Crypto Academy / Season 3 / Week 6 - Homework Post for Prof. @stream4u : Blockchain

It is a great privilege to be writing on the @cryptoacademy again at this point in time. This has given me the opportunity to know and learn more about cryptocurrency from our learned professors in the crypto space. I have read and studied the lecture of professor @Stream4u where he taught about Blockchain. Indeed,it was really educative and interesting and this has necessitated me to write my homework given by the professor.

The term Blockchain is derived from two word words, block and chain. that is to say, blockchain is a chain of blocks that contains any data recorded in the block. Blockchain is concerned with centralized database. Blockchain is the keeping of transactions records that are distributed across the network of the computer system in a digitalized form. It cannot be hacked by fraudsters or changed. The main feature is that, it is decentralized. Blockchain was first known in 2007 which later became popular with Bitcoin in 2009. The founder of this bitcoin is Satoshi. In addition to what I earlier said, once an information is stored, it is non-corruptible, immutable, safe, thereby ensuring that all the transactions between the users in the network are stored by means of verification. In blockchain, transactions, records wherein the blocks are connected with each other to form a chain. These blocks are registered in the system by carrying out rules given to it and are later processed in a distributed registry. Blocks are verified, when the transaction is broadcasted on the network with encryption algorithms.
There are components that make up the blockchain. These are blocks, chain and miners.

1. The blocks: The blocks contain data wherein the files on the network are permanently stored. The blocks contains all the last transactions and allows a new block to be created. There are three features of a block, these blocks have its unique features, they are:
   Data which is held in the block
   Nonce which 32 – bit number that is generated when the next block is created
   Hash which is generated 256 –bit number which starts with zeros. In all, the hash shows whether the block has been verified or whether not.

2. Chains: As stated earlier, each block has a peculiar hash and nonce. Here, blocks are connected to each other and a chain is created

3. Miners: The miners solve mathematical problems. The miners also confirm transaction and create new blocks in the blockchain. The miners can also verify hash values. In mining, the higher the hash rate, the more energy is consumed and miners get rewards in form of a coin.

TYPES OF BLOCKCHAIN

There are four types of blockchain namely:
Private, public, consortium, hybrid blockchain

✓Private blockchains: This is the kind of blockchain where a user has a right to join the network. As the name implies, it is under the control of one person. It works in a closed environment or network. Private blockchain uses peer to peer connection and it is built on a smaller seal and network. This kind of blockchain can be found in a company or organization. This type of blockchain is also known as a permission blockchain.

This implies that, it is only the user that has the authority to change the rules and thereby reverse the transactions on the network.

The private blockchain save cost and increase efficiency in the work place. The security check is not as high as that of the public blockchains. In this systems, it is only the user that has the authority to verify and change their identity.

The weakness of this type of blockchain is that, it is centralized thereby making it difficult to trust information stored in the network. Also, it is a closed network and has less security check.

✓Public blockchain: Just as in private blockchain where it has a restrictive network, in public blockchain it is non – restrictive and no permission before anyone can have access to the blockchain platform. In this type of blockchain, anybody and anyone can have access to this type of blockchain in so far as, it is connected to the internet. Transactions and records, are not changed on this type of blockchain.

By virtue of been a public blockchain, anyone can verify transactions and conduct mining activities. This is because, this type of blockchain is open to everyone. Public blockchain is not owned by any particular person or organization as they are completely independent of any organization. The resultant effect of this, is that, if the organization fails to exist, the public blockchain will be in operation in so far as the computers are connected to the internet.

The public blockchain is transparent and the security level is very high as compared to the private blockchain. The major weakness of the public blockchain is that, the network becomes slow as more nodes have access to the network. Examples of this public blockchain are Bitcoin (BTC) and Etherrum (ETH).

✓Hybrid blockchain: This is the combination of a private blockchain and public public blockchain. The reason for this combination is because there are organizations that want the best of the two blockchains, so the organization will go far hybrid blockchain. Transactions in a hybrid blockchain are not usually made public. But can be verified through the help of a smart contract. In hybrid blockchain users have full access to the network and their identity is protected from other users, save for when the users will engage in a transaction, of which the identity of the user will be revealed to the other user.

The hybrid blockchain cannot be mounted by a 51% attack on the network by the internet hackers. The hybrid blockchain gives room for privacy but allows communication with the 3rd parties. In this type of blockchain, transactions are cheap and fast and it gives a better increase than that of public blockchain. The weak points of the hybrid blockchain is that, it is difficult to upgrade and there is no reward for users to participate. The real estate companies use hybrid blockchain wherein the real estate company use hybrid blockchain to show a systems of a particular information to the public.

