Steemit Crypto Academy – Season 3 - Week 6 - Post for @stream4u

Question 1 - What is Blockchain and What are the types of Blockchains / Explain in detail the types of Blockchain?

The past few years have seen the massive rise and growth of blockchain technology as it continues to gain adoption all over the world. A blockchain is basically a digital immutable and distributed ledger that processes, records and stores data through decentralization. A blockchain is immutable which means that data stored cannot be altered by anyone.

Blockchain data are stored in encrypted blocks in a chain that are chronologically connected. In other words, a blockchain is basically a digital distributed ledger of transactions duplicated across the different network of nodes or network of computer systems where transactions that are immutable and are recorded and stored through what is known as a hash.

When a new information is added, a new block is created. Any transaction on the blockchain creates a new block and is added to the chain which is stored securely and immutably. Any information can be stored on the blockchain securely because it is a type of distributed ledger that is stored across a network of nodes or computers that are connected to each other. .The blockchain is made up of 3 main components which are, blocks, nodes, miners/validators

The Blocks

When it comes to blockchain technology, blocks are the key essential element, hence the name blockchain which is simply chain of blocks of transactions. A blockchain consists of multiple blocks that contain all the transactions on the network. Every transaction on the blockchain network are stored in blocks and for any new transaction that is created, a new block is added to the chain. The blocks of transaction that made up the blockchain are connected chronologically in a chain. Each block of a blockchain consists of 3 elements, the data in the block, the nonce and the hash.

The Nodes

This is another main component of the blockchain. The blockchain is made up of multiple networks of nodes or computers that are connected to each other, hence why a blockchain is a type of distributed ledger that are shared across multiple nodes. The nodes are without a doubt one the key elements of a blockchain, and without the network of nodes, a blockchain wouldn’t be what it is today. The network of nodes or computers that power the blockchain are the key aspects of decentralization, that is why it is almost impossible to take down any information stored on the blockchain.

The Miners/Validators

The miners/validators are also key element of the blockchain. The miners/validators are people who secure the blockchain network. Miners/validators are the ones responsible for creating new blocks on the chain. Miners and validators pretty much do the same thing on the blockchain, however, they operate differently deepening on the blockchain and the algorithm of the blockchain. Miners secure the network and create new blocks on proof of work blockchains where powerful computers are used to perform the complex mathematical calculations to solve the puzzles on the network. Validators are on proof of stake blockchains where the amount of stake on the network are considered when it comes to securing the network and creating new blocks on the chain.

Types of blockchain

Public blockchain

Public blockchain are one of the most popular types of blockchain in existence today. It is basically a type of blockchain that doesn’t restrict access. It is public which means that anyone can have access to the blockchain and can become part of the validators to validate transactions on the network. Public blockchains are permissionless distributed ledger which means that anyone can run a node and become part of the network. Users who run nodes on a public blockchain become authorized validators and verify transactions on the blockchain network. Two popular examples of a public blockchain are the bitcoin blockchain and litecoin blockchain.

Private Blockchain

Private blockchain are also one of the major types of blockchain. It differs from the public blockchain because it is a closed network. Unlike the public blockchain that is permissionless, the private blockchain is permissioned and runs on a closed network. In this type of blockchain network, only a selected few have access to the network. When it comes to private blockchain, the organization that have access to the network are in control of the security, accessibility, permissions, of the network. This kind of blockchain network are very popular when it comes to voting on the blockchain, digital identity, authenticity of assets. Corda is an example of a blockchain network that operates on private blockchain.

Consortium Blockchain

A Consortium blockchain is another very popular type of blockchain. This type of blockchain is known to be a semi-decentralized blockchain because more than one organization has access to and controls the blockchain network. Unlike the private blockchain that is controlled by one single entity or institution, a consortium blockchain is controlled by multiple entities. More than one entity can control a node and validate transactions on the blockchain network. This type of blockchain is common in the conventional banking system or governmental organizations.

Hybrid Blockchain

The hybrid blockchain is another very popular type of blockchain. Like the name hybrid which means it is created from the combination of two different types of blockchains. A hybrid blockchain is a hybrid of a public blockchain and a private blockchain. The main characteristics of a hybrid blockchain is that it makes use of features from both the public blockchain and private blockchain. This means that it is both permissioned and permissionless at the same time. Simply put, only certain parts of the stored data on the blockchain network is accessible to the public and certain parts of the stored data remains private.

