Blockchain, is in the simplest of terms, a time-stamped series of immutable records of data that is managed by a cluster of computers/individuals not owned by a single organization. Each of these blocks is secured and bound to each other using cryptographic principles.
How is Blockchain is different?
Blockchain is different from traditional systems as it relies on “Decentralization” which means it is not owned or controlled by a single person or organization, it is managed by individual users with equal privileges.
By looking at the following image you can see the difference, for example if Sarah wants to send money to Adam via PayPal, all transactions data are controlled and owned by PayPal as middleman between Sarah and Adam which cost her some fees for each transaction.
But what if we can eliminate the middleman and Sarah could send money directly to Adam in a quick yet secure way without any transaction fees, that what blockchain technology offers, cryptocurrencies like Bitcoin and Ethereum rely on Blockchain and offer fast, secure and anonymous money transactions without fees.
Imagine a big datasheet that is duplicated thousands of times across a network of computers around the world. Then, imagine that this network is designed to regularly update this datasheet.
Information held on a blockchain exists as a shared database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning that the records it keeps are truly public and easily verifiable. No centralized version of this information exists for a hacker to corrupt.
Blockchain technology has three main properties:
1. Decentralization
Before Bitcoin and Torrent came along, we mostly used centralized services. The idea is very simple. You have a centralized entity which stores all the data and you’d have to interact with this entity to get whatever information you require, like banks; they store all your money, and the only way that you can pay someone is by going through the bank..
But, centralized systems have treated us well for many years, however, they have several vulnerabilities:
Firstly, because they are centralized, all the data is stored in one spot. This makes them easy target spots for potential hackers.
What if the centralized entity somehow shut down for whatever reason? That way nobody will be able to access the information that it possesses
Worst case scenario, what if this entity gets corrupted and malicious? If that happens then all the data that is inside the database will be compromised.
In a decentralized system, the information is not stored by one single entity. In fact, everyone in the network owns the information.
2. Transparency
One of the most interesting concepts in blockchain technology is “transparency.” Some people say that blockchain gives you privacy while some say that it is transparent. Why do you think that happens?
Well, for example in cryptocurrencies the person’s identity is hidden and represented only by their public address. So, if you were to look up a person’s transaction history, you will not see “Sarah sent 1 Bitcoint” instead you will see “3OF1zhsFLkBqcz9vpDXEmvwT2TbyCt4RYJ sent 1 Bitcoint”.
The following snapshot of Ethereum transactions will show you what we mean:
3. Immutability
Immutability in blockchain means that once something has been entered into the blockchain, it cannot be tampered with, so no one can fake or manipulate any records.
In this article we talked about how blockchain provide more security in comparison with centralized-systems, but blockchain has a very dangerous vulnerability called “51% Attack”.
As we mentioned before, blockchain consists of big network of thousands or millions of computers but if someone has a lot of devices more than 50% of the network he can control the entire network and apply the “51% Attack” to reverse transactions that have already taken place and manipulate the data of the entire network
This kind of attack is very dangerous affecting the small networks, if we have a network of 100 devices that means if someone own 51 device only he can apply the attack, but this scenario is different in huge networks, let's say a network of 1 Million devices it is very very difficult for someone to own 500,000 devices, in other words the more the network size get bigger the more it will be secured.
To sum up…
Today, we’ve talked about the centralized system we used in most of our lives and how this changed with the evolution of blockchains. As well as we also got to some vulnerabilities that users may face while using blockchains…
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