What blockchains do?
· In a P2P
(Peer-to-Peer) network, the "peers" are computer systems which are
connected to each other via the Internet. Files can be shared directly between
systems on the network without the need of a central server. In other words,
each computer on a P2P network becomes a file server as
well as a client.
· A blockchain is a peer-to-peer
system with no central authority managing data flow.
·
One of the key ways (to removing central
control while maintaining data integrity) is to have a large
distributed network of independent users.
·
This means that the computers that make up the network are in more than
one location.
·
These computers are often referred to as full nodes.
To prevent the network from
being corrupted, not only are blockchains decentralized but they often also
utilize a cryptocurrency.
·
A cryptocurrency (or “crypto”) is a digital currency that can be used to
buy goods and services, but uses an online ledger with
strong cryptography
to secure online transactions.
·
Cryptography is associated
with the process of converting ordinary plain text into unintelligible text and
vice-versa.
· Cryptography not only protects data from theft or alteration but can also
be used for user authentication.
· Cryptography is used in many applications like banking transactions
cards, computer passwords, and e- commerce transactions.
Blockchain networks produce cryptocurrencies as an
incentive to maintain the integrity of the network.
·
Many cryptocurrencies are traded on exchanges
like stocks.
·
Cryptocurrencies work a little differently on
each blockchain.
·
Basically, the software pays the hardware to
operate.
·
The software is the blockchain protocol.
·
Wellknown blockchain protocols include Bitcoin, Ethereum, Ripple,
Bitcoin Cash, Stellar, and EOS.
·
The hardware consists of the full nodes that
are securing the data in the network.
Why blockchains matter?
Blockchains are recognized
as the “fifth evolution” of computing because they’re
a new trust layer for the Internet.
·
Before blockchains, trust was established by central authorities that
would issue certificates.
·
One you may be familiar with is Secure Sockets Layer (SSL) client
certificates.
·
An SSL certificate is the “green lock” that is next to a web domain. It
lets you know you’re on a secure website.
· SSL certificates have proven
to not be fool proof. Certificates have been stolen from the domains of the
Central Intelligence Agency (CIA), the U.K.’s Secret Intelligence Service
(commonly known as MI6), Microsoft, Yahoo!, Skype, Facebook, and Twitter. Relying
on a third party allows for a single point of failure.
Blockchains, on the other
hand, establish trust in novel ways.
·
POW and POS are used to confirm transactions that take place on a
blockchain, without the need for a third party.
·
Proof-of-work (POW) blockchains
o
require miners to have a full and accurate history of their
transactions to participate on the network.
·
Proof-of-stake (POS) blockchains
o create trust by requiring
nodes that are processing transactions to “stake” some cryptocurrency that may
be forfeited if they’re caught defrauding the network.
Blockchains are important
because they allow for new efficiency and reliability in the exchange of
valuable and private information that once required a third party to
facilitate, such as the movement of money and the authenticity of identity.
· This is a big deal because
much of our society and economy has been structured around
o
establishing trust,
o
enforcing trust when it’s broken, and
o
third parties that facilitate trust.
· One can imagine how this
simple software can be utilized to fix areas
o
that have proven to not be foolproof,
o
such as
§ voting,
§ supply chain management,
§ money movement, and
§ the exchange of property.