This makes it easy for users who want to be part of the private network of the hybrid blockchain to join, and any transaction on the private network will remain private and can be verified in the private network. However, this transactions on the private network part of the hybrid blockchain can be released in the public network so as to be verified as well. This increases the number of nodes for the verification and increases the security as well. A clear example of a blockchain network that makes use of the hybrid blockchain is the Dragonchain.

Question 2 - What are the Benefits of Blockchain?

Transparency

One of the main benefits of blockchain is the aspect of transparency. Transparency is a key aspect any blockchain that is why blockchain technology has been on a massive rise and used in a lot of industries to enhance security. Transparency basically means that every transaction details and records on the blockchain is visible and accessible to anyone. Anyone can see the data and information that is stored on the blockchain.

Stored data and records cannot be altered

This is another main benefit of the blockchain and also one of the main characteristics of blockchain technology. Any data, information or transaction records stored on the blockchain cannot be altered once it is stored on the blockchain. Every transaction on the blockchain creates a new block which ensures that no records can be altered.

Decentralization

This is another main benefit of blockchain. Decentralization is a key aspect of blockchain technology because of the multiple network of nodes that secure the network, ensuring that no single entity can control what happens on the blockchain, and for every block that is created, consensus on the network has to be reached.

Cost reduction

This is another benefit of blockchain technology when it comes to use cases. In most industries or sectors, the cost of performing transactions is high, especially when it has to involve multiple third parties. However, with blockchain technology, the cost can be greatly reduced since the transactions can be handled automatically on the internet via the blockchain. Also, human errors can lead to increase in cost, this is where blockchain shines because human errors can be eliminated via automation on the blockchain.

Speed

This is another benefit of blockchain. Because the blockchain runs on the internet, it means that it will process transactions and anything recorded on it much faster than any human. This makes it a very viable solution to any industry or sector that needs to process transactions and information faster. Information can be transferred via the blockchain faster and securely as it cannot be altered which ensures the security of the information.

Trust

Trust is another key benefit of blockchain. Any record stored on the blockchain cannot be altered or changed which ensures the authenticity of any record on the blockchain. This increases trust in any industry or sector because users can be assured that there is no alteration on any data or record that is stored on the blockchain.

Question 3 - Explain Blockchain Distributed ledger

A blockchain distributed ledger is basically a database of records, distributed and syncs across a network of nodes. This allows multiple people to have access to the records. A distributed ledger ensures that any member can have access to the stored records or data on the network without the control of any central entity. This is done locally by each node or computer on the network. This allows the distributed ledger technology to function as decentralized peer-to-peer network.

In blockchain distributed ledger, transactions have public witnesses who are the members that run the nodes or computers that power the network. Each member that run a node on the network can own an identical copy of the ledger that is distributed across the multiple nodes in the network and any changes that is made to the ledger would reflect on all the copies in each of the network of nodes. With the peer-to-peer nature of the distributed ledger technology, blockchain technology also make use of this technology as a way of securing any record or information stored on the blockchain. This makes it difficult for hackers to hack or for the blockchain to be shut down because there isn’t a central point.

Question 4 - What Is Blockchain Double Spending and how Bitcoin handles this problem?

Blockchain double spending is a term that is common in the blockchain space, most especially in blockchain like the bitcoin blockchain. Like the name says, blockchain double spending is basically a term that is used to refer to when a user spends the same amount of coins twice. In the conventional financial does not have the issue of double spending because it is impossible to double spend the same physical currency since a physical currency cannot be in multiple places at the same time.

In digital currency like cryptocurrency or bitcoin, double spending can be an issue because highly technical bad actors can somehow manipulate their way into spending the same coin twice before they are verified on the blockchain. Also, in double-spending, highly technical bad actors can manipulate the system and send out an identical fake version of the coin they stole from a wallet. This issue mostly occurs on proof of work blockchains like bitcoin where the confirmation time is a bit higher.

To explain how double spending happens, let’s take for instance, bitcoin… bitcoin is basically a digital currency and by digital, it means that there is a possibility of being manipulated and duplicated by highly technical bad actors. This act of spending the same bitcoin twice is known as double spending.

