THE DAILY ENCRYPT

September 30, 2022
Blockchain

A blockchain is a distributed database which is shared between the nodes in a computer network. A blockchain is a distributed database that stores digital information in digital format. Blockchains are most well-known for their role in cryptocurrency systems such as Bitcoin. They allow for the secure and decentralized storage of transactions. Blockchains are unique because they guarantee the security and integrity of data records and can generate trust without the need of trusted third parties.

A blockchain’s data structure is a key difference from a traditional database. A blockchain gathers information in groups known as blocks. These groups can hold multiple information sets. Each block has a certain storage capacity and is linked to the previous filled block. This creates the chain of data called the blockchain. Any new information following the newly added block is combined into a new block, which will be added to that chain once it has been filled.

A database typically structures its data in tables. However, a blockchain structures its data in chunks (or blocks) that are then strung together. When implemented in a decentralized manner, this data structure creates an irreversible timeline. Once a block has been filled, it becomes part of the timeline. Every block is assigned a time stamp as it is added to a chain.

How does Blockchain Technology Work?

Blockchain’s goal is to enable digital information to be recorded, distributed and edited. A blockchain is the foundation of immutable ledgers. These are records that can not be deleted, altered, or destroyed. Blockchains are also known as a distributed leadger technology (DLT).

The blockchain concept was first proposed in 1991 as a research project. Its first widespread use was in 2009 with Bitcoin. Since then, blockchains have seen a surge in popularity thanks to the creation of various cryptocurrency, Decentralized Finance (DeFi), Applications, Non-fungible Tokens (NFTs), and Smart Contracts.

Decentralization

Imagine a company that owns 10,000 computers and uses them to maintain a database that holds all client information. The company has a warehouse that houses all these computers. It also has complete control over each computer and the information within them. However, this is a single point for failure. What happens if there is no electricity? What happens if the Internet is cut? What if it is completely destroyed? What happens if an unsavory actor deletes all data with one keystroke? The data can be lost or corrupted in any event.

A blockchain allows data from a database to be distributed across multiple network nodes in different locations. This creates redundancy and protects the integrity of the data. If someone attempts to alter a record at a particular instance of the database, all other nodes will not be affected. One user could alter Bitcoin’s transaction record, and all the other nodes would cross-reference to find the correct node. This system allows for a transparent and exact order of events. It is impossible for any one node to alter the information within the network.

This makes it impossible to retrace the history and information (e.g. transactions in a cryptocurrency) that has been stored. This record could include a list or transactions, but it is also possible for a blockchain not to have any other information, such as legal contracts, state identifications or product inventories.

How Secure is Blockchain Technology?

Blockchain technology provides decentralized security and trust in many ways. New blocks are stored chronologically and linearly. They are added to the “end”, of the blockchain. It is very difficult to change the content of a block once it has been added to the blockchain’s end. This happens only if a majority of the network agrees to do so. Each block has its own haveh and the hash of any previous block. A mathematical function creates hash codes. This transforms digital information into numbers and letters. The hash code will change if the information is altered in any way.

Let’s suppose that a hacker who also runs a node in a blockchain network wants to alter a Blockchain and steal cryptocurrency from everyone. They could alter only one copy of the chain, and it wouldn’t be compatible with all others. If everyone crosses-references copies against one another, they will see that this copy stands out and the hacker’s version would be discarded as invalid.

To succeed with this hack, the hacker would need to simultaneously alter 51% or more copies of the blockchain in order for their new copy to become the majority copy. This will allow them to create the agreed-upon chains. This attack would require a lot of money and resources. They would have to redo all blocks as they would have different time stamps or hash codes.

Given the sheer volume of cryptocurrency networks and their rapid growth, it is likely that such a feat would prove impossible to achieve. This would not only be extremely costly, but also unlikely to prove fruitful. This would be a costly and likely ineffective move. Network members would notice the drastic changes to the blockchain. Network members would hard fork to access a new version that has not been altered. The token would then lose its value and the attack would be futile. If the bad actor attempted to attack the fork of Bitcoin, the same thing would happen. This is because taking part in the network’s operation is more lucrative than attacking it.

Take Aways

  • Blockchain is a shared database type that is different from other databases in how it stores information. Blockchains store data in blocks which are then linked via cryptography.
  • Each time new data is received, it is added to a new block. Once the block has been filled, the data is chained to the previous block. This allows the data to be arranged chronologically.
  • A blockchain can store many types of information, but transactions are the most popular use.
  • Blockchain is used in Bitcoin’s decentralized case so that no one person or group can control it. Instead, all users retain control.
  • Blockchains that are decentralized and immutable can be reverted to at any time. This means transactions can be viewed and recorded forever for Bitcoin.
 
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