzzle can only be solved by picking random numbers that, when coupled with the information in the previous block, provide a specific outcome. A typical computer might need a year to make the correct assumption and figure out the equation but because there are so many computers in the network guessing numbers, a block is usually solved every ten minutes. The node with the correct answer gains the privilege to add the following block to the chain and broadcast it to the network. Due to the fact a block must be solved and added to the blockchain using a large number of random guesses, pre-compiling a sequence of blocks is exceedingly challenging. The outcome? Fraud is prevented from occurring within the blockchain.
Now that you know how the blockchain functions in general, let’s quickly review some of its advantages. The value that a user owns will be entirely under their control; a third party cannot hold that value or restrict your access to it. Other than that, there is complete transparency because anyone, at any moment, may check every transaction conducted on the blockchain. People from all parts of the Earth with an Internet connection can conduct a value transaction for very little money, and it just takes a few minutes to transfer the value. There are a few issues, though, that must be resolved. Like for instance, transactions can be sent and received anonymously. This preserves user privacy, but it also permits unlawful behaviour on the network. Additionally, Bitcoin is extremely volatile, like many other cryptocurrencies, and its price may abruptly shift in response to significant developments or announcements in the cryptocurrency industry.
In conclusion, blockchain technology has the potential to revolutionize a number of industries, including energy distribution and advertising. Although it is crucial to keep in mind that this technology is still in its infancy and will take some time to be improved, its fundamental strength comes in its decentralised structure and its ability to eliminate the need for trust.