BlockChain for layman — Part 1
What is blockchain? → In simple terminology, blockchain is a immutable, highly available digital ledger stored in a decentralized network of computers(nodes) where all transactions are stored chronological order and secured via cryptographic way.
In other words, blockchain is a Database that stores information about transactions and stores a copy of all transactions separately in a network of computers also called Consensus. Since it is stored in multiple computers there is no single point failure and no single computer will have the authority to manipulate transactions. These computers collectively decide what is a legit transaction and what is not and which transaction/block goes into chain. In this way, it is Decentralized and no single authority has the access to manipulate underlying information.
It doesn’t matter how you refer to blockchain (Block Chain, BlockChain, block chain or Block Chain), but it’s super important to remain consistent. I just went with lowercase blockchain because it’s the one I see the most… like antivirus (not anti-virus, AntiVirus, etc).
Difference Between Distributed and Decentralized Systems:
Computers in both distributed and decentralized networks are spread across the globe; the difference is authority. Decentralized networks don’t have a centralized authority to make changes to the system or to the blockchain. Therefore, there is no single point failure and it is not possible to manipulate transactions that are sitting in the system. In the case of bitcoin (or most of the cryptocurrencies) a global network of decentralized computers will decide what is legit and what is not.
In a distributed network there is a central authority. Let us consider the example of Amazon. Its network is distributed all over globe but there is a centralized authority that decides what to store in those computers, what each computer does, how each computer behaves, upgrade details, modifications to the existing data in each computer, etc.
Advantages and Disadvantages:
- Decentralized Systems are trust less and secure; at the same time, it is inefficient and hard to manage. For example, if you want to update the system it is possible only by forks which are difficult to manage compared to updating a server sitting in a centralized architecture.
- For distributed systems there is trust involved, and because of the security and reliability flaws it should need extra layers of security monitoring when maintaining financial and confidential applications.
When dealing with digital assets or currency, security plays a important role. Decentralized systems use more hashing power, which helps secure the network. In distributed systems, we don’t have that paradigm; we only have authentication and access controls.
Properties(Advantages) of a Blockchain:
It is very important to understand what blockchain is good at and what it is not good at before building any blockchain application or before investing in any blockchain idea. In order to understand this we can divide block chain in to 5 properties, PCSHF → Providence, Consensus, Security and Immutability, High Availability, and Finality.
Providence: Since blockchain is a store of information (typically transaction information) in a decentralized network, we don’t want any one entity to be able to go there and change the data, We should also have the ability to trace the origins of the data. For example, if you want to find how your shirt was made, you may ask yourself, “Was it made by people or companies that use child labor or did they use fair labor?” Or perhaps, “What are the ingredients of the food you’re eating?” “Where did these ingredients originate?” “ How were these grown?” You should be able to track all this information without any middle man. With blockchain technology, you can go to block chain and get all the information, and it’s reliable . It is a very important property to of a transparent system that can be used to fight corruption or to find fraudulent activities etc.
- One example of the benefit of this property would be if the IRS used blockchain to keep track of all tax transactions for individuals in the United States. Within this scenario, there is no possibility of tax evasion. The IRS already has all transactions in their system to track down evasion instead of validating all copies of the bills they receive.
- Another example would be if you are contributing to a foreign NGO and you wanted to ensure that money that you donated is utilized in a proper way.
So, digital providence is very important property that blockchains possess for developing transparent applications.
Consensus: As we discussed earlier, blockchain is a decentralized system. There is no single authority to tell the remaining system what to do. A network of computers (nodes) in a decentralized system coming to a general agreement on deciding legit transactions or some other agreement is called Consensus. Consensus is driven by incentives and they are very secure. Consensus plays very important role in blockchain; it removes middleman and breaks information silos.
Security and Immutability: In a centralized system, security is provided by the organization and controlled through access controls and authentication. There is trust involved in this paradigm. For example, online banking for a bank is maintained by the bank itself and all your credentials are stored by the bank. Here, trust plays key role; you are trusting the bank that they secure your creds, but all your information is stored is a centralized system which can be vulnerable to hackers. Blockchain brings a whole new paradigm in to security called Trust less. The paradigm suggests to not trust any centralized system or authority, but instead trust the mathematics and computation principals used to develop the blockchain. Security in blockchain is provided by hashing the previous block in a chain. Any changes or tampers to the block results in an invalid hash and makes the complete blockchain invalid. This is the way the information stored the block is secured. I will explain more on this in later sections.
High Availability: Any website or application that is built using centralized infrastructure is prone to DDoS attacks and is a single point failure. Centralized architecture basically limits us from high availability. Conversely, blockchain or decentralized applications are global so it is not possible to shut down. That is why any application that is built on blockchain is available 24*7. It makes perfect sense to maintain all critical and global infrastructure such as Air Traffic Control systems in a decentralized highly available way. HA is one of the biggest strength of blockchain.
Finality: This is one of the most important properties that blockchain possesses. Finality means once the transactions are written to blockchain it stays there forever, and it is not possible to reverse the transaction or to modify it.
