Steemit Crypto Academy | Season 3 : Let's Open The Blockchain | Homework task for @stream4u

Today I'm going to make my Steemit Crypto Academy Homework task by professor @stream4u that talking about Let's Open The Blockchain. Very interesting lessons. Actually I have very little knowledge about this, but I will try to discuss it to improve my writing skills. On this occasion I will try to discuss it.

SOURCE

Blockchain

Blockchain is data that is stored in the form of blocks that are connected to other blocks so that it is not possible to be changed and hacked. This is a system with a high level of security. Every data and transaction that runs on the blockchain network will be processed and stored for a certain period of time which will then be added to the blockchain that has been previously formed. Blockchain has a very large and extensive database so it is very feasible to use.

Blockchain is formed and runs because of several components that have their respective roles and functions. These components are Blocks which are data or records that are stored and cannot be changed, Chain which is a hash that connects each block formed on the network, Nodes which are computers that are interconnected and have been designed in such a way to process blocks and Miners who are members of the network play a role in validating data, blocks and transactions.

Hash is a cryptographic function on the system which is data and information from a block. The presence of hashes in blockchain technology has created a high level of security. This is very beneficial and beneficial for users. This is evidenced by hashes which are very difficult to hack and repeat in an algorithmic form. in this case each input will be processed with a hash and become an output that has characteristics such as efficient, secure, immutable, non-repeatable, fixed length.

Types of Blockchain

Public Blockchain

Public Blockchain is a type of blockchain that is public and can be accessed by anyone with an internet connection. In this case the freedom and flexibility in participating for transaction validation on the blockchain is the main factor. In the world of cryptocurrencies, a public blockchain is the type that is used and adopted for a specific reason. Each user who uses and processes transactions cannot change after validation is done. For this validation process Proof of Work or Proof of Stake is the algorithm used.

Public Blockchain has several advantages that are very useful and beneficial to users. Its transparent nature makes every transaction information publicly visible and accessible. A high level of security makes users feel safe and able to prevent hacking. Very friendly and easy accessibility allows many users from various backgrounds to access and carry out transactions in the business and financial world.

Private Blockchain

Private Blockchain is a type of blockchain that has a smaller scale and must have permission from the main party. In this case the user's access level can be limited after passing the approved identity verification. The use of a private blockchain is only suitable for an organization or company that has the main party in charge of all data and information on the network. This is a type of blockchain created and intended for a small community or group of individuals.

Private Blockchain has several advantages that are very useful and beneficial to users. Its function that allows full control makes the main party or individual have the responsibility and control over the decisions that will be made on each access to the network. Its smaller scale makes the network run faster and safer. It is capable of improving qualities such as processing speed, verification, storage and everything else involved with data on the network.

Hybrid Blockchain

Hybrid Blockchain is a type of blockchain which is a combination of public and private blockchains. This is evidenced by the merging of public and private blockchain features together to achieve more specific functions and characteristics. In this case, transactions and data validation cannot be accessed by everyone or the public but still provide security and transparency. A high level of security is indicated by the data that cannot be changed after the validation process. Information and transaction data can be selected and determined by members of the blockchain network to be published, although not all of them.

Hybrid Blockchain has several advantages that are very useful and beneficial to users. Of course, the advantages already exist and are almost similar to public and private blockchains. Besides that the combination of features and functions makes the blockchain network inaccessible to hackers. The use of fewer nodes makes transactions cheaper and maintenance costs low. A high level of security makes all information and data safe and secure. System settings or other things related to the network can be changed if needed.

Benefits of Blockchain

Blockchain has brought innovation and improved the quality of a system with all its functions, features, and characteristics. This has been felt by many users who feel satisfied and comfortable in carrying out and running the transaction process or data validation. Its powerful system improves security, transparency, level of trust and reputation, manipulation of data and information, less time, minimizes errors, and low transaction fees are a positive thing that benefits many users on the blockchain network. The details are as follows:

• Security & Transparency
  The benefits of blockchain are very useful for users from the security sector. A high level of security where every transaction process that occurs produces information and data that cannot be changed or deleted and stored securely. Public or private transparency allows parties who have interests or fellow users in the network to see the authenticity of every valid transaction process that occurs.

• Trust & Reputation
  The benefits of blockchain are very useful for users from the trust sector. User confidence and interest will increase by seeing a quality and capable system that is very suitable for use in the financial and business world. The reputation of the blockchain will also increase with the use of blockchain in various fields and sectors that are used by users from various circles.

