In the last discussion I explained the key terms in the bitcoin world. I also explained the main technology driving the network and the currency.
The Blockchain technology and the 5 underlying principles of Blockchain
Mark Zuckerberg stated sometime this year that the blockchain technology could be used to fix Facebook. Everybody in the tech world is impressed by this technology. In this article I am going to show you the key principles of the blockchain and how mining is done on it.
Blockchain technology has now become a new darling of this 21st century. But much before this technology came into existence there was a system of Digital Cash which was brought to life by Chaum in 1983 to correct the problem of double spending, despite the fact that advanced cryptography existed at the time too, it failed to be compatible with centralization, the anonymity of the transaction and double spending.
Three decades later in 2009 Satoshi came up with Bitcoin, the world’s first decentralized currency, which replaced the centralized model with a consensus based proof of work. It solved the problem of double spending and improved the concept of Chaum by introducing the decentralized payment system using revolutionary blockchain technology.
The five underlying principles of blockchain technology you all should know
Blockchain is a peer to peer (P2P) network where no single participant (user) controls the transaction, the power is distributed among all the participants in this network, that means no single stakeholder can hack, manipulate or close the chain of blocks or can shut it down. This blockchain network due to its distributed (Decentralized) mechanism is free from any hacks or fraud. The blockchain contains all the transactions ever made on the bitcoin network and everyone has access to this information on an equal basis.
In the blockchain powered network all the participants have got the rights to make decisions, here the trust in the system is not forced but is totally guided by user intuition. The tight integrity is observed in the way every user gets incentives for their effort and also in the way this entire P2P network function. The key idea to blockchain is validation of transaction which is proved by other peers in the network.
Blockchain has been designed with this core principle to provide high level of security and authenticity to the user. To ensure tightly knit security & data integrity it uses the power of cryptography. The Blockchain transaction mechanism is favorable and rewarding for an authentic user at the same time it is very harsh on reckless user. That means the blockchain system is fair for all who behave as a good user and reward them appropriately. But if you go about using it with wrong intent you are not spared and penalized.
Blockchain being distributed network, there is no one central point of failure and also no single person can behave recklessly to damage the entire chain of network. The damage because of any individual hack of password will limit to that single person itself. With blockchain PKI(Public Key Infrastructure) encryption mechanism your transaction over the network is highly secured until you are a fool to share your private key for which no technology has a solution. So, largely you can trust on Blockahin technology to ensure your transactions gets completed without being hacked .
The Blockchain is inclusive in its approach where everyone is independent to participate without any discrimination in the global economy. The bitcoin allows all the richest, the poorest, to invest in their capacity and become part of this global economy, as the need to have a bank account was totally removed. They can directly decide to transact to whomsoever they want without third party intervention that too paying zero to very little transaction fee.
The blockchain’s main contribution to the world will be the inclusion of one and all to be a part of this global economy, which will be fair, safe, secure and just to all.
In the next article we will explain the concept of mining in the blockchain and how value is created and what makes a bitcoin an asset.