Blockchain technology utilizes decentralized computing to create many different kinds of networks. So, what is it exactly that makes it decentralized and trustless anyways? Afterall, it is extremely important to understand and be aware of the different variations of networks which exist in today’s world. To answer this question and explore several more, let’s take a closer look at how decentralized networks maintain security and achieve consensus.
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To fully understand how decentralized networks function, you should first familiarize yourself with blockchain technology. Without going into extensive detail, blockchain is the underlying technology for digital currencies like Bitcoin, while it can also be employed for a multitude of ulterior purposes like voting. This allows for all kinds of data to be distributed, verified and recorded on public ledgers.
Essentially, it’s a fully transparent and continuously updated record of the exchange of information through a network of personal computers, a system which nobody fully owns. This makes it decentralized and extremely difficult for anyone to single-handedly hack or corrupt the system, pretty much guaranteeing full validity and trust in each exchange of information.
What makes blockchain exceptionally unique is its trustless network, as anyone can add information to the blockchain. So how is each new block of data confirmed to ensure that everything is correct? Well, that’s where the following consensus protocols come into play: the practical byzantine fault tolerance algorithm (PBFT), the proof-of-work algorithm (PoW), the proof-of-stake algorithm (PoS), and the delegated proof-of-stake algorithm (DPoS). These protocols review and confirm each new block of information, culminating in a decentralized and trustless network.
Blockchain is the underlying technology for cryptocurrencies like Bitcoin, but has other possible applications outside of finance as well. The many kinds of resulting networks can be differentiated by exploring the specific consensus algorithms which they employ, as well as by their infrastructure behavior.
Blockchains are a type of decentralized network, removing any centralized form of decision making thanks to various types of consensus algorithms. The nodes involved in the network interoperate and collaborate with each other to execute these consensus algorithms without the need of any central decision-making source, thus making it a decentralized network.
Satoshi Nakamoto devised the Proof of Work consensus algorithm which also happened to be the first blockchain consensus algorithm ever created. In PoW, miners solve difficult problems — otherwise known as hash functions — to create blocks. PoW runs on a system of “the longest chain wins,” so assuming most miners are working on the same chain, that one will grow the fastest and end up being the most trustworthy. Bitcoin is the first digital currency to use PoW, as it’s popularly known as the best method for reaching consensus in a blockchain.
The Byzantine Fault Tolerance algorithm employs a distributed computer network to function as desired and correctly reach a sufficient consensus despite malicious components (nodes) of the system failing or propagating incorrect information to other peers. Essentially, all of the nodes in the pBFT model are ordered in a sequence where one node serves as the primary node (leader) and the others become the backup nodes. All of the nodes within the system communicate with each other and not only have to prove that messages came from a specific peer node, but also need to verify that the message was not modified during transmission.
What sets the pBFT model apart from other forms of consensus algorithms is its ability to confirm final transactions without the need for extensive verifications like those found within the Proof-of-Work models. If a proposed block is agreed upon by the nodes in a pBFT system, then that block is final. This is possible due to the fact that all the “honest” nodes are agreeing on the state of the system at that specific time as a result of their communication with each other.
Proof of Stake is another form of achieving consensus within a blockchain network, differing from other consensus algorithms like PoW. With Proof of Stake, there is no mathematical puzzle or hash function involved, instead, the creator of a new block is chosen in a deterministic way based on their stake — how many coins or tokens one possesses. The validators don’t actually receive a block reward and are instead fully rewarded through the transaction fees. Resultantly, PoS currencies can be several thousand times more cost-effective.
DPoS differs from PoS by utilizing a delegated stakeholder approval voting system to resolve consensus issues and validate the blockchain in a model with similar designs to democratic systems. Stakeholders who own any amount of tokens can vote to effectively elect block producers. The block producers are chosen based on who has the most votes at the end of each voting round. Unlike the PoS system, there is no minimum stakeholder token requirement to participate and users cast votes proportional to their stake to select block producers.
What makes a network “decentralized” is its ability to fully validate and authenticate transactions without a central decision-making authority. This is done by utilizing consensus algorithms such as Proof of Work, Byzantine Fault Tolerance, Proof of Stake, and Delegated Proof of Stake.
