Simple Concept

Blockchain is a straight forward concept that sits on a pretty complicated technology framework. The concept is simple and straight forward - it allows storing of data that is shared and secure yet tamper-proof and the data would be decentralized.

What is the benefit of decentralization? Just think of the stock market and the batman movie.

In the batman movie, the villain tries to take the stock market offline by sabotaging the stock exchange to interrupt the economy of the country. In terms of best practices, stock exchanges usually have contingency plans whereby remote locations will serve as the fail-over facilities in case of emergency.

Remember the case of Bursa Malaysia when the CIO resigned over a technical glitch reported as hardware failure? In a typical scenario, the data centre is usually a centralized facility with fail-overs.

In a decentralized scenario, the data is distributed into multiple servers and PCs in a free-will manner which results in free fail-over facilitation - theoretically, it is impossible to take down all these fail-overs even with coordinated efforts.

In retrospect, with the decentralized concept inherent in the design, the blockchain platform supports fail-over by default.

To put things into a simple manner, a decentralized data is akin to a data which has gone viral (and out of control).

Data is shared and secure due to the data being encrypted using cryptography technology - only the data owner has visibility of the data, but he or she can share it with friends.

Tamper-proof is because there is no delete button in the blockchain platform, as the matter of fact, each block is chained up and has historical linkage, a broken link may result in collapse of the whole chain.

One cannot rebuild the blocks from current block to the first block (going backward), hash is one-way street from left to right (starting from the first block). Therefore, without the right data input, one cannot afford to verify data ownership and go forward with rebuilding the blocks.

Now why is the technology complicated?

1.) Public-key Cryptography

First and foremost, blockchain is based on the very technology of public-key cryptography which saw its invention dated back to 1976. It is quite a complex system where the encryption and decryption are dependent on a pair of keys (public and private) - the public key is meant for distribution while the private is only known to the owner - this makes up the basis of shared yet secure of the blockchain platform.

Pay attention that the public-key system is a result of years of research and it is an open standard and this is what makes it stand out - it is an open standard, yet it is unbreakable.

Just imagine the scenario whereby the world most famous recipe of Coca-Cola is exposed yet no one could figure out the process of manufacturing it – as good as nothing.

The public-key cryptography is computational resources intensive, this contributes in part to the basis of the infamous Bitcoin mining which is not environmentally friendly – yet, the energy inefficiency of Bitcoin mining is largely due to the difficulty module inherent into the design of the Bitcoin which forms the basis of competition – the key point to take note is that the difficulty of a mining process was pre-programmed to decrease the chances of someone winning the block, it is NOT caused by big data nor network slowness etc

2.) Chain Linking

Public-key cryptography enables the function of chain-linking of the blockchain.

In a nutshell, chain-linking is referring to the technique of the blocks in a blockchain linked up by a string known as the consensus hash (an alphanumeric keyword) - there is a hash for each block.

Blocks are linked up in a chain of hashes and the contents hold intrinsic values

The hash (of the block) is not the aforementioned public-key but the unique ID of the block or one may say it is the address (of the block). It is derived using cryptography technology based on data pertaining to the block (i.e transaction data and signature of the sender) as the inputs - the signature of the sender includes the public-key.

Using hash to represent the address of the block is primarily to ensure that the ID is globally unique.

This results in two powerful features of the blockchain: backtracking and tamper-proof.

Tamper-proof because there is no way one can cheat by introducing a forged key to claim ownership of the data such as the value of the token.

3.) Token Mining

Token mining is a great invention as a result of implementation of cryptocurrency projects based on the blockchain technology.

The idea is ingenious – in terms of the implementation of ensuring scarcity, difficulty policies and incentives policies for miners.

The entire mining concept is a clever analogy to the invention of interest rate system which powers the finance industry today.

In a nutshell, when a data is to be inserted into the blockchain, the job must be carried out by workers who would compete to be the first to accomplish the job and the winner worker will be rewarded, usually by token such as Bitcoin – the workers are known as miners.

4.) Chain Forking

There is however a known challenge which affects all blockchain implementation: chain forking.

Chain forking is usually caused by the process where the nodes recognize a non-canonical block as the new block.

During the process of mining, many miners work simultaneously to create new block for a new request. Whilst the mining process defines the criteria of determining the mining winner, it is however inevitable that multiple winners may emerge at the same time at different nodes in the entire network; since all these would happen at the nodes (only), it is possible that certain nodes may declare themselves as winners without the majority consensus (51% of it) because it takes time for the canonical consensus to spread across the entire network, the bigger the slower.

Therefore, a node may end up recognizing the wrong hash for the new block and if the same node keeps operating (by receiving new blocks), the corrupted chain will end up as a fork.

Recognizing this reality, client software running at each node would have a contingency plan to identify fork based global consensus information at a later stage and to perform a process known as chain reorganization by replacing corrupted blocks with the canonical blocks.

In financial accounting, this process is akin to the reconciliation process. Nonetheless, it is more complex implemented than said.

5.) Uncharted Territory

Blockchain is considered stable yet uncharted territory.

Although Bitcoin implementation has been 10 years old, Blockchain is still considered uncharted largely due to the promise of decentralization.

In a typical centralized scenario, many things can be properly scoped and there is a limit to everything such as computing power and storage space.

In retrospect, the Blockchain platform challenges limitless data growth and linkage which may lead to inevitable challenges such as the aforementioned chain forking, lest the fact that Bitcoin only permits 21 million tokens in circulation and hence it has a limit too.

Bitcoin gave birth to Blockchain Implementation

The Blockchain technology was mooted out of the Bitcoin project as a decentralized platform to host shared yet immutable and encrypted cryptocurrency data, that was in 2008. Although proofs show that some computer scientists and mathematicians had theorized the Blockchain concept before Bitcoin, however, it was the very idea to create the decentralized currency that brought it into practical application.


Brandon Teoh said…
According to various reports, a small cohort of Ethereum developers are clandestinely working on short-term scalability upgrades to the protocol. The upgrade which is still under consideration was brought up as part of private discussions during the recently concluded Devcon 4 in Prague and could possibly be rolled out as early as June 2019. Speculated as part of the upgrade include replacing the EVM (Ethereum Virtual Machine) and levying storage costs on smart contracts to deter the growth in the size of the blockchain, which currently stands at around 1 TB. This ballooning of the Ethereum blockchain is widely viewed as detrimental as it increases the cost of running a full node, as anyone that runs a node is expected to download a copy of the entire blockchain. Other solutions aimed at reducing the growth of the blockchain are also being discussed, but might require massive, structural overhaul.