The Blockchain technology has burst onto the world scene in a short time as something new and revolutionary. While it has aspects that meet these characteristics, the reality is that for the most part it is made up of many other technologies that have been in use for a long time. That is why it is common to find obsolete or partial explanations of its operation or characteristics.
In this article intends to describe and explain its operation to provide an overview of how Blockchain really works. In addition, the characteristics derived from this performance will be analyzed, emphasizing those that are most publicized when talking about "the blockchain".
The 3 key elements of the blockchain
The blockchain is a distributed database that can store any type of information, in minimum units of validated information called "blocks". Although Blockchain is not bitcoin, since bitcoin is just a way to use the string, it will be used as an example based on a cryptocurrency transfer, since it is the best-known currency.
Let's say a bitcoin user who wants to pay for coffee in a cafeteria. On his mobile, he has a bitcoin wallet and makes a transfer to the cafeteria account. The terminal then issues the transfer report to the nodes of the nearest Blockchain network. They relay it to their known nodes and so on until they reach the entire network. Each node that receives the information from the transfer performs some checks to avoid false information. When this review arrives at a mining node of the network, it will put it in a block and try to "undermine" the block the first one to introduce it in the chain and win the reward.
The basic unit of this chain is the block, which is made up of different fields. The most relevant is the one that contains the information (of any type), which has an approximate size of 1 megabyte. The number field identifies the block within the blockchain in consecutive order.
The field "nonce" is the key to introduce the block in the chain and can be any natural number, this will be explained later when discussing "mining". Finally, the "hash" field is a code that is obtained from the information of the block, unique to that block. The block contains the hash of the last block of the chain (its predecessor if it just enters the chain) and its own, calculated from all other fields.
Returning to the example, once the information of the transaction has been transmitted to the network, it arrives at different nodes. The majority will perform three operations to verify that it is true: they check their format, their signature and with the information available in the chain, they make sure that the client's account has funds to carry it out.
Other nodes, the so-called "miners", will collect transactions and put them together in a block. Later they will try to "mine" it to introduce it in the chain, definitively validating the information it contains and making it unchangeable and accessible to all. And what is " mining "? It consists of generating the hash of the block, previously mentioned, with a determined "nonce" number. This number is unknown and the "miners" must be randomly tested until they find a valid one. The one with which a hash is obtained that starts in a certain way (18 zeros for the case of the bitcoin chain), will be the correct one. In each chain, the hash has a certain format, and it is what the "miners" will have to achieve by varying the number "nonce" to "undermine" the block.
The Blockchain technology in the case of bitcoin is public, but there are other variants. The type depends on which users can read and contribute information in the chain. Thus, there are public, private and hybrid networks. In the public, there are no restrictions to read the data of the chain of blocks (which may have been encrypted) or to send transactions to be included in the chain of blocks. The private chain is one in which both the access to the data of the blockchain and the sending of transactions to be included are limited to a predefined list of entities.
The main characteristic of the chain is that it constitutes a relationship between blocks that prevent the information from being modified by interested nodes. Since each block includes the hash of the previous block to calculate its own hash, if a block is modified, the hash of all subsequent blocks must be recalculated. This would require an impossible computing capacity today. In addition, even if it were achieved, it would have to incorporate that false version of the chain to 51% of the nodes in the network.
Characteristics of Blockchain Technology
These elements of the technology and its way of functioning conform certain characteristics of Blockchain, both positive and negative. Positive characteristics include veracity, transparency, speed, and anonymity. Negative aspects include non-scalability, a certain aspect of anonymity and legislative regulation, scanty and disparate.
Thanks to the nature of blockchain technology, as explained above, once the information is added to it, it can only be consulted but not modified. Because of this and because everyone has this information, it is truthful and cannot be manipulated by a single entity that possesses it in its entirety. In addition, this provides transparency about the information, since all the participating entities can know all the movements made.
Once the information is in the chain, the speed of access to the data is another positive feature. By keeping the chain local, you can quickly consult without intermediaries or bureaucracy.
The operations are signed with a private key, which provides anonymity to anyone who adds data to the chain. But it is not a complete anonymity, because if someone finds out the key of a user he would know all the movements of this one in the chain. That is why this feature can be included in both positive and negative aspects.
Finally, and speaking of weaknesses in technology. The blockchain contains more and more information (currently the bitcoin chain occupies about 155 Gigabytes), which means that fewer and fewer users can keep it in their conventional devices, with everything that implies for the operation of this technology based on the Number of users. An adopted solution is that certain nodes contain the bulk of the chain and the rest consult them.
Bitcoin mining is also affected by this problem; since to be the first to find the correct hash of a block and add it to the chain, the equipment used must have a competitive computing capacity. This capacity has increased since bitcoin was created and will continue to do so, allowing only a few entities to mine blocks. Currently, the vast majority of the computing capacity of the network resides in 4 mining equipment, mostly Chinese. This tendency would make the power to add information depend on a few entities, ending with the essence of Blockchain.
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