Decentralization, transparency, permissionless and pseudonymity.
In the previous issue, we got to understand buzz words like web3 and the blockchain and a little bit of how nuanced they are from each other. In this issue, we will cover, from a high level the features of a blockchain and what makes them so interesting, let's get started, shall we?
The features of a blockchain are inherent characteristics of a blockchain that are derived from its internal architecture. Think simply, a blockchain is a distributed ledger technology in which transactions (think data) are stored across nodes (participants in the blockchain network) and each node has an identical copy of this data. What feature does this confer on the blockchain then?
- Decentralization:
Decentralization, simply put, is a phenomenon where data is distributed among multiple servers. In contrast to centralization, where it is a single-server model and data is stored in a central server. Centralization offers speed because there is no need to check and verify data against another server but the trade off here is security and fault tolerance. In centralized systems, there is a single point of attack or failure.
An attacker needs to take down a server to compromise the network or the server being down means the entire system is down.
On the other hand, a decentralized system offers better security and fault tolerance because an attacker needs to take down a majority of the nodes to take over the system and while this is possible in theory, it is practically not a feasible thing to do because of the way the internal architecture of the blockchain, one of which is cryptography - we will discuss this in a future issue.
A decentralized system is also fault tolerant because the downtime of a node or some nodes does not spell the end of the system, as long as there is still a running node.
- Transparency:
This feature of the blockchain is that its records can be seen by anyone with an internet-connected device. Ever heard of "Blockchain explorers"? The tools that allow you view transactions within a blockchain network Just imagine you could monitor transactions a company you have invested in are being made, cool right?. This is particularly useful for things like cyrptocurrencies, NFTs (Non-Fungible Tokens), smart contracts among others. We will go into these in a future issue.
- Pseudonymity and Permissionless:
These features also make the blockchain very interesting. On the blockchain, data is not typically stored as in conventional systems, one common way of identification on the blockchain is through addresses (0x00...). Think of addresses as locations on the blockchain that can only be generated once (in most cases). This is what cryptocurrency wallets use to track funds, an amount of tokens, which are basically integers are mapped to an address, not an account number, not a name. So an address could own 10 bitcoins and you would not even be able to know who, because when setting up your wallet (e.g. MetaMask), you are not asked for a name or address, you are simply provided with a seed phrase and a private key that you will use to control the wallet.
This means that anyone around the world can have access to funds irrespective of race, gender, location or age as long as they are connected to the internet.
In short, the blockchain is permissionless because there is no central body to provide restriction.
Whoosh, that was a lot, I hope you have learnt something new. In the next issue, we will go over how these features apply to real-world scenarios using two standpoints: finance and agreements.
See you in the next issue!
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