Why is 'Blockchain' so Important?

Why blockchain matters?

Blockchain was first introduced by bitcoin as the main foundation that causes bitcoin to be highly valued economically and technically. Blockchain can be said to be a new type of database after the emergence of a commonly known technology as NoSQL database, although in practice the use of blockchain as a DBMS (Database Management System) has not been as simple or as simple as using RDBMS (Relational DBMS) or NoSQL DBMS.

Blockchain

Simply blockchain can be said to be a new type of database where in RDBMS data is stored in columns and rows, in blockchain the data is stored chronologically (in sequence of time of writing) in a unique identity bundle where each new bundle must enclose Bundle of its predecessor, thus forming a series of bonded bundles (blockchain). This bonding circuit that makes blockchain logically difficult to change (tamper resistant), because if one block is changed then the entire data becomes inconsistent or invalid.

Broadly speaking, there are 2 types of blockchain, the UTXO (Unspent Transaction Output) and the state tree. Bitcoin is one that holds UTXO, a block can store unspent virtual coins where to calculate the ownership balance must trace the blocks with valid UTXO (although in practice the total balance has been stored in memory to speed up the process). While Ethereum is one that embraces a state tree, where state changes (variables) are stored in a tree structure, in a state tree type, nodes can quickly retrieve the last value of a variable (eg balance) without needing to trace previous blocks.

Characteristics

The main characteristics of blockchain that distinguish from other types of databases are distributed, immutable, and decentralized (no centralized power - central authority - as controller). In computing, distributed terms have several meanings, such as their fragmented processing, shared data, or a combination of the two. To date most blockchain solutions still use distributed process characteristics with replicated data (all nodes / machines have the same data) and some are developing support for distributed data (shard).

Immutable is the property in which a data or variable can not be changed after the assigned value in program execution, in contrast to the constant where the value determination is performed before the program is executed. In the program execution environment, immutable can be achieved easily through a series of logic rules, whereas in the context of data stored in storage media the conditions are more difficult to achieve. One way to create an immutable file or data is to write it on a single write media such as on a CD or DVD, another way is to use cryptographic methods that generate a pseudo immutability, apparently because the physical data can still be altered but logically can be checked using the calculation mathematical. Blockchain technology uses cryptographic methods to secure transaction data from unauthorized changes.

Decentralization is the most unique characteristic that distinguishes between blockchain and other database technologies because the distributed and immutable features are essentially nothing new in the database world (although the technical form is different). To date, all blockchain solutions use consensus to achieve decentralization with a variety of variations. Consensus can be defined as an agreement between machines (nodes) incorporated in a blockchain ecosystem to determine which data or transactions are considered valid and valid and make it a single truth. There are several methods of consensus, including Proof of Work (PoW), Proof of Stakes (PoS), Voting, and Voting with Stakes which currently dominate is PoW method known as mining process.

Consensus

Bitcoin is designed to allow anyone (in machine) to join in a single transaction ecosystem with the same rights (read and write database) without a single governing party. This condition has consequences that allow anyone at the same time to write on the same record, therefore an agreement with certain rules is necessary to prevent any party attempting to commit fraud within the system. Of the type of membership, blockchain is broadly divided into 2, namely public blockchain and private / trusted blockchain. Public blockchain as in bitcoin allows anyone to join into one node, whereas in private or trusted blockchain, membership is limited to those entries on the trusted node list and or in a dedicated network

Proof of Work

This consensus model involves an algorithm called hashcash, the same algorithm used in mail clients where computers are required to perform repetitive calculations to produce a specific number to prevent spam. Hashcash can be analogous in that one has to throw two dice to produce 5 and 4 simultaneously before being allowed to do something, the more the number of dice the more time it takes to produce the intended configuration (although there is an element of profit as well) -the verification takes only a minute.

By the same principle, nodes incorporated in the blockchain ecosystem are asked to count the hashcash of a transaction with a certain difficult degree challenge (the number of dice to throw), the first discovered node is considered the winner and the resulting block will be recorded by the node - other nodes as legitimate transactions. Since this process takes up enormous resources (energy and machinery), an incentive mechanism (reward) is required, whereby the inventor of the hashcash solution agreed upon will be awarded a prize of digital money value with an agreed amount. This process is known to people with the term mining

Although this mechanism has been quite successful in securing bitcoin networks, there are some criticisms of this approach, one of which is the wastage of computing resources (with the electrical count used) for something that is not useful, imagine thousands of hours and even hours, Day just do the throwing dice and there are only a few people who earn money. The second is that if one person controls more than half the computing power then there is the possibility of a monopoly.

