A blockchain is a decentralized ledger comprising a continuously expanding series of records (blocks), securely interconnected using cryptographic hashes. Each block contains a cryptographic hash of the preceding block, a timestamp, and transaction data, typically organized as a Merkle tree structure, with data nodes represented as leaves. These blocks create a linked chain, where each new block connects to the previous ones. Consequently, once data is recorded in a blockchain, it becomes immutable, as altering any block would require modifying all subsequent blocks.
Blockchains are typically managed by a peer-to-peer (P2P) computer network, serving as a public distributed ledger. Nodes within this network collectively adhere to a consensus algorithm protocol for adding and validating new transaction blocks. While blockchains aren't entirely immune to alterations, as blockchain forks can occur, they are inherently designed for security and exhibit a high level of Byzantine fault tolerance.
The concept of blockchain was introduced by an individual or group using the pseudonym Satoshi Nakamoto in 2008. It was initially created to function as the public distributed ledger for Bitcoin cryptocurrency transactions, building upon earlier research by Stuart Haber, W. Scott Stornetta, and Dave Bayer. Bitcoin's blockchain implementation marked a significant milestone as it solved the double-spending problem without relying on a trusted authority or central server. This breakthrough has inspired the development of various applications and public blockchains widely adopted in the realm of cryptocurrencies. Some consider blockchain as a form of payment infrastructure.
Private blockchains have also been proposed for business purposes. While some skeptics have criticized the marketing of such privatized blockchains without adequate security measures, others argue that well-designed permissioned blockchains can offer a higher degree of decentralization and practical security compared to permissionless counterparts.
History
Bitcoin, Ethereum, and Litecoin transactions per day (January 2011 – January 2021) The concept of a blockchain-like protocol was initially proposed by cryptographer David Chaum in his 1982 dissertation titled "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups." Building upon this idea, further developments in creating a cryptographically secure chain of blocks were outlined in 1991 by Stuart Haber and W. Scott Stornetta.Their aim was to create a system where document timestamps couldn't be altered. In 1992, Merkle trees were integrated into the design by Haber, Stornetta, and Dave Bayer, enhancing its efficiency by enabling multiple document certificates to be consolidated into a single block.Under their company, Surety, the hashes of their document certificates have been published weekly in The New York Times since 1995.
The inception of the first decentralized blockchain can be attributed to an individual or group operating under the pseudonym Satoshi Nakamoto in 2008. Nakamoto introduced a significant improvement by employing a Hashcash-like method to timestamp blocks, eliminating the need for them to be endorsed by a trusted entity. Additionally, Nakamoto introduced a difficulty parameter to stabilize the block addition rate. This design was subsequently implemented by Nakamoto in 2009 as an integral component of the Bitcoin cryptocurrency, serving as the public ledger for all network transactions.
By August 2014, the Bitcoin blockchain's file size, containing records of all network transactions, had reached 20 gigabytes (GB).In January 2015, it had expanded to nearly 30 GB, and between January 2016 and January 2017, the blockchain's size grew from 50 GB to 100 GB. By early 2020, the ledger size had exceeded 200 GB.
The terms "block" and "chain" were originally used separately in Satoshi Nakamoto's original paper but eventually gained popularity as the single term "blockchain" by 2016.
According to Accenture, applying the diffusion of innovations theory, blockchains achieved a 13.5% adoption rate within the financial services sector by 2016, marking the early adopters' phase.In 2016, industry trade groups collaborated to establish the Global Blockchain Forum under the auspices of the Chamber of Digital Commerce.
In May 2018, Gartner's research indicated that merely 1% of CIOs reported any form of blockchain adoption within their organizations. Only 8% of CIOs were in the short-term "planning or actively experimenting with blockchain." For the year 2019, Gartner reported that 5% of CIOs believed blockchain technology had the potential to be a 'game-changer' for their businesses.
Structure and Design
Blockchain Formation. The primary chain (black) comprises the longest sequence of blocks starting from the genesis block (green) up to the current block. Orphan blocks (purple) exist outside the primary chain. A blockchain is a decentralized, distributed, and often public digital ledger comprising records known as blocks. These blocks are employed to document transactions across numerous computers, ensuring that once a block is involved, it cannot be retroactively altered without impacting all subsequent blocks. This feature enables participants to independently and relatively inexpensively verify and audit transactions. Management of a blockchain database is achieved autonomously through a peer-to-peer network and a distributed timestamping server. Authentication is facilitated through mass collaboration driven by collective self-interests. This design promotes robust workflows with minimal participant uncertainty about data security. By utilizing a blockchain, the property of infinite reproducibility is removed from a digital asset. It verifies that each unit of value has been transferred only once, effectively resolving the age-old challenge of double-spending. A blockchain is often referred to as a value-exchange protocol.[Moreover, it can establish and maintain title rights by providing a documented record that enforces offer and acceptance in a transparent manner.[citation needed] Logically, a blockchain can be conceptually divided into several layers:
• Infrastructure (Hardware)
• Networking (Node Discovery, Information Propagation, and Verification)
• Consensus (Proof of Work, Proof of Stake)
• Data (Blocks, Transactions) • Application (Smart Contracts/Decentralized Applications, if applicable) Blocks Blocks serve as containers for batches of valid transactions that are hashed and encoded into a Merkle tree.Each block incorporates the cryptographic hash of the preceding block within the blockchain, thereby establishing a link between the two blocks. These interconnected blocks collectively form a chain. This iterative process not only confirms the integrity of the preceding block but extends this verification all the way back to the very first block, known as the genesis block (Block 0). To ensure the integrity of a block and its contained data, the block is typically digitally signed.
