Hey everyone! javajrr here :) Just wanted to start off by saying a big thank you for all of the love in my last article — I couldn’t do it without you guys! As always, if you’d like to support me, follow me on my Twitter @javajrr and leave a comment down below.
Today’s topic is going to be none other than Blockchain: The Basics. If you’re just getting your feet wet in the crypto space, I can’t emphasize enough how important it is to understand the fundamentals of blockchain tech. After all, it’s the entire backbone behind the crypto space as we know it.
So, let’s start.
What is blockchain technology? Like its name connotes, a blockchain is a chain of blocks. This might seem pretty intuitive, but it’s a very useful visual to help process information with. A blockchain network is decentralized and distributed. These words might sound big and scary, but they’re just fancy ways of saying that a blockchain does not rely on any centralized server (think Google or Amazon), which typically stores all of your data in one large server, thereby giving one person (or company) all of the control over your information. Instead, blockchain relies on math and code to make sure that no human flaw or error can tamper with the system, and that every transaction executed is verified by everyone else on a network.
Let’s take a look at the diagram below:
As seen from the diagram above, the first block is a very simple block known as the Genesis Block. This block is the original starting block of any new chain and contains a set amount of data in it. After a certain amount of time passes or a fixed number of bytes are recorded on the Genesis Block, another block will be generated with the intent of verification by another miner (we’ll go into this further in the article). In other words, after a miner is the first to verify a transaction over a bunch of other miners, Block B will form, and then after the process is repeated again, Block C, D, etc.
So — what is mining? You can think of it as a big machine solving math problems that grow harder over time. You’ve heard of crypto like BTC and ETH, right? Well, there are two ways that you can get a hold of it: either mine it yourself, or buy it on an exchange. If you’re a miner, your giant computer will essentially compute against other miner’s computers to solve complex math puzzles — whoever verifies the transaction first gains the asset as a reward. Of course, this means that you could technically spend a lot of computing power and energy to mine an asset like BTC and end up not solving the puzzle first :( Although this is a bit unideal, allow me to assure you that it is only through this fostered competition that a kind of beautiful teamwork forms — through everyone’s consistent struggle to be the first to crack the puzzle, the network becomes more secure and efficient.
At this point, you must be wondering — can a blockchain ever be hacked?
It’s extremely rare, but yes. One of the most famous cases of a blockchain being hacked was with a DAO VC Fund called “The DAO”. “The DAO” was launched on the ETH Classic blockchain, the first version of ETH (and not ETH 2.0 that we are so familiar with today). In 2016, the network was hacked with over $50 million in funds that were stolen (equivalent to about 3.6 million ETH at the time). This posed a major problem — if blockchains were meant to be immutable, how were hackers able to break in and steal so much money? As it turns out, a bug was discovered in the code, making it vulnerable to attack. As a result, ETH had to hard fork the network from ETH Classic into the ETH 2.0 that we know today.
Although “The DAO” was a bit of a flop, a decentralized network is ultimately much safer than a centralized one. That’s because of the 51% rule through a mechanism called a poW, or Proof-of-Work, which makes tampering with a block harder over time. If the hash of a block changes, the data inside the block changes as well — this is precisely the reason why blockchain is so foolproof, as a hacker would have to recalculate each individual hash in the entire chain (hence, the 51%) before the next legitimate block is verified, at which point any fraudulent work would be wiped out.
If you’ve kept up with the news, you’ll know that poW isn’t the only way that a blockchain network can be kept safe — the other mining mechanism that encourages a collective effort is called poS, or Proof-of-Stake. ETH 2.0 currently runs on a poW mechanism, but they are hoping to hard fork their network into a poS chain in the near future. A poS is so revolutionary because it mimics a shareholder vote in the real world instead of relying on pure computational power (think poW). Validators (not miners) collect network fees based on how much stake they have on-chain. poS is also much more cost and energy efficient, however, less explored than poW.
A Brief Closing:
I hope you guys learned a bit more about blockchain! As always, if you have any questions or comments, feel free to leave them down below — in the meantime, I hope that everyone stays safe and healthy, and remember to wear your mask!
-javajrr ❤