The way double spending happens is that, for instance, person A who is a highly technical bad actor wants to manipulate the system, has just 1BTC and decides to send that 1BTC to person B, the transaction which we will label as transactionA, goes into a pool of unconfirmed transactions. TransactionA will sit in the unconfirmed transactions pool until it is confirmed on the blockchain network.

While transactionA is still in the unconfirmed transactions pool, person A sends 1 BTC to person C. This transaction which we will label as transactionB will also enter into the pool of unconfirmed transactions. With that, it means that person A sent the same 1BTC twice. The transactions in the pool of unconfirmed transactions leave the pool and enters into the blockchain where the validity is checked.

One of the transactions in the pool will leave the pool and be verified before being stored on the blockchain and the other transaction will become invalid and unverified because since one of the 1BTC transactions has already being verified, it means that the second identical 1BTC transaction no longer has the 1BTC for the transaction to go through.

However, there is still a possibility that both transactionA and transactionB can happen simultaneously and both transaction would leave the pool at the same time and shown as a valid transaction. When this happens, there will be two branches of the blockchain with each of the transactions, and a race will kick off. The winner will be determined by the transaction that achieves the next block of confirmation. Until the transactions are confirmed and stored on the blockchain, both transactions can be cancelled, which is why it is important for users to wait for full confirmation rounds before being sure that the transaction is successful. On the bitcoin blockchain, 6 confirmations rounds reduces the risk of cancellation.

How bitcoin handles this problem

Bitcoin handles the double spending problem with the minimum of 6 confirmations. This is why it is important for receivers to wait for atleast a minimum of 6 confirmations before considering the transaction successful because it will only take a minimum of 6th confirmations to have a winner if there is a race between two simultaneous transactions racing for confirmation. By 6 confirmation on the blockchain network, it means that 6 more blocks would have to be added after the transaction was added to the blockchain.

Because 6 more blocks were added after the transaction was added to the blockchain, it means that the transaction is a legit and valid one because blocks that are added to the blockchain has a relationship with the previous block in the chain. This is where irreversibility and immutability comes in because once there are new blocks of transactions added after the previous block of transaction, the previous block is immutable and cannot be reversed. Because of this, anyone can prevent being a victim of double spending just by waiting for the minimum of 6 confirmations on the blockchain.

Question 5 - Explain in detail how Blocks Hashes Work in Blockchain, what will happen when any middle of the block gets changed

How Blocks Hashes Work

Block hash is one of the key aspects of blockchain. Hash is basically a string of encrypted alphanumeric value that are of a fixed length. This fixed length of alphanumeric value that stores information and data on the blockchain. The hash is the output of alphanumeric value generated from an input which is the raw information or data. When a block hash is produced, it becomes irreversible, which is why it is used as a security measure in blockchain. Block hashes output value would always have the same fixed length no matter the length of the input data.

To demonstrate how block hashes work, let’s look at a tool andersbrownworth which is https://andersbrownworth.com/blockchain/hash

Inputting the data: Blockchain is amazing
The generated hash output is: 22ce6b60547d06c5cffc6b41266f0f4a7737b2c7959a584d72108482ce824d5f

I will be inputting another data with a longer input,
Inputting the data: Cryptocurrency has a lot of benefits compared to the centralized conventional financial system
The generated hash output is: 526f9d8cff4c639b526959207d86860b0006a094a793e014062f973843718b28

We can see that both hashes have the same fixed length of alphanumeric value containing the input data. This shows that block hashes outputs would always have the same fixed length no matter the length of the input data.

Visiting the block section of the website here

From the screenshot, we can see that the first block hash begins with 4 zeros which is known as the difficulty level.

I will be inputting the data; this is great. We can see that the hash output value is showing as invalid and cannot be added to the chain.

I clicked on mine and the hash output value becomes valid and the block is valid.

What happens when any middle of the block gets changed

To demonstrate what happens when the middle of the block gets changed, I will be visiting the blockchain section of the website here

In blockchain, blocks are arranged in chronological order which means that it is arranged one after the other in time. The new references the previous block. block 2 is created, Block 2 comes after block 1, block 3 comes after block 2 and so on. With this, all the blocks that are created are chronological tied to each other, which means that once any block is changed, it would become invalid and every block created after would be invalid as well since the new block references the previous block.

When the data in the middle block is changed, for instance, we have 3 blocks, block 1, block 2 and block 3…
From the screenshot, we have mined different data for block 1, block 2 and block 3.

