“… He is the spirit behind the machine, he is the one who gives life to the item in question, always working in silence to maintain the system, those few in number and wisdom aware of his existence still incomprehend him, by misfortune he is long forgotten, not knowing that Providence nourishes the hope that one day everyone will know him and thank him for all these years….”
Excerpt from a short tale by gw
Bitcoin nor any of the cryptocurrencies could exist if it were not for the blockchain, being the algorithm behind the operation of the cryptocurrency, and it is that it is based on a libertarian philosophy (No reference is being made to libertarianism, only in a generic sense of the word freedom) where the information is in the public domain, decentralized, always in automatic mode, so that no one has any power over the algorithm in question to cheat, which is what they would do in any centralized human institution. Although I must admit that I couldn’t be totally sure of that, the fact is that nothing is foolproof, but the good thing is that after many years it works and continues to work.
What is blockchain?
The blockchain is not something that is exclusively for cryptocurrencies, it can be used for anything that has a database, the idea is to have a continuous chain of groups of data that are added as events happen, the data that was processed is unalterable and chronologically sequenced, as a way to visualize this we should think by imagining a group of data, This group contains the transaction or transactions of the moment, each group of data is called a block of data that is added to a queue of blocks that is already on the network, which are nothing more and nothing less than the previous blocks of data and that is shared by at least most of the computers that are part of the blockchain system, forming a giant ledger that contains all the incidents from the moment the cryptocurrency was activated. That would be the general shape of a blockchain.
However, we must take into account some characteristics of the blocks in question, because they are the basis of the system, when a transaction happens, usually the sending of some amount of cryptocurrency, let’s say that someone sends 0.5 Bitcoins to some wallet address. A train of data is written in a block with the amount of cryptocurrency, the time it happens, the sender address, all the corresponding data as if an email message were to be sent, in addition to that, each transaction or block has a hash, which is an alphanumeric code of considerable length, it would be something like a voucher number, basically a unique digital identifier, with which the transaction can be confirmed.
Blocks are what make up the blockchain, they are literally the bricks that form the great wall called blockchain, the interesting thing that also has other uses besides cryptocurrencies, such as smart contracts, as databases, or as histories in the financial or industrial or institutional fields.
El bendito Hash
The hash is generated from a highly complex mathematical process, guaranteeing digital security since it verifies if the data has not been altered, any slight change in the data will change the hash number, in that it will be considered an invalid transaction and will purge the blockchain, on the other hand if the hash number is correct from the comparison of the value with the registered one, It will be considered authentic and propagated to all nodes (a node is a computer that someone makes available by running blockchain software to validate transactions, mine, and thus earn rewards) in the system, so the blockchain is linked chronologically by the hash number. A hash can be produced from any text, code, string of characters, regardless of the length, if for example we enter an entire book text such as the bible into a hash function, this text is encoded from mathematical calculations, creating a specific string of a certain length usually a few bytes, and if for some reason someone enters the text of the bible with an extra comma, The function generates a very different hash, so to generate the original hash, the original text must be entered.
To create the hash, there are many algorithms that can be used such as SHA-256, MD5 and others, in cryptocurrencies several types of hashing algorithms can be used, so that a hack of any transaction is really unlikely, the reason is simple, if I come and want to change the value of the amount of bitcoin of a block, It can’t because it will automatically change the hash because it compares the hash with the registered one and with the other nodes that change have the same transaction history, and although it could have many nodes to do the hacking, any discrepancy with someone else will invalidate the change.
If we go into villain mode, perhaps the only way to hack the bitcoin blockchain is to have all the nodes available, that is, hundreds of thousands or maybe even millions of computers around the world, but… Even if you change the data on all the nodes at the same time (technically impossible) with a node with a chronologically authentic history, there will be a discrepancy and the possibility of defeating the massive hacking attempt. This is where the magic of the blockchain is, a transaction is valid because the predecessor transactions are valid and cannot be changed because the hash,So not only would he have to hack the block but possibly the previous ones so that there is no discrepancy, but he would change all the hashes and it would be rewriting the entire Bitcoin ledger, which is nonsense. The other possibility of hacking would be to have a quantum computer, but we would be several years away from that technology, and perhaps by then the software of the corresponding blockchain will have been updated and so the hacker would be as at the beginning.
Associated with hashing there is another very important aspect of cryptography, we have the concept of Nonce (Number used only once), this is an arbitrary string of text created randomly with specific criteria, which together with the date and time, makes the text unique and unrepeatable, the value of this text can usually be four bytes that is added to the hash, now, to maintain efficient security, the hashes of previous blocks are used that will be the header of the next block, this header has a series of metadata fields, among which is the Nonce, this criterion that was referred to above, must be satisfied by an adequate computational computing power (mine),which depends on the node it is on and therefore on the power of the computer it is mining, once a miner (the node’s computer) finds a Nonce text suitable to the criteria, it will validate the transaction by propagating the block to the network while the other miners verify the validation and eventually take the reward, This aspect of competition between miners makes the network safer and more efficient.