✓Consortium: This is also called a federated blockchain. The consortium blockchain is a similar to hybrid blockchain because it has the same features with private and public blockchain. The consortium blockchain reduces the risks that come with one user controlling the network on a private blockchain. It connected to more than one blocks where nodes have the main disadvantage of consortium blockchain is that, it is vulnerable in hackers.

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2. WHAT ARE THE BENEFITS OF BLOCKCHAIN

There are so many benefits of blockchain. They are:

It enhances security
It saves time
It reduces paper work
It is transparent
It enhances efficiency
They are highly secured network
It reduces cost
It is decentralized
I will discuss some of the benefits in seriatim

1. Enhances security : Since transaction and recode are encrypted, it cannot be altered. It prevents fraud and activities, which are not authorized. This is one of the leading importance of the blockchain technology. In blockchain, there is some level of privacy whereby user can not have access to another user unless an authority is given to that effect.
2. It reduces cost: By nature, blockchain reduces cost for, with the coming of blockchain, it limited manual works like paper work and auditing process.
3. Enhances efficiency : Blockchain has reduced the use of manual works, human beings to carry out a task. This is because they are all prone to make mistakes or error. Also, blockchain has reduced use of human intelligence to correct task that were reached in error. But rather, blockchain makes the work efficient and faster. Blockchain reduces human intervention.
4. It saves time : Blockchain saves time by reducing and eliminating paper works. Whereas, in blockchain, transactions are carried out and completed within short time.
5. Automation : Transactions and records are automated through smart contracts thereby increasing efficiency and speed. Smart contract reduces the use of third parties to verify transactions.
6. Transparent : with block chain, transactions are transmitted to each node and it is verified retrospectively. By this, the users can see all the transactions at the same time.

3. EXPLAIN BLOCKCHAIN DISTRIBUTED LEDGER:
Blockchain distributed ledger is a peer-to-peer networks that provides high membership in order to maintain a copy of their shared ledger. Instead of requiring a central authority to communicate records to all the participants, distributed ledger will give the members the opportunity verifying, executing and keeping records of their own transaction without the interference of a third party. The technology responsible for the blockchain distributed ledger is decentralized. The blockchain is sued as been similar to the distributed ledger but both are not the same. the block chain makes sue of many technologies to enable blockchain applications, one of this technology is distributed ledger. Distributed ledger centers on an encoded and distributed database which serves as a ledger wherein, records with respect to transactions are stored.

Origin of Blockchain distributed ledger

In the olden days,the exchange of goods and services were done by a middle men who oversea transactions between two parties. For instance,banks tend to validate and verify that, the employer or the costumer has the required funds in the account to Carry out or do business. The third party (Banks) record the transaction in a ledger and thereafter, present the records in form of a bank statement. Here, the bank has the absolute power over the records in the ledger. Historically, this approach was the best method of securing the ledger wherein Power was given to a central body to control the transaction. Today, central ledgers are no longer the only option for exchange. Now, with the advent of distributed ledger, parties can get their paychecks without needing an intermediary.
Advantages of Distributed ledger

• There is a high level of security
• The transactions in the ledger are transparent because parties can always have access to the copy of the ledger.
• The effect of distributed ledger cannot be overemphasized as the distributed ledger is best used in an election,tax collection etc.

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1. What is blockchain double spending and how Bitcoin handles the problem?

Double spending is a process whereby two payments are made with the Same funds so that,the recipient of those funds can be deceived. Double spending is a threat to the digital currency and also double spending has its peculiar problem to the digital currencies. This is because, informations on the digital currencies can be reproduced easily by individuals who can comprehend the Blockchain network and the necessary tool to manipulate the system. However, this is not the case in with physical currency. This is because, physical currency can not reproduced twice and the physical currency give the parties involved in the transaction the opportunity to verify the authenticity of the physical fund. For instance, two people cannot be given the same @10 bill and that is why banks try to minimize and reduce the risk of double spending. However, there is no third party in cryptocurrency. It is only the sender and the receiver. The greatest risk for double spending is in form of 51% attack which occurs if a user controls 50% of the computing power in the cryptocurrency. The question therein is how can double spending be protected and the answer is blockchain

Blockchain and double spending

With the advent of Blockchain in 2008 and Bitcoin in 2009, double spending was reduced. Blockchain could now verify the double spending the authenticity of each transaction and thereby preventing double spending from occuring. Thus, Bitcoin makes sure that, all transactions are included in the Blockchain in order to ensure that that,party who spends the Bitcoin really owns the Bitcoin thereby preventing double spending. It is not easy to falsify the Blockchain because of the complex algorithms that would be required in competing Power.