Mesh networks are decentralized networks in which the infrastructure is carried by nodes that connect with each other directly and dynamically, cooperating with one another to efficiently route data packets. This removes the dependency that one node has on any central hub, thus making it a decentralized network. Each mesh network is unique and its performance is dependent upon the type of mesh network (fixed vs. mobile), the capability of the nodes in the network, and the wireless technology used to connect nodes.
Fixed mesh networks rely on consistent hardware for nodes and use a common wireless link to produce a better quality of service than mobile mesh networks with varying nodes. However, fixed mesh networks come with the cost of deploying and maintaining an infrastructure whereas mobile mesh networks can be spontaneously created anywhere at a relatively low cost.
The fact that mesh networks are crowdsourced and maintained by the users themselves allows these networks to be more affordable and accessible to everyone. More importantly, mesh networks play an important role in narrowing the digital divide of connectivity that affects our world today.
Mesh networks are crowdsourced, decentralized networks which are comprised of dynamic nodes that cooperate with each other to route data. In this way, the network can effectively be accessed by anyone with the necessary credentials and removes the dependency that one node has on any central hub.
Another type of decentralized network, swarm networks are composed of groups of locally interacting devices with common goals that engage in a range of collective behavior. Swarms follow simple rules without centralized control, thus optimizing node movement and actions. Most of today’s swarming research and development effort is directed towards coding nature’s swarming rules in terms of machine behavior. Block technology does not code swarm behavior but actually helps enable the behavior instead.
A key aspect of swarm networks is the emergence of what is called “swarm intelligence.” This is the ability of the nodes in a swarm network to utilize self-organizing algorithms in order to collectively solve one problem much more efficiently.
The swarm’s ledgers , which are lodged within each swarm device, record the data that tells the story of the swarm’s operating experience baseline for every moment after it awakens to begin operations. In fact, each swarm essentially begins to function as its own micro-network within the network as a whole, relying on its swarm learning capability to effectively solve problems and collect data that is stored in the swarm’s data ledgers. The resulting shared pool of data is used by the consensus algorithms to improve overall swarming effectiveness.
Swarm networks are another type of decentralized network, utilizing “swarm intelligence” amongst its nodes to essentially create micro-networks that collectively solve problems. Swarming is executed by inputting the consensus data into the self-organizing algorithm to better position the nodes each time.
One of blockchain’s revolutionary benefits is its capability to serve as a “trustless” network. This means that the network runs on a model that does not require any form of trust to safely interact and transact. Using the aforementioned consensus algorithms, these networks can assure full validity and authenticity in each transaction made, thus removing any need for trust.
Blockchains define protocols that allow two individuals to transact with each other in a peer-to-peer manner over the Internet. When you digitally transfer value from one account to another on the blockchain, you’re trusting the underlying blockchain system to both enable that transfer and ensure sender authenticity and currency validity. This differs from the way we transact through centralized networks which requires that we put our trust in a third party to execute the transaction. In a trustless network, we can rely on consensus algorithms to confirm each transaction.
Similarly, cryptography answers the needs of trust of safety, because we can require transactions to have cryptographic signatures. As long as everyone in the system is able to verify cryptographic signatures and refuse to accept payment without one, the trust of safety is achieved and makes it impossible for anyone to transact on your funds.
Trustless networks use cryptography and consensus algorithms to remove the need for any third party required to execute any transaction on the blockchain. Instead, these networks allow you to transact in a peer-to-peer manner over the internet without having to trust anyone, as everything is fully validated and authenticated through cryptography and consensus algorithms.
Now that we’ve taken a deep dive into the different kinds of networks which exist, you should have a better understanding of what makes a network decentralized in the first place. The very idea of blockchain technology would not exist if consensus algorithms were not created and utilized over the years to authenticate each transaction. Additionally, it’s imperative to understand that all kinds of decentralized networks remove the need for a central decision-making authority — think about all the places this could be applied in outside of just finance! Overall, a better understanding of how decentralized networks function will allow you to truly appreciate the potential of blockchain for our society moving forward.
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