Blockchain Technology: What You Need to Know

Blockchain Technology - What You Need to Know

Without nodes there is no blockchain

Just as it is impossible for the Internet to function without means of communication, it is also impossible for blockchain networks to function without nodes. The main task of blockchain is to ensure the storage and processing of any data (assets) in a decentralized environment; it cannot be implemented without creating a huge number of copies of this same data.

The task is complicated by the fact that all created copies must not only be synchronized with each other, but simultaneously updated with new information and archived At the same time, it is necessary to remember that these copies can be physically stored not on one particular device, but on many different ones, which, in turn, are not localized in one place, but scattered throughout the world.

All these various devices, which store copies of blockchain network assets and form blocks with new assets, represent nodes. The family of nodes is quite extensive and is subject to a certain gradation depending on the tasks assigned to them. The “heart” of this large family is a group of full nodes, among which the archive nodes not only performs the direct tasks of full nodes, but can also perform some additional functions.

Departure from centralization

Continuing to talk about blockchain technology, one cannot help but notice that many organizations and companies continue to look for those areas of activity where they can successfully apply it. The excitement around blockchain continues, although it is mainly caused by interest in cryptocurrencies. Why the financial component prevails in the blockchain topic should not raise questions, since the centralized approach applied to the circulation of assets is often associated with a large number of risks and problems.

First of all, there are risks associated with the capture of assets, their blocking, as well as data substitution and other malicious actions. In this regard, attempts were made to partially avoid centralization, for example, attracting certain commercial structures instead of central bodies. However, the problem of dependence on a third party does not go away with this approach.

There were other attempts to achieve fair and unbiased interaction between participants in transactions without the involvement of some third regulatory party, but they did not bring the expected effect. The absence of an arbitrator led to a new problem – the inability of the parties to agree on a method of interaction in cases where their positions on controversial situations differed from each other. In other words, it was about the lack of a way to achieve consensus.

About hashing

Ideas about ways to avoid centralization and to achieve consensus, which had been in the plans of a variety of stakeholders for a long time, were systematized and formulated in the form of a new technology, which was called “blockchain”.

This technology was based on a certain linked cryptographic value or hash function which was introduced into the data with the results of the exchange of any assets. A cryptographic hash function is a mathematical process of generating a unique result of a predetermined value after processing input data of any size.

An important feature of the mathematical definition of a hash function is the use of a deterministic approach. This means that every time the same input data is hashed, the hash value of the function will remain the same. As soon as anything changes in the input data, a new hash value will immediately appear. Another feature of the hash function is that even if its value is known, it is impossible to determine from which input values it was obtained.

It is these properties of the cryptographic hash function that guarantee protection against unauthorized changes or any fraudulent actions in the blockchain network with almost 100% probability.

Transaction differences

The state of any non-archival database, including blockchain, does not remain unchanged. State changes of all databases occur through transactions, and this principle is inherent in any blockchain network. However, the algorithm for carrying out the transactions themselves may not be the same for different blockchain platforms. As an example, it is enough to consider the differences between transactions of the two most famous blockchains, Bitcoin and Ethereum.

When storing data, Bitcoin always operates on transaction addresses or, in other words, their hashes. This means that changes in the balance status of Bitcoin users’ accounts are also described by hashes. This process seems a little labor-intensive, but this approach has an undoubted positive aspect. It allows you to accurately determine and track the movement of any assets, even with the most complex and confusing combinations of their division, transfer or return.

That is, based on the results of transactions, Bitcoin generates an output sheet of unspent transactions or a UTXO sheet. For Ethereum, the process is different and it’s a little simpler. When performing each transaction, a link is made to the following data: who sends, what, how much  and to whom, and each account will have a corresponding balance with a certain number of tokens in the account. That is, based on the results of transactions, Ethereum forms a “balance tree”.

Both approaches to transactions have their advantages and disadvantages, so it would not be correct to say which one is the best and which is the worst.

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