Before getting into this topic, it’s important to understand the basics of blockchain. However, we’re not going to get to the heart of the technical details, as that is a topic in itself. So, what is blockchain? Many people confuse the use of the term blockchain for Bitcoin, but they are not the same thing . Blockchain is a concept, an idea. Bitcoin is the first and foremost implementation of the idea . There may be other implementations on top of the blockchain that have nothing to do with Bitcoin. In fact, there has been considerable progress in other areas such as smart contracts, interbank payments etc. which is more interesting than Bitcoin.
In essence, blockchain is just a distributed ledger. As opposed to the general paradigm where there has to be a trusted center of authority to control everything, blockchain provides a network where there is no single point of power . There is no need to “trust” anyone, because the system itself makes it nearly impossible for anyone to take control. This decentralization is what makes it so strong and attractive to the general public.
Bitcoin is a crypto-currency (crypto-currency) based on a blockchain that is not regulated by anyone . Transactions are spontaneous and there is a small commission associated with the transaction and have made it very popular for payments worldwide. However, there is no actual value of the currency, as it is not supported by anything. Its value depends solely on how much people are willing to pay and has a direct bearing on people’s belief in this system . That’s why you see the Bitcoin price drop whenever negative news regarding blockchain comes out. (You can read more about Bitcoin here .)
Now what is permanence and why should you care? In broad outline, perpetuity refers to something that cannot be changed after its creation . Those of us who come from the world of software programming know the importance of immutable objects. When it comes to blockchain, immutability has a similar meaning but is much more important. To explain why it is so important, let’s talk in a concrete context taking the example of Bitcoin.
Bitcoin transactions – which take place around the world – are actually stored in a distributed manner across the network with multiple copies of information floating around them. This is literally a block chain that is interrelated with one another . Now, if the block is mutable, then it is possible for a bad person to change the transaction history and become super rich by simply changing the archive. That’s why the sustainability of the blocks is so important. Let’s go into the details:
To initiate a new transaction, you broadcast a message with details of the transaction, such as “Pay Bob 9 BTC.” But how does the world know that it was you and not someone else who started the transaction? To do this, the Bitcoin software / wallet you use creates a digital signature from your private key , which is known only to you (your system) and is unique per transaction. Others will use the appropriate public key to decrypt the message. The diagram below describes the flow at the top level:
However, since the transactions are carried out via networks and computers that are not reliable, how will you ensure that the messages are persistent / permanent and that no one changes the details? The way a digital signature works is that if the message has changed, it will invalidate the entire signature and therefore everyone knows that the message has been tampered with . Next, your transaction goes to a pool of unconfirmed transactions. The people participating in the network select some of these transactions and try to add them to the existing blocks . However, in order to add a transaction, a math puzzle must be solved ( SHA256 Hash). Finding the solution to this puzzle takes time which characterizes a very important facility in the Bitcoin infrastructure as we will see later. So, many people will try to solve the puzzle. Anyone who can crack it first can add the transaction to an existing block, and they receive a small percentage of Bitcoin in return. Below is a diagram that explains it. Note that the last transaction has a pointer to an older transaction to form a block.
Due to the nature of Bitcoin’s infrastructure, it is possible that several branches of the blockchain contain conflicting information. How do you know which ones to trust? The rule is that the longer branch is the one that should be trusted and the shorter branch returns to the pool of unconfirmed transactions. That is why there is a cool down period after you have entered into a transaction, and for the initial period, it is generally risky and uncertain. Some wallets mark transactions in red to indicate the same meaning.
Now, our question arises again. Is this block really sustainable? Is there a possibility for a malicious attacker to change the block for his own benefit? The answer is that it’s not 100% sustainable , but the mathematical approach we discussed earlier makes it nearly impossible to do so. For the attacker to be successful, he or she needs to create a chain of blocks that is longer than the existing one. The nature of the distribution process and its time consuming make it practically impossible for someone to work on it.
But what about the blocks that have been received? Is it vulnerable to modification? Yes, but again, because the nodes are distributed, it would require an attacker to control a large number of computers on the network. Probably , this would likely require the attacker to take over 51% of the computer and hence the name ” 51% attack” . But then, the logical argument would be that, if one had control over so many computers, it would be more profitable to get Bitcoin by mining and doing business in the right way than cheating the system .
So, in conclusion, it would be wise to say that blockchain is nearly sustainable , as long as there are many participants. But it’s also important to understand why because some people are still paranoid about this and maybe they are.