Blockchain - the tip of iceberg

Created On 08. Apr 2020

Updated: 2021-05-02 00:01:11.452805000 +0000

Created By: acidghost

The blockchain is the medium, as we know it, where crypto transactions are stored. You can also call it - a distributed database which everyone can view.

While its first major use was noticed in Bitcoin’s concept, nowadays, there are thousands of applications that run on it. The idea became a success due to its validation protocol that in case of cryptocurencies - ensures that everything runs as required. Compared to conventional methods, fraudulent activities and errors during transactions are reduced to a minimum.

How do we know that everything on the blockchain is secure and executed without errors? Let’s dive deeper in its structure for that. We will refer to blockchain structure and functionality based on Bitcoin as an example.

The structure of the blockchain can be viewed as a vertical stack of blocks, with the first block at the bottom. Each of the blocks can be identified by a cryptographic SHA256 hash algorithm that is imprinted in its header. The hash refers a number of data including the previous block, which in a consecutive manner would lead to the first block in the blockchain, known as the genesis block.

The hash of a block contributes in generating the hash for the next, which links the all existing blocks and makes them immutable. This means that to change the information of all blocks is almost impossible as it would require an enormous computing power, to alter them down to the first block. There might be cases where more blocks emerge with the hash of the previous, which results in a fork.

As a rule, if an attacker wants to compromise a transaction, this is possible only up to the 6th that will run after. In Bitcoin’s example, it would need a tremendous amount of computing power, as with large amounts of transactions and long history, the trouble in deciphering the genesis block rises with each passing day and is theoretically impossible. Bitcoin can pass about 4-5 transactions per second at most, this concludes that attacker would have a bit less than 2 seconds to execute the attack.
In practice there is need only for a few thousands of blocks to settle the blockchain. Each passing block increases the difficulty in reaching the bottom.

Section: Blockchain