Proof of Stake

From the criticism of the energy wasted from the PoW approach, a concept called Proof of Stake (PoS) emerged, when it was described with a dice throw, at PoW everyone raced together to throw dice, so in PoS everyone was given the opportunity to roll the dice with a run Certain time, if at the given time period has not produced the proposed solution, then the opportunity will be given to the next person. In the PoS also proposed the concept of such shares through the deposit of money, where larger share owners will get a greater chance to do the dice throw. The reason for involving money here is when in PoW someone spends money to buy a fast machine, then in this PoS money is spent on getting a bigger chance.

Voting

In the voting mechanism, each node is asked to calculate the incoming transactions and publish the result as a vote, the most widely calculated result will be regarded as the truth which is then written into the block on each node. As an illustration, in a class each person is asked a question to count a multiplication, then each one is asked to name the answer and the answer is the most correct answer. Voting mechanisms have a disadvantage when most nodes collude to cheat, so this mechanism is more suitable for systems with private or verified nodes such as banking networks or between companies.

Voting with Stakes

This mechanism is a variation of the voting mechanism to be used in open ecosystems. In this mechanism, before voting the participant (node) is required to deposit a sum of money as collateral, if the participant is deemed to be cheating, then the security deposit will be forfeited and distributed to another competitor. This mechanism adds economic and social consequences (blocking) to the voting system if the participant cheats.

Present condiition

Multi Central

Web technology was originally intended to form a distributed computer ecosystem, although in general this goal has been achieved, but from the perspective of the setting there is still the concept of central authority, it can be said that the current web ecosystem is a set of centralized interconnected servers and Communicating with the same language (http, url, html). Such ecosystems are considered vulnerable to censorship, ddos ​​attacks, and have low availability.

Since the advent of p2p sharing (torrent) technology, efforts have been made to make the Internet as a truly decentralized and distributed ecosystem with the birth of technologies such as TOR (The Onion Ring), IPFS (Interplanetary File System) and blockchain. When a TOR is created to make the network a decentralized resource, IPFS and torrent focus on the distribution of files or content, then blockchain focuses on transactions involving assets with economic value.

Multi Ecosystem

In the financial world, today most still use the concept of multi-central as the web in mainstream. Unlike the web ecosystem where there is a common standard that has been agreed upon, the financial ecosystem in my opinion fails to become a distributed system in the sense that there is no standard that makes financial institutions seem to be in a global ecosystem like in web technology. Can be said in the world of finance besides embrace multi central also embrace multi ecosystem, ecosystem which I mean for example is financial network like master card, visa, ATM together, ATM prime, maestro, SWIFT, As a result, transactions become very inefficient, requiring the exchange of messages (messages) with certain formats, need settlement process, and the need for consolidation in addition to various risks when the occurrence of such transactions

Disadvantages and Weaknesses

Inter Blockchain

For that reason, when bitcoins are released the various parties say that blockchain is the future of financial transactions, even financial and technological companies have invested heavily in developing a blockchain-based financial solution. Nevertheless, with each party developing its own blockchain technology, the possibility of multi-ecosystems remains unavoidable, so in some communities it has proposed an inter-blockchain protocol to connect between different blockchain ecosystems. Unfortunately, until now there is no single umbrella that can really unify the differences between one blockchain technology with another.

Performance

One of the problems faced by blockchain technology from database technology goggles is the low performance per second transaction rate that can be handled, bitcoin currently only able to serve 1 transaction per second, when compared with the mainstream database, the speed is still very far. One attempt to solve this problem is by combining database processing technology with blockchain storage, one of them is a bigchaindb project, they claim to be able to transmit up to 1 million transactions per second, but currently the project status is still under development

Privacy

Another problem with the concept of blockchain is privacy, in principle each node has the same data copy as another node, meaning that all data can be seen by all nodes. Positively this encourages transparency, but the drawback is the lack of privacy, to minimize the blockchain should not be used to store data outside the transfer of assets (transactions), data such as user profiles and supporting documents are not recommended to be stored on blockchain.

Future

Blockchain will not replace the database in general, but for transactional systems, slowly but surely blockchain will soon replace the traditional database. In principle, any system involving asset ownership, asset transfer and involving multiple parties will be potentially replaced by a blockchain system. Currently the system being developed on the blockchain technology such as currency system, banking, supply chain, music distribution, medical record, identity and so on. My prediction, sometime if the countries agree to use blockchain to replace passport, the identity identity (KTP) becomes global and replace the existence of the passport itself, even enough identity for all purposes (SIM, Insurance, etc.)

Follow me @cekblack 💕