⛓️ Technical Intro to Blockchain
While understanding about Web3, we cannot miss technical details about blockchain. Blockchain is core of third generation of internet.
What is a Blockchain?
A blockchain is a continuously growing list of records called blocks, which are linked and secured using cryptography.
Each block is connected with link of its pervious block. Single block contains data, its own hash and previous block hash. And first block is call Genesis block.
Blockchain is consider as a digital ledger which stores transaction information across network of node running blockchain. Everytime a new transaction takes place the information is propagated to all node and once have enough transaction they all are consolidated in a block which is saved across node in distributed fashion, which we call Distributed Ledger Technology.
Blockchain is DLT which store transaction information with an immutable cryptographic signature called a hash.
Property of distributed ledger technology:
- Distributed: As name suggest, it is distributed ledger which means information is saved across participant nodes
- Immutable: As same information is saved with an immutable cryptographic signature, changing store information is impossible.
- Secure: All records are encrypted, hash of a block cannot be changed.
- Timestamped: Transaction time stamp is recorded
- Programmable: Blockchain is programmable, anyone can write
- Anonymous: Identity of participant is hidden or partially hidden
- Unanimous: Network’s all participating node has to agreed on transaction
Flow of transaction in blockchain:
Below are the step which happen before any transaction is completed. We will go in details about authentication using cryptographic keys which is called user wallet address, authorisation done by proof of work/stake with role of mining. How proof of stake better than proof of work.
Authentication:
Authentication in web3 for any user is done by their wallet address. As we know this is decentralised system where no body is controlling the system. So for user to get authenticated they need to create their wallet in each chain which is used by network to authenticate user.
Authorisation process:
Once the transaction is authenticated, it is not directly added to block of chain it will first approved and authorised. Which means majority of node has to agree on validity of block. Nodes participating in chain will do the process of mining the hash and valid the block then it will be added to chain which is popularly known as Proof of Work.
Proof of Work
In a proof-of-work is a consensus mechanism in blockchain network, where majority of node validity block and transaction. A miner has to solve a cryptographic puzzle and add new block to blockchain, then that block is broadcasted to all nodes in network through peer-to-peer communication. Each node valid block independently by checking its content and ensuring certain criteria is matched.
Node communicate with each other to establish consensus for validity of block. Nodes broadcast message to a subset of other nodes in the network, which is forwarded to other nodes to there subsets of node and so on. This helps all nodes to receive and process in distributed manner, without requiring any central authority to coordinate the process. This process of communication is called Gossip Protocol.
If majority of nodes agree on block validity, then it is added to blockchain permanently and become part of ledger. Nodes can also reject blocks or transactions that are found invalid, and communicate to other nodes of network.
Proof of Stake
Proof of Stale is also a consensus mechanism used by some blockchain networks like Ethereum, to validate transactions and create new block in chain. In this mechanism, nodes (validators) in network have to stake their own cryptocurrency as collateral.
Validator is randomly selected, who creates a new block and broadcasts it to network. As in this mechanism validator doesn’t need to mining for hash, overall computing time and resource is saved.
Draw back of Proof of Work:
PoW is securing blockchain and providing decentralized feature, but there are some notable drawbacks also,
- Energy Consumption: PoW is energy intensive process that required vast amount of computational power to solve complex cryptographic problems.
- High Transaction Fee: As mining process is energy intensive process, PoW leads to high transaction fee.
- Security Risk: In this mechanism block validity depends on 50% of nodes, suppose if an entity control more than 50% of nodes in network then they can control the network. Which to some extent affect decentralization of network also.
- Scalability: With the required amount of computational power, it limit the transaction capacity of network and also makes it slower.
To overcome these issues few blockchains are moving to PoS.
Conclusion:
So in this blog we learn about what exactly is blockchain technically and how transactions are converted to block and added to blockchain. Consensus mechanisms to validate the blocks and shift towards PoS for speed and scalability.
Please free feel to comment for any improve can be done from my side.
