Utility Blockchain. Values

Started by zetta81, Jul 27, 2022, 11:46 AM

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zetta81Topic starter

In the modern planet, the term "blockchain" is steadily associated with cryptocurrencies, NFT tokens, mining, investments and economic pyramids. However, even among programmers and IT folk there is not always a clear understanding of what it is and what it is for.



The Problem of Authenticity

Some  elements can be easily copied - for instance, a text file or a photograph on an electronic medium. Others do not, such as food. For some items, creating a duplicate degrades its very essence. Copying a hundred dollar bill is a little, but it devalues all the dollars in the planet. And such objects, the essence of which is incompatible with unjustified reproduction, are not only funds, but also many other human tangible and intangible values (assets) - shares, certificates of land rights, intellectual property, bonus points, theater tickets, votes in elections , social capital, business reputation.

The presence in society of folk who want to personally benefit from unauthorized copying of values raises the question of the need for a mechanism for managing these values, which would guarantee their authenticity and fair movement.

Fair Turnover

What does "fair trade" mean?

Imagine that you change the currency from your hands, and a "doll" is slipped to you. Or invest your savings in a business that turns out to be a pyramid scheme. Or your fundsin the bank disappears because the banker fled to Nice. Or your broker turned out to be a scammer. Or you "bought" a house, the owner of which did not even know about the deal.

In all these cases, an external force intervenes in the fair circulation of values - either an attacker, or some combination of circumstances. They have a loophole. Is always. Because no operation on these values can be carried out as an atomic transaction, with the exception of the transfer/donation operation, which is of little interest. Usually there is an exchange of values. You to me, I to you. And this process consists of steps, between which an outside force can intervene. I sell dollars, I give them to someone, and the power kicks in. I put money on the stock exchange to buy stocks and the power kicks in. I want to buy real estate in another country, I make a notarized power of attorney for an intermediary - and then these forces simply stand in line.

Guarantee

In order to somehow make such dealings more or less reliable, the concept of a guarantor (escrow) was introduced. This is a certain company or individual that conducts this transaction and guarantees its fairness with its reputation. The parties to the transaction transfer their values to the guarantor (atomic operations), and the latter distributes them according to the agreement concluded between them. An ordinary bank through which a person makes monetary dealing is such a guarantor. The state is the guarantor. LinkedIn is the guarantor. Uncle Vasya can be a guarantor for certain yard fights.

But, firstly, it is far from always possible to find a guarantor for a certain deal. Secondly, the guarantor is also subject to the influence of evil third-party forces. Both personally and through his computer system, for instance. Less affected, but not zero. And, thirdly, his services - risk minimization - are often very expensive.

The task of mediator and guarantor has always existed. This is a fundamental problem for economic and social relations in society. Somehow, at least partially, it did not work out - neither in ordinary life, nor in the computer planet. Until the blockchain technology appeared, which brought some  element qualitatively new, which was impossible before it. Namely, a guarantee of fairness in certain operations.

Progress

Since the middle of the 20th century, information technology has developed quite predictably and systematically. First there were computers. Then they began to be networked. Then additional protocols arose on top of these networks. For instance, distributed computing networks - when one task that requires large computing resources is parallelized on several computers, which greatly speeds up its execution time. Or database replication - when the same data is duplicated on several physical servers in order to increase the reliability, performance and convenience of working with the user database.

The work of any even very complex knowledge system did not go beyond the algorithmic design of its creator. Each node of the system was responsible for something, occupying its own niche in the program's data flows. The developer or system administrator was for her a god who could do anything. For instance, a PayPal developer could set the balance of his personal account to a couple of million dollars with a flick of the wrist. The same could be done by a hаcker who got into the system. The problem of the centralized system. Systems where there is a center that you can influence and get the desired result.

In 2008, someone named Satoshi Nakamoto introduced an innovative decentralized software architecture that made it very difficult for anyone to make such unauthorized changes to data.


bitcoin blockchain

He introduced the blockchain - a network of a large number of computers (thousands) that store information about:

    Addresses of bitcoin wallets with their balance.
    Transactions - operations of transferring a certain amount from one bitcoin wallet to another.


By design, once recorded in this registry data is unchanged. All knowledge is available to everyone for viewing, and all of it is duplicated on each computer (node) of this network. All nodes are copies of each other. And this insane decentralized redundancy gives that dialectical transition of quantity into quality, which consists in the fact that it is almost impossible to unauthorizedly change once recorded data.

This protection is implemented in the following simple way. All incoming information about new addresses and transactions is recorded in parts - blocks. Every 10 minutes a new block is created from new dealings. After the formation of the next block, the hash of the previous block is added to it, and the hash of the current one is calculated, which is then used for the next block. It turns out the same chain of blocks, when each block refers to the previous one. As a result, when data in one block changes, its hash will change, which means that the hashes of subsequent blocks will become invalid. And that means the whole chain. Even if we recalculate and rewrite all subsequent blocks, we will get one node that is different from all the others. It simply will not be taken into account by the system.


When recording new transactions, the blockchain uses certain algorithms, a method of finding consensus between the nodes participating in the procedure. Specifically, the Bitcoin blockchain uses the "Proof of Work" method. It makes outside interference very difficult.