How does Bitcoin handles double spending
Once a transaction that is not confirmed is included in a block, it will be written to the Blockchain and confirmed the transaction. The confirmed transaction is sent to recipient and is verified by the network by way of cryptographic proofs. Permission is not needed from anyone to send the transaction but all that is needed is a cryptocurrency wallet and an internet connection.

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5.Practical + Theory, Visit Blockchain Demo and check section Blockchain, then explain in detail how Blocks Hashes Work in Blockchain, what will happen when any middle of the block gets changed, try to give screenshot for each possible details.

In blockchain, transactions and data are encrypted to cryptographic known as Hashing. To demonstrate it practically, open Blockchain

Block
In the block section, there are Block ,Nonce, data and Hash. The default block number is 1. Nonce value validates the block. The hash value starts with 000 and it changes when inputs are made in the data. The default hash value is 0000f727854b50bb95c054b39c1fe5c92e5ebcfa4bcb5dc279f56aa96a365e5a while the hash value after an input was made is a1c6d67c992a70fca66188e178d9ca7c20d5c775393948f19955be7f0952c0fa

HASH
In the hash section, there is SHA256 Hash. Whenever an input is made,it generates a hash value. Also, anytime the input is changed another hash is generated. The feature of the hash is that,two hash value cannot be the same for two inputs

This is the default Blockchain

The hash value changed when an input was made on the data

After an input was made on the data, the hash value changed

Blockchain

The blockchain contains more than one block which has block number, Nonce,data, preview block hash and block hash. By default, block number is 1. There is a Nonce value Which is 11316 in the block 1. Preview block hash 0000000 and it is also known as the Genesis Block. Hash value starts with 0000 which makes the block valid

If I change the data input,all the blocks will be red which makes it invalid. This is shown in the picture.

1. What is Race attack in Blockchain? Or what is Finney attack in Blockchain? Or what is Vector 76 attack in Blockchain.

It is undisputed fact that, Blockchain has really solved the problem of double spending. However, there have been attempts to exploit the Bitcoin through race attack, Finney attacks and 51% attacks. For the purpose of this homework, I will talk on race attack.

Race Attack in Blockchain

This is one of the double spending attacks on blockchain whereby a hacker sends two transactions at the same time and only one is confirmed on the Blockchain. Race attack occurs when the recipient of the cryptocurrency, accepts payments without waiting for confirmation. When this happens, the transaction will be invalidated. But, since the sender has sent the transaction to More than one user , only one transaction will be validated and other will be invalidated. It is hereby advisable to always wait and confirm transactions before taking any other step.

1. Disadvantages of Blockchain

Despite the beauties that are associated with Blockchain,it still has disadvantages. They are:

✓ Blockchain is not a Distributed computing system.
Since blockchain relies on nodes before it can operate very well, it is pertinent to assert that, the quality of nodes will determine the quality of blockchain. This means that, blockchain is not distributed computing system, if it does not involve nodes.

✓ Some blockchain solutions consumes too much energy.
With the introduction of Bitcoin and blockchain, it uses the Proof-of-Work which allows miners to use consensus algorithm to do hard work.

✓ Data is Immutable
This means that, once a data is written, it cannot be removed. Everyone has a right to privacy, so if the same person makes use of a digital platform that runs on blockchain, he will find it difficult to remove its trace from the system whenever he does not want it again.

✓ Not completely secured
Blockchain is more secure than other platform. However, with 51% attack which occurs,if a user controls 50% of the computing power and the issue of double spending, then, blockchain is not completely safe.

✓ Users are their own banks
This is possible with the help of private keys. To access information contained in the blockchain,a wallet will be created and the user will take note of the private keys, so that the problem associated with these private keys is that,if another person has access to those private keys or of the user loose the private keys, the user will not have access to the wallet forever.

Conclusion

Blockchain is a distributed ledger. Blockchain like bitcon and Ethereum are decentralized Which ensures high security and transparency in any transaction. Blockchain has not grown to its fullest. Blockchain is just a decade old. So, the blockchain requires time to mature into what can change our world. However, we stay put and learn what blockchain has to offer in another decade.