Although the article is true to a certain technical point and is not the idea in principle, it is clearly necessary to have a proper view of the functioning of the blockchain, so far, the bitcoin book for example, they have everything written and it is shared by all nodes, this ledger there is a sequence of chapters, where each chapter would be a block that can be one transaction or several, each block is sequentially linked to each other in a historical way by hashes that are calculated from the text of the respective block, encoded for authentication purposes, and a block in its header contains data from previous blocks and others such as Nonce which is a singular text that is added and that will eventually validate the transaction by the miner who gets the appropriate text.
Data Components in a Block
A block is a document that has a header and a body, the header contains a series of data such as the version of the block (a set of criteria that must be followed), the hash of the previous block which would be the chain of the block chain, a Merkle root (it is a hash of the hashes of all the transactions that are part of the block), the universal time and date when the block was created, the nonce that was already explained in previous paragraphs, and the target that has to do with the mathematical operations that the miners must solve.
The body of the block contains the list of transactions where each transaction contains the addresses of the sender and receiver, the amount of value of the cryptocurrency sent as well as the digital signatures of each item. The transactions have a specific order, where before each transaction there is a coinbase transaction, which is an amount of money transferred to the miner for their transaction validation work, and which in principle is the way in which new amounts of cryptocurrencies are entered into the system or alternatively for the fees paid by the sender.
The Ecosystem of a Blockchain
We know the nature of the blockchain, but everything happens with transaction, the logical thing to think is that a transaction is the act of entering the recipient’s address in a wallet, the amount and clicking “send”, and nothing else. Actually, it happens more than that, the transaction is packaged in an unverified block, being sent to a waiting list known as a “mempool” in the network, waiting for validation, that is, in a queue waiting for miners or validators to clear the block in question, in this process the miner or miners solve the mathematical operations to obtain the text that validates the transaction,in turn, verifying that all the data is legitimate (Proof-of-Work or Proof-of-Stake) in order to obtain the reward. When the blocks are verified, it propagates to all the other nodes of the network, these nodes recheck that everything has coherence, and the process culminates when the group of nodes give the yes to add to the blockchain thus forming another chapter of the cryptocurrency book.
The size of the blocks is an important aspect and this is where the concept of scalability comes in, because a successful cryptocurrency will eventually grow in use and number of participants, so processing transactions will increase exponentially, and therefore, the blockchain of the given cryptocurrency must have the capacity to be able to meet that growth in demand, Therefore, an inadequate block size negatively affects the performance of the cryptocurrency due to bottlenecks in transactions, delay in executing processes, and therefore trust in the cryptocurrency, eventually affecting the price.
In the case of large blocks, it certainly makes transactions more comfortable, but it also tends to require larger memory spaces, and to centralize, since miners with greater resources will tend to hog transactions. So a balanced block size brings the best of both worlds, which is why this aspect is important. In 2021, Ethereum, due to many factors, had a rise in fees, reaching absurd values of hundreds and thousands of dollars per transaction due to large bottlenecks, high transaction demands, and of course it was the time of the pandemic, Obviously benefiting miners and validators, but harming users even so far, because it is still affecting a significant number of users because of the impracticality of using Ethereum due to the fees of 20 or 30 dollars, if it is because of the high fees of Ethereum, it is better to use other cryptos or even conventional banking. This speaks to the problem of the low scalability of ethereum, which is why the Ethereum layer-2s (a second layer of blocks) is implemented as a solution to these contingencies, but there is still a lot to be solved in that crypto.
Miners, and also validators are elements of vital importance in blockchains, the obvious thing is that those who invest in miners/validators are there to make money, and they do so, in high amounts, moved by ambition and the promise of a better life because of large commissions, only in exchange for serving the blockchain so that it exists, Because of this, they are very important within the crypto ecosystem. In the infancy of Bitcoin, back in 2009, someone who had put a simple desktop computer to mine for the cause of Bitcoin, could earn entire bitcoin in commissions, the same bitcoins that now cost thousands and thousands of dollars, those were good times.
Investing in bitcoin or cryptocurrency mining/validator in general is an excellent passive income resource, the problem is that due to the competition, those who take the biggest cut are investors who install mining farms with state-of-the-art hardware, the drawback is that over time it is more difficult to mine, And he would have to be updating equipment from time to time to stay in the competition.
Nodes are the heart of the blockchain, it is a computer, computer, server, intended not only to mine, but to process, store and update the transactions that enter the mempool to stack them in a block waiting for consensus to be validated by the node or groups of nodes involved so that after approval it is formed and then linked to the blockchain to save in history.
Last but not least, cryptocurrency technology is improving over time, and as there are new cryptocurrencies popping up every day, at some point a cryptocurrency may emerge that stands out and potentially becomes the next Bitcoin.