Occasionally, separate blocks can be generated concurrently, resulting in a temporary fork. Alongside a secure hash-based historical record, every blockchain employs a specific algorithm for scoring different versions of the history, enabling the selection of the version with the highest score over others. Blocks that are not chosen for inclusion in the chain are referred to as orphan blocks.Peers supporting the database may possess varying versions of the historical data from time to time. They retain only the version of the database with the highest score that they are aware of. Whenever a peer receives a higher-scoring version (typically the old version with a single new block added), they extend or replace their own database and transmit the improvement to their peers. There is never an absolute guarantee that a particular entry will persist in the best version of the history indefinitely. Blockchains are typically structured to augment the score with new blocks alongside old blocks and are incentivized to extend with new blocks rather than overwriting old ones. Consequently, the likelihood of an entry becoming superseded diminishes exponentially as more blocks are added on top of it, eventually becoming exceedingly low.: ch. 08 For instance, bitcoin utilizes a proof-of-work system where the network considers the chain with the most cumulative proof-of-work as valid. Various methods can be employed to demonstrate an adequate level of computation. Within a blockchain, computation is carried out redundantly rather than in the conventional segregated and parallel manner.
Block Time
Block time denotes the average duration for the network to generate an additional block in the blockchain. At the point of block completion, the included data becomes verifiable. In the realm of cryptocurrency, this practically signifies when the transaction occurs, making shorter block times synonymous with faster transactions. Ethereum, for example, has a block time set between 14 and 15 seconds, while bitcoin's average block time is approximately 10 minutes.
Hard Forks
This section is an excerpt from Fork (blockchain) § Hard fork. A hard fork represents a modification to the blockchain protocol that lacks backward compatibility, necessitating all users to update their software to continue participating in the network. During a hard fork, the network splits into two distinct versions: one adhering to the new rules and another adhering to the old rules.
For instance, Ethereum experienced a hard fork in 2016 to "make whole" the investors in The DAO, which had fallen victim to a hack exploiting a vulnerability in its code. This hard fork resulted in a split, giving rise to both Ethereum and Ethereum Classic chains. In 2014, the Nxt community deliberated on a hard fork proposal aiming to roll back blockchain records to mitigate the repercussions of a 50 million NXT theft from a major cryptocurrency exchange. However, the hard fork proposal was rejected, and some of the funds were eventually recovered through negotiations and ransom payments. Alternatively, to prevent a permanent division, a majority of nodes employing the new software may revert to the old rules, as was the case in the bitcoin split on March 12, 2013.
A more recent example of a hard fork is the Bitcoin split in 2017, leading to the emergence of Bitcoin Cash. The network division primarily stemmed from disagreements on how to increase transactions per second to meet rising demand.
Decentralization
The blockchain achieves a degree of decentralization by distributing data across its peer-to-peer network, mitigating certain risks associated with centralized data storage.The decentralized blockchain may employ ad hoc message transmission and distributed networking.
In what is referred to as a "51% attack," a central entity gains control of more than half of a network, enabling them to manipulate that specific blockchain record at their discretion, thereby facilitating double-spending.
Blockchain security mechanisms incorporate the use of public-key cryptography.
A public key, represented as a lengthy, random string of numbers, functions as an address on the blockchain. Value tokens transmitted through the network are registered as the property of that address. On the other hand, a private key serves as a password, granting its possessor access to their digital assets or the means to engage with the various functionalities supported by blockchains today. Generally, data stored on the blockchain is regarded as incorruptible.
In a decentralized system, every node possesses a copy of the blockchain. Data integrity is upheld through extensive database replication and computational trust. There is no centralized "official" version, and no user enjoys greater "trust" than any other. Transactions are disseminated throughout the network using the software, with messages being delivered on a best-effort basis. Early blockchains rely on energy-intensive mining nodes to validate transactions, incorporate them into the block they are constructing, and subsequently transmit the completed block to other nodes.
08 Blockchains employ various time-stamping mechanisms, such as proof-of-work, to serialize modifications.Later consensus methods encompass proof of stake. The expansion of a decentralized blockchain introduces the risk of centralization as the computational resources required to process larger volumes of data become more costly.
By: Best Crypto Exchanges
source:https://cryptonews.com/news/bitcoin-etf-decision-dates-approach-what-to-expect-in-january.htm
Cryptocurrency is a high-risk asset class. This article is intended for informational purposes only and should not be considered as investment advice. By using this website, you agree to abide by our terms and conditions. Please note that we may include affiliate links in our content and earn commissions.
Comments