• Efficiency
  The benefits of blockchain are very useful for users by relying on its excellent efficiency. The system that runs quickly and easily has made users feel comfortable in carrying out every transaction process or data validation. System errors are also very rare and have a very small chance. Efficiency in terms of time and system errors have been handled well.

• Cost
  The benefits of blockchain are very useful for users from the cost sector. Low fees for each transaction process allow users to make many transactions within a certain period of time. Cost is something that is always a consideration for many users because it involves money or assets. In this case, it is expected to save capital and maximize profits.

Blockchain Distributed Ledger

Blockchain distribution ledger is a technology that exists in the system and has the function to manage data and transactions from each block that is formed. It is a technology that is available to all users from different regions who are connected in the network. In this case the distribution of data and recorded transactions will form a block and be connected to all nodes in the blockchain. Every change and addition of data and transactions will be synchronized in a fast period of time.

Blockchain distribution ledger is the main factor that makes the difference between centralized and decentralized systems especially in the world of cryptocurrencies. The system works well where when a node is going to mine a block, the block must be validated. In this case the blockchain distribution ledger is known to have a high level of security. All information, data and transactions are secured and guarded with cryptographic functions which make them immutable.

Distributed Ledger Properties

• Distributed
  All data and transactions are distributed and made available to all users connected to the network and are transparent.
• Programmable
  Allows programmed according to use and needs. Smart contracts will work properly and automatically.
• Secure
  All data and information will be encrypted and secured by relying on a cryptographic function called a hash.
• Immutable
  All data and transactions that have been validated and form a new block cannot be changed or deleted.
• Time-Stamped
  All data and transactions that make up a new block will be time-stamped for more accurate results.
• Unanimous and Anonymous
  Ensures all connected users accept the validity of each block. And ensures the identity of all users is anonymous.

Blockchain Double Spending

Blockchain Double Spending is a problem or bad situation that occurs in the blockchain system especially with regard to digital currencies. Simply put, the same amount of crypto or digital currency can be used for multiple transactions. This is a form of threat and fraud in the world of crypto or digital currency. This is often the case for blockchains that involve parties carrying out transactions, namely buyers and sellers. In the digital world, things like this are very easy to do or misuse by irresponsible parties by copying or duplicating any files, including buying and selling transactions.

As an illustration, an investor buys a building to be used as an office from a construction developer for $1000. These investors pay with cash. The exchange of fiat currencies and assets is confirmed and agreed. Now these investors cannot spend the same $1000 or double fiat currency. But this can happen if the payment is made in digital currency or crypto. Double spending can occur if an investor wants to buy another building by sending the same $1000 transaction to another construction developer. It is a manipulation or deception in the blockchain system where transaction details can be copied, duplicated and retransmitted.

Blockchain Double Spending types are as follows:

• Race Attack
  This double spending occurs when fraudsters send transactions with the same amount of crypto or digital currency on the blockchain network for buying or selling before they are confirmed.
• Finney Attack
  This double spending occurs when miners duplicate transaction details in different blocks and use them for buying or selling before they are confirmed.
• Vector 76 Attack
  This double spending occurs when hackers use executable software to generate and send counterfeit crypto or digital currency for buying or selling on the blockchain network.

Bitcoin Handles this Problem

As described above, the use of distributed ledger technology in the cryptocurrency world including the bitcoin blockchain is very useful and works well. Validators (miners) have an important role in confirming and validating data and transactions so that they are able to handle the problem of double spending.

The process is that when a transaction occurs on the bitcoin blockchain, it requires verification and validation of the transaction by miners using a hash algorithm. If a fraudster or hacker makes a double spend on the bitcoin blockchain, the unconfirmed transaction will be deleted. Next the transactions are added to the distributed ledger and form new blocks on the blockchain network. This makes the transaction details immutable.

Practical + Theory How Blocks Hashes Work in Blockchain

Practical demonstration by visiting Blockchain Demo

Hash

Based on the picture above, filling and giving any input produces different hashes. Every time there is a change in the input, a new hash is generated. No hash is the same for two different inputs. Here I use the word "steemit crypto academy" and a hash has been generated. If there is a change in the letter of the word then a new hash will be generated.

Block

Based on the picture above, there is a Block (1) which shows the number of blocks, there is a Nonce (72688) which functions for block validation, and there is a Hash that always starts with (0000) which indicates a valid block.

Based on the picture above, filling and adding data will change the block to red which indicates an invalid block. Here I use the word "Blockchain" as input data. The Hash will change and indicate an invalid block.