Block 1

Data: I like to read books
Nonce: 29794
Hash: 000070218b66c36527c133ed91a7ca00456e4a832a1968c977709c6ab69f789c

Block 2

Data: The day is bright
Nonce: 124613
Hash: 0000c1ed289665240ffa079ff6dc26f2f6da58c36cc5eb6bacdd890578415cd0

Block 3

Data: It is good to work hard
Nonce: 59305
Hash: 0000f6cd1e306712fbddd4b411ff7131276e254e8f79edfef8a90bbd8e0c41f6

We can see above that I have mined 3 valid blocks with different data in each of the blocks. Each blocks have its own unique data and is valid. Block 1 is not referencing any previous block that is why it showing 0000… in the prev. Block 2 is referencing block 1 as we can see that the prev hash in block 2 matches the output hash in block 1. Block 3 references block 2 as the prev hash in block 3 matches the output hash in block 2.

When i change the data in block 2, there will be a new hash and the block will be invalid. After changing the block 2 data to “Super amazing”, we can see on the screenshot that all the blocks created after block 2 is now invalid as well since block 3 references block 2. Block 3 is tied chronologically to block 2 and referencing it, it means that block 3 has become invalid.

Question 6 - What Is Race Attack in blockchain?

Race attack in blockchain is basically what happens in double spending. When a highly technical bad actor tries to manipulate the system by performing two transactions and sending the same coin at the same time. To explain how this happens, a user sends the same coin twice by performing two transactions, let’s say TransactionA and TransactionB.

Both transactions will sit in the unconfirmed transactions pool until it is confirmed on the blockchain. Since the same coin was sent at the same time, there is a possibility that both TransactionA and TransactionB would leave the pool of unconfirmed transactions simultanously and there will be two branches of the blockchain with each of the transactions, and a race will kick off.

Question 7 - Limitations/disadvantages of Blockchain

Even though blockchain technology has proven to have a lot of benefits, there are also some limitations. Some of the limitations of blockchain technology are;

• High power/energy consumption - is one of the limitations of a lot of proof of work blockchains like bitcoin, ethereum etc. Mining on proof of work blockchains consumes a lot of power and energy which has its effects. Yes, there are newer blockchains that utilize proof of stake that is more energy efficient, bitcoin is still the number 1 and most popular blockchain. Also, bitcoin, ethereum and a lot of other proof of work blockchains are still the most popular types of blockchains which increases high energy and power consumption.

• A bit technical - This is another limitation of blockchain because it can a bit technical for an average person to understand how it works. A lot of persons find it difficult to understand how blockchain works which slows down adoption.

• Increase in scam/fraud transactions - This is one of the major disadvantages of blockchain. Because transactions on the blockchain cannot be traced, it has increased the level of scam/fraud as bad actors are taking advantages of the anonymity of blockchain to perform scam and fraud transactions.

• Scalability issues - This is another limitation of blockchain. We have seen blockchain like ethereum suffering from scalability issues and slow transactions. This has become a problem as more and more people are making use of ethereum blockchain. With scalability becoming an issue, it has slowed down adoption as many people cannot deal with slow transaction times.

• Errors cannot be erased - Any error in any transaction recorded on the blockchain cannot be reversed as the blockchain is immutable. This can be an issue when a mistake is made and is already recorded on the blockchain, there is no way to erase that mistake.

• 51% attack - This is another disadvantage of blockchain. Since blockchain is controlled by miners who secure the network, there is a possibility of 51% attack which basically means that 51% of the malicious miners will plan and take control of the network since they are now the majority.

8 – Conclusion

Blockchain has proven to be very powerful and beneficial ever since it was created. We have seen the massive rise and growth of blockchain technology as it continues to gain adoption all over the world. A blockchain is basically a digital immutable and distributed ledger that processes, records and stores data through decentralization. A blockchain is immutable which means that data stored cannot be altered by anyone. The blockchain data are stored in encrypted blocks in a chain that are chronologically connected. However, even though blockchain has a lot of benefits, it has shown to not be the perfect solution as it also has its own limitations and disadvantages. Nevertheless, we are still in the early days of blockchain technology as more and more development continues to be done, improved versions will be created as blockchain technology continues to grow and gain adoption.

@stream4u