Catch up on the current trend, Tay Nguyen - our Backend Engineer, brought a picture about Blockchain 101 and its applications.
- WTF is the blockchain?
- Pro & Cons
- Proof of Work (PoW) & Proof of Stake (PoS)
- Technology behind blockchain
- Current popular blockchain (Bitcoin and Ethereum)
Blockchain is a type of Distributed Ledger Technology - a decentralized database managed by multiple participants, across multiple nodes. Namely, blockchain technology is a structure that stores transactional records, also known as the block, of the public in several databases, known as the “chain,” in a network connected through peer-to-peer nodes.
Nowadays, I think blockchain becomes a super hot keyword because of distributed technology, not the blockchain itself.
Many conventional databases rely on a single or a few servers and are more vulnerable to technical failures and cyber-attacks. Take a traditional bank, for instance. If Hackers hack the bank's database, millions of personal information and transaction will be revealed.
It is said that blockchain, or distributed for specificly, is the future of technology. The system and the data are highly resistant to technical failures and malicious attacks. So it solves the trustless problems. The second advantage lies in its stability. Each network node is able to replicate and store a copy of the database, so a single node going offline does not affect the availability or security of the network.
However, there are a few potential attacks that can be performed against the trustless system. If 51% is controlled by one entity, they can disrupt the network by intentionally excluding or modifying the ordering of transactions. Another downside is slow in data modification. The stability advantage makes data changing become a hard fork, where one chain is abandoned, and a new one is taken up.
Other cons can be counted as private key 🔑 (you lost the key, then you lost everything), inefficient (especially Proof of Work) and large storage.
A consensus algorithm is a mechanism that allows users or machines to coordinate in a distributed setting. Currently, there are 2 most-discussed of consensus algorithms: PoW and PoS.
For more details:
Hash function: nearly all cryptocurrency protocols rely on hashing to link and condense groups of transactions into blocks, and also to produce cryptographic links between each block, effectively creating a blockchain.
Validating signature: Digital signatures are nearly impossible to forge due to their use of number theory to guarantee the functionality and use a system called public-key cryptography in which users own both a public key and a private key, forming a pair.
Bitcoin (BTC) is a digital form of cash launched in 2009 and there is no central bank controlling it. For the primary purpose, Bitcoin provides users with the ability to send and receive digital money. It has a finite supply, but not all units are in circulation yet. The only way to create new coins is through a process called mining - or Proof of Work.
Ethereum (ETH) is a decentralized computing platform. Like Bitcoin, it allows us to transfer digital money. We can also deploy our own code, and interact with applications created by other users. Because it’s so flexible, all sorts of sophisticated programs can be launched on Ethereum. More interestingly, these applications can set conditions on how value is transferred. We call the programs that make up applications smart contracts. In most cases, they can be set to operate without human intervention.
The hugely popular topic on Ethereum can be named NFTs (non-fungible tokens). This is a crypto asset representing something unique and collectible, like a photo or games card. What makes an NFT special is that it cannot be faked, copied or interchangeable as only one exists. Remember the "Disaster Girl" meme? She has turned it into a fortune — selling an NFT of the image online for 180 ETH (~ $430 000).
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