Based on the picture above, block validation needs to know the correct Nonce for each specific data input. By clicking Mine which means using computing power, then after a few seconds the block has been validated and generates a new Nonce and Hash. The Nonce is 15446 and the Hash is 000041a03b7328189f5f7154681c5827a1b2fce2fcb5301a8e412e22ea9a7859.

Blockchain

Based on the picture above, there is a Block (1) which shows the number of blocks, there is a Nonce (11316) which functions for block validation, there is a Previous Hash (0000000) which shows the first block and is known as the genesis block, and there is a Hash that always starts with (0000) which indicates a valid block. And then there is a Block (2) which shows the number of blocks, there is a Nonce (35230) which functions for block validation, there is a Previous Hash which is the Hash of block 1, and there is a Hash that always starts with (0000) which indicates a valid block.

Based on the picture above, filling and adding data will change all the blocks to red which indicates an invalid block. Here I use the word "Let's Open The Blockchain" as input data. The Hash on Block 1, Previous Hash on Block 2 which is the Hash of block 1, and Hash on Block 2 will change and indicate an invalid block.

Based on the picture above, block validation needs to know the correct Nonce for each specific data input. By clicking Mine which means using computing power, then after a few seconds the block has been validated and generates a new Nonce and Hash. The Nonce is 49227 and the Hash is 00007ffde9f1ae8c577dc171ce41fa903f4f5325657b98b347190bce1b4be75e.

This only happens and applies to Block 1 only but not all blocks after this. In Previous Hash on Block 2 a change occurred which shows the new hash of block 1 but the Nonce is the same as before. The Hash on Block 2 has also changed. This makes the block still red and indicates invalid block. This shows that in a blockchain system no data from any block can be changed. If there are changes and additions to data, the entire blockchain will be disrupted and become invalid so all blocks must be re-mined.

Race Attack in Blockchain

Race Attack is a double spending that occurs when fraudsters send transactions with the same amount of crypto or digital currency on the blockchain network to buy or sell transactions before it is confirmed. The process is that an investor or buyer wants to send the same amount of crypto or digital currency to more than one trader or seller. Furthermore, if the trader or seller trusts the transaction sent by the investor or buyer without waiting for confirmation and validation, then the transaction may occur and the trader or seller will be deceived and suffer losses.

This is because investors or buyers have made previous transactions with the same amount and have re-sent it. In the blockchain system, this kind of thing is can prevented and anticipated because only one transaction is valid and the others are invalid. This is evidenced by the mining process which will validate one transaction and cancel the other. Invalid transactions will be deleted from the blockchain. The key is that the trader or seller must wait for confirmation and validation of the transaction before releasing and taking any action to avoid a race attack.

Limitations of Blockchain

The greatness of the blockchain can not be separated from the limitations that always exist in a system. The use of blockchain which is very useful and beneficial for many parties and users also has limitations that cannot be avoided. The limitations of blockchain are as follows:

• Scalability
  The high and wide number of interconnected nodes in the blockchain system has affected the performance of the blockchain. In this case, the speed and power of processing data, transactions, and blocks are still categorized as slow and take a long time.

• Cost
  All processes that occur on the blockchain system require the use of computers that has high and large computing power. Every transaction process small or large will incur high costs because it requires a lot of energy to run the process.

• Immutable
  Every data in the blockchain system is immutable and cannot be edited. In unfavorable cases such as if there is an error in copying the wrong address by the user, then the confirmed and validated transaction cannot be changed so the user suffers a loss.

• Hacking
  Hacking may be carried out by irresponsible parties and fraudsters. Blockchain's decentralized, public, transparent, and openly accessible system allows hackers to carry out their mission to develop embedded attacks on blockchain systems with the aim committing criminal acts.

Conclusion

The use of blockchain which has been used in many sectors has provided innovation and improved quality especially in the world of cryptocurrencies. Blockchain has a high level of security in managing data, transactions, blocks and everything related to it so that users feel comfortable and safe. This is very beneficial for every users. Blockchain distributed ledger also has an important role in blockchain by relying on its functions and characteristics.

Blockchain double spending can be identified and avoided by users. All processes and procedures must be well understood so that attacks will not occur and prevent losses. Hash has a very influential function in the blockchain system. Where the hash will indicate valid and invalid blocks to the user. Blockchain also has unavoidable limitations, but these do not outweigh the advantages of blockchain. As time goes on, it is hoped that blockchain will continue to grow and can continue to have a positive impact on users.