The silent tornado effect of blockchain has disrupted quite a few steadfast industries for centuries. Of course, the driving force behind a number of coined words such as Bitcoin, DeFi, FinTech, to name a few, signaled the fusion of timeless principles with modern innovations that were only dreamed of before. Benefiting above all from this seismic change in mentalities, processes and mechanisms, the global financial system is on which resides the cornerstone of the economy of each nation.
The invention of the blockchain is redefining the many ways in which transactions are made, values are stored, sums of money are exchanged, and currencies are created. Simply put, a blockchain is an internet-based digital ledger that uses chained cryptographic blocks that store an immutable record of verified transactions occurring within the blockchain infrastructure. As Bitcoin was the first successful use case of a cryptocurrency that triggered an avalanche of thousands more, blockchain technology is widely exploited in smart contracts as it is eagerly explored in the storage of personal health records, real estate, voting system, supply chain, e-commerce. , games, NFT, government and other data storage purposes.
As complicated as the technology is, what makes the revolutionary blockchain an architecture ensuring the secure storage of sensitive data is based on three foundations: cryptography, consensus and decentralization.
Transactions on the blockchain are cryptographically secured as each transaction is digitally signed and sealed with a private key and its public key pair for further verification. This is called hashing. Any data tampering can invalidate the signature and the block is rejected by the blockchain.
Cryptography’s mathematically complex algorithms effectively fend off hacks and attacks that constantly test the vulnerability of any blockchain network. A unique cryptographic hash hides the identity of data like a password. A hash contains characters from the transaction data and the hash from the previous block. The transaction ID is also hashed. Reverse engineering will not work with hashing. Changing a hashed block means that the entire history of its blockchain must also be changed.
Users or nodes must agree to abide by the rules of the blockchain in order to maintain its integrity. Consensus mechanisms ensure that the rules are followed. Some of the most popular are Proof of Work and Proof of Stake. When the nodes have validated a block according to the predefined rules, the miners rush to solve a difficult math puzzle until a miner solves it first and shares the solution with the network. If the consensus is positive, the block is added to the chain, making it immutable or tamper-proof, and the winning miner will be rewarded with coins or tokens. This is an example of Proof of Work, which is a laborious consensus mechanism that scammers avoid. While a 51% consensus malicious attack is possible, it is not worth it.
The blockchain is the most popular with its decentralizing character, that is, it does not have a central authority that manages the whole system, but the responsibility is distributed among the participating nodes or the users who individually manage an original of the same copy of information, updated in real time. Any attempt to tamper with a file must do so with all other files held by hundreds of thousands of participating nodes on the network. A modified ledger is automatically rejected by the majority consensus of the members of the network. In addition, the registry is transparent and can be viewed by any node. It will be difficult for the data to be lost as there are several original versions available held by other nodes. With decentralization, middlemen are eliminated, reducing costs, and there is no single point of failure.
One of the weaknesses of a blockchain is a possible 51% attack, which can occur when 51% or more nodes conspire to exclude or change the order of transactions. But since this is a very expensive operation requiring magnificent energy scales to get started, and since good deeds have higher incentives, this is never done especially with proof-of-work algorithms.
Immutability while being good can be the downside of a blockchain. To change the data, a hard fork must be launched, abandoning the original community and its code, and creating a new one.
Blockchain uses PKC or public key cryptography so that an owner can access their crypto data and assets. While the public key can be shared containing the blockchain address, the private key must be confidential and kept secret. As the owner becomes their own bank, they need to secure their private keys as private keys once lost or forgotten, stored data and assets will be impossible to recover.
Blockchain operations with a Proof of Work consensus mechanism consume too much electricity to surpass the energy consumption of some countries, which is not good news for the environment. As math puzzles get harder and harder to solve, it takes even more energy to find the right answer. Also, if only one miner wins every 10 minutes, too much energy is wasted on losing miners by counting by the thousands.
There will only be enough nodes in the world to store the records of the fast growing blockchain, and the nodes will be lost if the growth beyond hard drives does not slow down.
As blockchain is an emerging technology, the advantages will eventually outweigh the disadvantages. Technological advancements show no signs of stopping and that’s a good thing. More and more improvements, inventions and innovations will emerge to further strengthen current digital configurations. In the meantime, we have to be content with what we have by keeping the pressure of turmoil at bay to maximize current technological inventions which, in all reality, are still difficult to understand.
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