Theoretically, in order to have an impact on a decentralized blockchain, an attacker would need to interfere with the work of more than half of its nodes. Then he will be able to deceive the system and make "double spending" bitcoins - send two transactions from one address at the same time and duplicate the transfer amount to both receiving addresses. This problem is called "Attack 51%". Theoretically, this is possible, but economically very costly.

The term "blockchain" is used to refer to both the chain of blocks in one node and the entire computer network.

Mining

Writing a new block to the bitcoin blockchain is designed in such a way that it requires large computing resources - for time-consuming mathematical calculations. This is done on purpose to increase the dependability of the system. These calculations are performed by miners - folk who have provided the computing power of their computers for this purpose. They receive a certain amount for this, which is paid by the person who initiated the dealing.

GPUs on video cards handle the above calculations best of all. That is why their price, following demand, jumped so much after the popularization of bitcoins.


Internet of Value

So, a system of some virtual values, protected from unauthorized copying, was created. Satoshi "launched" bitcoins into it, because his goal was to create a cryptocurrency, but in the same way it was possible to deploy a similar blockchain (computer network) with arbitrary values - company shares, social capital, bonus points. What the participants in the movement of values agree among themselves. An element of knowledge in a blockchain can be of any value.

It was a truly qualitative breakthrough - the Internet of values was added to the Internet of information. There was a guarantee of the authenticity of digital value - that is, the confidence that it cannot be copied. This value could be securely held and passed on to someone else.

The property of data immutability in the blockchain is still far from appreciated and is not widely used. Imagine a real estate registry that can't be changed by corrupt employees. And this is a big problem not only in developing, but also in developed countries.

Cryptocurrency

However, bitcoin was immediately seized as a cryptocurrency - that is, an analogue of ordinary funds. It has become convenient for a person from one point of the globe to quickly and inexpensively send a certain amount of bitcoins to another continent. It was much more comfortable, faster, cheaper and even more reliable than a bank transfer. There were exchangers where fiat (ordinary) money could be exchanged for bitcoins and vice versa.

Cryptocurrencies are completely anonymous. A bitcoin wallet (which lives somewhere on the blockchain) is accessed using its private key, a string of characters. Whoever owns this key can send transfers from this wallet to other addresses. This is done with the help of special programs or sites that have implemented access to the blockchain.

At the same time, knowledge about all addresses (wallets) and transactions in the bitcoin blockchain is publicly available. You can trace the movement of funds from wallet to wallet, and government agencies fighting, for instance, against drug trafficking, use this.

However, bitcoin as a monetary instrument has a serious problem - high volatility. Its exchange rate against the US dollar can fluctuate quite a lot. Therefore, it is well suited for transactions with fast deposit/withdrawal, but during long-term storage, unpleasant surprises may arise. At the same time, the volatility of bitcoin was actively used for "investing" in it in order to play on the course jumps.


Blockchain v2.0

Canadian Vitalik Buterin introduced a new version of the blockchain technology - Etherium, which brought some useful innovations, such as different types of values in one blockchain (tokens). But, most importantly, it allowed, in certain cases, when conducting transactions between the parties, to remove the need for a "guarantor", ensuring the dependability and fairness of the dealing. For instance, in order to buy shares of a company, it is not necessary to contact a broker or a centralized exchange, losing on commissions and risking funds. Now theoretically it is possible to do it yourself directly. The need for exchanges disappears, the need for banks, sharing companies and other intermediaries disappears.

It was Buterin's Ethereum that launched the era of smart contracts and decentralized finance (DeFi). The technology of the new blockchain, in addition to the guarantee of the authenticity of the valuables donated by Satoshi Nakamoto, added a guarantee of their fair circulation.


conclusions

Blockchain allows you to put into movement virtual elements that represent values well in the human planet. At the moment, the main, although far from the only value virtualized in the blockchain, is money.

These elements are protected from copying (fake), have an owner, can change it at his request. Blockchain as a system for managing these elements is well protected from both hаcking and technical failure.

Blockchain is decentralized - no company owns it, and no individual has virtually no ability to interfere with its work.

Blockchain is economically self-organized — transaction fees go to reward miners who create new nodes.
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Efremof

This is great, but the Ethereum DAO hаck refutes both "hаck protection" and "decentralization". When, in response to the use of code in Ethereum, the community forgot its main worth - "Code is the law" and unanimously, centrally rolled back to hard fork.

Claiming that you are solving a problem and really resolving it turned out to be not equivalent ...
Bitcoin is also not at all smooth with decentralization, several large pools control about half of the mining, which means they can carry out Attack 51.
The crypt does not cover the entire blockchain, but is constructed according to the same precepts. Which don't work..
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onefor1two

According to the topic, however, questions:

In the case of decentralized storage - the more information, the more resources for its storage. If these are Terabytes of information, then it is unlikely that it is transmitted as you described - "after each update, the entire amount of information is sent to all miners and updated with them"

Why are video cards mainly required for mining, if the calculations are approximately mathematical?

In the case of solving problems with manners, it is unclear who and how sets these tasks. That is, some kind of program (algorithm, utility) sets the tasks, right?
Where is it stored? Centralized? Is it also transmitted along with blockchains or what?
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