Top Key Features That Make Blockchain Technology Popular
Hello and welcome to a new Bitget Academy article. Today we will break down the different technological aspects of blockchain technology to understand why it is so popular. Let's go!
First of all, let's start by establishing a definition of blockchain technology. Blockchain technology is defined as a decentralized, transparent, and immutable technology. It is about maintaining a history within a distributed registry on a network. The principle is simple. The chain is made of blocks. Each block contains transactions. Each transaction must be validated in order to be entered into the register. Once one or more transactions are confirmed within a block, we register that block and open a new one. All blocks are therefore linked to each other. If a malicious participant wanted to modify a transaction within the registry, then the entire registry would be modified and its version rejected by the other members.
This article will not go into the technical details of how the technical validation is done. Still, we will study the different aspects that make blockchain one of the most innovative technologies of the last centuries.
Centralization VS Decentralization
The first blockchain, Bitcoin, was designed to be as decentralized as possible. For this, everyone has access to all Bitcoin transactions since the network's inception. Thus, the only way to falsify transactions is to control 51% of the network. Let's say there are 100 validators on the Bitcoin network who validate transactions, and of these 100 validators, 51% are corrupted. In this case, no one wants to be part of the 49 who get ripped off. We call this attack the 51% attack. That is why this attack has yet to be performed on Bitcoin because what is particularly intriguing about this protocol is that you are better off securing the network than trying to cheat. Indeed, once you have attacked the network, 49% of the network will no longer trust you, and everything will collapse. So what the 51 have stolen by cheating is no longer valuable, except to them. Trust is, therefore, a critical parameter that is encouraged by rewards available if you are a benevolent actor. Instead of cheating, you help to store a genuine version of the distributed registry. So, out of our 100 actors, if all 100 keep a clean version, they are all rewarded in turn for doing so. Which, in the long run, is much more interesting than cheating once. That said, the 51% risk exists, and it is decentralization that induces this risk.
If you want to avoid this attack, then you must make the registry private. In this case, you get a less decentralized blockchain. It is quite possible to consider that only previously certified validators are eligible to validate blocks. In this case, you improve security at the expense of decentralization. This is the choice of some blockchain projects that, being aware of the risk of the 51% Bitcoin attack, have decided to create a copy of Bitcoin but offer another method of block validation. Where Bitcoin is very sensitive to the risk of the 51% attack, as long as it is not attacked, it is very resistant to censorship. Projects that have opted for less decentralization are, therefore, more exposed to censorship from validators who control the network and may form a coalition that endangers other participants.
We wanted to expose here that each project has to find the right balance between decentralization and centralization. Bitcoin was developed with decentralization in mind. Depending on the features needed, decentralization within a blockchain will be more or less important. What is interesting about Bitcoin is that it is costly to cheat. This induces a major risk of attack if 51% of the network is corrupted. What is very interesting in the case of a centralized blockchain is that pre-selected validators control the security. The risk of a major attack does not depend mainly on a potential malicious majority but on the integrity of the participants. This induces a risk of corruption in the case of the private coalition.
The immutability of the blockchain is a key feature and depends on the level of decentralization.
Let's take the example of Bitcoin, which is the decentralized blockchain par excellence. All blocks are linked to each other. We will state that each block has a signature to simplify the technical process. To sign a block, you must include the signature of the previous block. Thus, modifying a block is the same as modifying all the previous blocks' signatures. You might as well say that it will be challenging to make all the other validators in the network accept your version that modifies the signatures because the cheating will be obvious. Therefore, your proposal will be rejected, except in the case of a 51% attack. Thus, immutability is a key feature that confirms that all Bitcoin transactions are confirmed and validated, block after block, and thus that one Bitcoin cannot have two owners.
In the case of a centralized blockchain, immutability is guaranteed by the selected actors. It's easy to question them and much less expensive to reward them. Thus, the advantage is that the guarantors of immutability are known to all. The disadvantage is that democracy is not present since a handful of actors decide what is immutable and what is not.
In the case of Bitcoin, whether you are a validator or not, you can access all the transactions that have taken place since the network was created. So you can know exactly how many transactions have taken place at any given time, and you can do so with great confidence. Validators work to keep the record as reliable as possible.
In the case of a more private and less decentralized blockchain, then you can restrict access. This can be very convenient if, unlike Bitcoin, you want to keep information about transactions private.
We have studied the three main characteristics that make blockchain revolutionary for transferring digital value.
Each technological feature has the quality of its defect and the defect of its quality. Thus, there is no perfect blockchain. That said, by combining the different features and tailoring them to the specific need of certain projects, blockchain is a technology that ensures that double digital spending is impossible.
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