What is Blockchain? How does it work?

The story of a new revolution Blockchain

What is Blockchain? How does it work?

What? What is not?

It's frequently the technology we've been hearing about lately. In 2008, bitcoin was discovered by a mysterious person named Satoshi Nakamoto. New notions came with bitcoin. Blockchain was the essence of all this. It is basically a database. You can think of it as a data pool with all the information. All records can be viewed by anyone and are open to everyone. Each operation performed on this network passes as a block. It is intrinsically decentralized and is stored in every user in every system in a messy way. Thus, there is more than one record of the transactions performed.

 

What is Blockchain?

In short, it is a dispersed database that functions by distributing risk and providing trust with the absence of a central authority. Blokzincir technology is widely known as the technology beneath virtual currencies such as Bitcoin and Ethereum. We are leveraging this technology not just in cryptocurrencies, but in every aspect of our lives.

Although the main application area of Blockchain technology is finance, it is also used in areas such as purchasing, marketing, sales, accounting, supply chain, data security, cartography, healthcare, real estate and education.

 

 

How Does It Work?

With curious eyes, I seem to understand how you say this technology works. In blockchain, the principle is that when a new transaction or an existing transaction receives an edit, if it is approved by the majority of users on this network, the new transaction block is accepted into the post and a new block is added to the transaction chain. If the transaction is not accepted by the majority, it is not added to the chain.

What is Bitcoin

The answer to the question of what is Bitcoin lies in Japan. Bitcoin, a virtual currency unit that was initiated experimentally by Satoshi Nakamoto in 2008 and has become very popular today, does not have a payment system or any center. And a maximum of 21 million pieces can be produced.

NOTE: Bitcoin will be halving on May 12, 2020. After halfway, the block reward will drop from 12.5 BTC to 6.25 BTC.
 

What is the mining?

We have said that bitcoins are not in a central structure, but 21 million will be released. These distributed building points are people who own a computer. All records are kept at these points. This series also performs a series of calculations within bitcoin production. As a result of these calculations, the miner who finds a new block that can be connected to the blockchain earns a certain number of bitcoins as a reward. Again in their money transfer, they receive a small bitcoin. To benefit from these rewards, the person required to become a bitcoin miner is for investment.

 

Bitcoin mining was previously possible even with a simple computer. Because the calculation needed to find a new block was very small. However, the founder, who designs a certain number of controlled bitcoins to be introduced into the system, with a system that increases the difficulty level and decreases the amount of rewards as bitcoin is produced (Firstly, the reward for finding each block is 50 BTC, but it has been halved every 4 years and has regressed to 12.5 BTC today.), has balanced production. For this reason, bitcoins, which can be produced with a simple system at first, can be made later with powerful graphics cards and now with special hardware called ASIC, which are produced for this job.

So Is It Safe?


Since it is not controlled by any authority, there is no risk of being affected by crises between countries. And since users on the network have a copy of this chain, there is no possibility of inaccuracy between transactions.

Well you always said safe. Isn't there a weakness of this?

51% attack

The theoretically possible 51% attack is seen as a flaw in open Blockchain networks. It means the majority (51 percent) in the network is managed, captured or manipulated by a single person. Just as having a 51% stake in a company has the right to speak, gaining the majority in the network in blockchain technology allows you to have a right to speak over the entire blockchain.
 

How Takes Place?

The Blockchain network is known as a highly secure system, as it is based on the job approval of all participants. However, malevolent individuals or groups may exploit this event by taking over the majority. Thanks to the majority mechanism I mentioned above, he is able to manage the network. Malicious people who control 51% can stop adding new blocks to the network, add only the blocks they have created, remove the old blocks from the network, reject the actions of the remaining 49%, fork or double spend.

 

Can 51 attacks be carried out on the Bitcoin Network?

Many miners have joined the Bitcoin network for block Awards. In other words, the number of miners could be said to be quite high for bitcoin. That means 51 attacks for bitcoin are unlikely. But it is possible that it will happen in a short term and affect several blocks. As the network grows, the likelihood of an attack gradually decreases as the power needed to be seized for this attack grows. Likewise, as blockchain trades, i.e. new blocks are added to the network, it becomes difficult to change all approved blocks. That's why bitcoin is seen as the safest cryptocurrency in the face of attacks. But its network and hash power can happen in subcoins that are smaller compared to bitcoin. For example, there have been 51 attacks on the networks of Monacoin, Vertcoin, Bitcoin Gold and Ethereum Classic.

 

Examples Of Attacks

ghash.io: In July 2014, GHash.io, one of the most popular bitcoin mining pools, managed to exceed 51% of the total computing power of the bitcoin network. In this case, many people were looking for certain that a 51% attack would take place on the bitcoin network. However, in response to these discussions, he issued a voluntary statement that he would not exceed 39% and asked for other mining pools to be subject to an upper limit of <40% to ensure the security of the blockchain.

Verge: In May 2018, the privacy-centric cryptocurrency Verge (XVG) was attacked 51% for the second time, and the attackers stole about 2 million dollars.

Bitcoin Gold: A malicious miner carried out a double-spend attack on the Bitcoin Gold network. In order to carry out the attack, the miner took at least 51 percent of the network's total computing power, providing temporary control of the network chain. Getting that much power is incredibly expensive - even on a small network like bitcoin gold - only after gaining control can you earn money by using it with a couple of spending attacks. After taking control of the network, the attacker began sending both BTGs to crypto exchanges and sending the same coins to a wallet under his control. Normally, the blockchain could only fix this by approving the first transaction on the block, but it was able to reverse transactions as the attacker took control of the majority of the network. As a result, they were able to deposit money on exchanges and withdraw quickly, reversing the first transaction. Thus, they stole a total of 18 million dollars in funds.
 

 

As an example, if we list the things that an attacker who wants to attack 51 on the Bitcoin network would need;
 

  • Hardware valued at about $7.4 billion dollar
  • 1800 hectares of indoor space for installation and operation of equipment
  • About 36,000 staff who will work to ensure the maintenance and safety of the hardware
  • Provision of electricity ($5.8 million worth of electricity per day) that about 100 dams can generate)

 

Final Evaluation 

Likewise, as blockchain trades, i.e. new blocks are added to the network, it becomes difficult to change all approved blocks. That's why bitcoin is seen as the safest cryptocurrency in the face of attacks.

It is possible that Blockchain technology is rapidly becoming widespread. Especially recently, the dollar has fallen into a weak position as a result of the restatement of viruses and countries. For example, the Fed can print money according to its head. And this corona virus can survive on metal and paper coins for a period of time. This virus and the currencies that have become worthless as a result of the political strife of countries give us the ability to work remotely and synchronize remotely(Zoom, Skype, etc.), Distance education (Eba, Udemy etc.) and, most importantly, taught that blockchain technology is an ineligible boon.