What are blockchains? Minor premise: we didn’t even know the topic, then it became the topic of any of our speeches. Because they are essential because they are, above all, precise. And because the boom of recent months has led us to re-evaluate them completely.
Thanks to this series of numbers and words, the Blockchain allows to regulate peer-to-peer networks in a way never seen before: it forms a chain of blocks that contain events, but which at the same time can be of any type and not only transactions. For this reason, it becomes essential to underline how the blockchain system has very versatile applications. That goes beyond cryptocurrencies.
The Peer-To-Peer Network
Okay, let’s start with the basics here too. Peer-to-peer networks are different from the typical internet network. In traditional ones, the user connects to a server via the device: the server in question takes information and sends it to the device. As? Through connection. In this way, the user can browse the web, taking and giving data. Messaging services are a stunning and easy-to-understand example of this.
This is why there is a double check: both devices need to be connected to the Internet to get the message across. On the other hand, peer-to-peer is a network that connects devices: it does not pass through a server. It is direct. This is why it does not have an entity that physically controls the network, so it does not have a single breaking point. It doesn’t depend on anyone.
What Is Blockchain Used For, And What Is It?
But what is the Blockchain for? Let’s say the case of a PTP network: there is a need for basic regulation to use the devices. In networks with a central server, the server itself determines the encryption of sent & received messages. Not only that: it also determines the chronological scrolling of messages, transmits them following specific criteria. Here: in a PTP system, this is the work of the Blockchain.
Which is simply a chain of blocks within which data organized for given encryption can be found. Sending money or receiving documents are encrypted processes: that is, communicated to all devices on the network. The devices are also organized in chronological, systematic order. It is forming, in fact, a block. Once this block is built, there are some mathematical rules to respect: otherwise, you will discover that the server has been tampered with, complete with data theft. If the block respects these internal rules, it is added to the chain.
Why not central servers? You have to have ‘trust’ in the PTP. You don’t always have to have a third party to control. The Blockchain, in this sense, immediately eliminates this need for trust: which is normal. Let’s be clear. But what’s more reassuring than a mathematical algorithm? So right, so numerical, so perfect. The protocols eliminate all the problems associated with the digital age, from the monopoly of big data to consumers’ fear in digital markets.
A Practical Example To Understand The Blockchain
The Blockchain should not be understood but at the same time you use it, it will have already changed your life. Basically: it’s a computerized system that’s made to help. Just help.
Install A Client
Here: now, let’s install a client together. And these are the basic steps:
- First step: let’s get a client. Things? The program is needed to enter the peer-to-peer network in which cryptocurrency circulates. The client used is Bitcoin Core: very reliable and used on every operating system.
- Once the client has been downloaded, we will install it on the device we prefer. Then this will be automatically connected to the Bitcoin network. It means, in a nutshell, that we will always have a constant copy of the Blockchain, with transactions made up to a given moment.
- Within the Blockchain, we will find several results: all anonymous, of course. This is also thanks to the protocol, which refers to the Wallet of the sender, that of the recipient, and the amount of Bitcoin transferred. Each Wallet also has an alphanumeric code that remains untraceable. Ergo: it is not possible to know precisely what refers to whom.
Each new block is formed once the data’s size is acquired: there is no time or quantity limit in transactions. For Bitcoin, a block may require 1MB of data to be added to the chain, and therefore be valid. To create an entire block, however, two thousand transactions are required. Average time: 10 minutes. The Blockchain can also be programmed, even with different parameters. After all, in this case, we are talking about different protocols:
The Phenomenon Of Mining And Its Relationship With The Blockchain
Be careful because you need imagination: it is a vast network of connected nodes. They send information to organize and arrange blocks quickly, following complex mathematical verification schemes. A system like this needs a lot of computing power. And this power is employed to collect all the transactions and put them in chronological order, eventually creating a valid block.
We arrive at the miners: the units that practice mining, the elements that ensure the perfect functioning of the network. Their power combines transactions to form the correct blocks: once the block is formed, they have a reward—sugary type for horses.
Proof Of Work And Proof Of stake: The Two Types Of Blockchain
It should be added that there are mainly two types of blockchains. First of all, proof-of-work, Bitcoin is; then the proof-of-stake systems, an example is Ethereum. Differences? Very important, they radically change the way of conceiving the Blockchain itself. In this diagram, we will tell you why:
Key point: computing power. Some blocks are challenging to form, which require attempts at mathematical combinations. The miners compete with each other to get to the next block first, simply by trying multiple sets of numbers.
The problem is that they are unable by themselves due to a lack of computing power: for this reason, proof-of-work miners gather in small groups called mining pools. In a pool, the rewards are shared among those who lend their energy. Teamwork. How are rewards awarded? Automatically. A reward consisting of a new cryptocurrency is issued for each block solved. With Bitcoin, we get to issue a total of 21 million.
It is much easier to use: it has many advantages in terms of scalability and convenience. Say goodbye to exaggerated computing powers or ultra-expensive bills. Proof-of-skate guarantees a new and different miner: one that can solve the block on precise parameters.
In short: the nodes that run the entire economy are only a few, and they refer to them for transactions or to hold large sums of cryptocurrency. Go to trust. Trust well placed. Ethereum mining also needs only a standard pc with 8 GB of RAM: sorry only for the blocks, without rewards. It has only a few transaction costs then assigned to the miner.