blockchain

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blockchain

distributed ledger technology

DLT or Distributed Ledger Technology.

is essentially a database that is shared amongst computers spread around the globe,

creating a decentralized environment rather than a centralized one.

blockchain is a term used to describe DLT and can be defined as a distributed and immutable storage system for data.

key features of DLT from a technological standpoint

immutability

once data is written to a blockchain data store or ledger, it cannot be changed – its there forever

if a bit of data is changed at any level on the ledger,

the entire system will report an invalid state.

the ledger is designed to be immutable using cryptographic algorithms and its distributed design.

distribution

trust is achieved by replicating the data store on a number of peers (hosts) on the internet.

if one of the misbehaving peers goes in an invalid state, the other peers can filter it out.

data in a valid state on a majority of distributed nodes, can be trusted to be accurate.

replication also guarantees high availability.

blockchain provides trust by design.

terminology

the data store that keeps all blockchain data is called a ledger.

each entry in the ledger is called a transaction.

transactions are timestamped and stored in groups of blocks.

the ledger is replicated and maintained by multiple hosts or peers or nodes.

this is why its called DLT or Distributed Ledger Technology.

what

blockchain or DLT is a ‘trustable data record’ built as a distributed system.

why

current systems of records either lack trust or pay a cost for trust.

the goal of DLT is to offer a trustless and safer alternative to centralized services.

for example, when you go to Facebook and log in, the user authentication process

is all done on Facebook’s, centralized database.

if Facebook was decentralized, then the user authentication process would be completed

by the distributed ledger shared amongst users around the globe.

instead of username information being stored at Facebook’s headquarters,

it is stored by everyone who is part of the shared, distributed ecosystem.

for a decentralized environment to achieve the same functionality as a centralized one

it requires some different technologies and processes.

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terms commonly used about protocols and blockchain communication...

proof of work

cryptographic hash function application

a proof-of-work system (or protocol, or function) is an economic measure

to deter denial-of-service attacks and other service abuses such as spam on a network

by requiring some work from the service requester, usually meaning processing time by a computer.

it is used to confirm the validity of transactions.

a key feature of these schemes is their asymmetry:

the work must be moderately hard (but feasible) on the requester side

but easy to check for the service provider.

the system used in bitcoin mining uses partial hash inversions

the sender is required to find a message whose hash value begins with a number of zero bits.

the average work that the sender needs to perform in order to find a valid message

is exponential in the number of zero bits required in the hash value,

while the recipient can verify the validity of the message by executing a single hash function.

distributed ledger

publicly visible history of transactions

smart contracts

build on the proof of work system, can be signed and created securely.

facilitate efficient digital commerce

by enabling parties to contract programmatically in a fraction of a second.

51% attack

most distributed cryptocurrency projects rely on consensus being reached

by anonymous network participants through a voting system.

Each participant's voting power is determined by how many coins they own.

Therefore, all distributed cryptocurrency projects are theoretically vulnerable

to an adversary who gains control of a network

by obtaining control over a majority of available coins

and using this control to damage the integrity of the network.

For large projects, such as Ethereum and bitcoin, 51 percent attacks are infeasible.

coins vs. tokens

moving coins between wallets require technical knowledge

physically moving coins can also introduce regulatory issues.

most blockchain services, such as cryptocurrency exchanges and trading platforms,

use tokens to transfer value between users.

in token-based systems, a provider holds a significant amount of coins,

and ownership of these coins are then transferred between users when they transact.

tokens can make transactions easier, but real ownership remains with the provider

instead of individual users.

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