Introduction to the Blockchain
Blockchain Technology didn't just pop up overnight. So how did we get here?
Decentralization and Distributed Ledgers
Components of a Block
Coming Soon: Mining and Consensus
Coming Soon: Blockchains vs. Cryptocurrency
Coming Soon: How is Ethereum Different than Bitcoin?
Coming Soon: Scaling and Goverance
Coming Soon: Private Blockchains
For the next potential vulnerability, let’s look at an example. Suppose there are two neighborhoods with 100 houses each. Neighborhood A has one house with 99% of the neighborhood’s gold or money. The houses in Neighborhood B each have the same amount of wealth.
Now let’s say you’re looking to rob one of these communities. You need to get a certain amount of the neighborhood’s wealth for any robbery to be worth the risk. Do you target Neighborhood A, where all of the wealth is in one house? Or do you target Neighborhood B, where you would have to rob multiple houses? Of course, any smart thief goes for Neighborhood A, where less effort would amount to the same amount gained in the heist.
In this scenario, houses are nodes and the money they possess is information. Neighborhood A represents a centralized network, with one server containing all the information. Neighborhood B represents a decentralized network; there is an equal amount of information in each node within the decentralized network.
So how does this relate to decentralized networks? Blockchains work off of a majority consensus. One possible way to attack a blockchain is to hijack a majority of the nodes in order to gain a majority of the hashing power of a network, thus allowing the hackers to write and confirm their own blocks. This is known as a 51% attack. However, Proof-of-Work makes any attempt very costly; it would take a great amount of costly energy in order to attempt to hijack the majority of the blockchain’s nodes.
Blockchains proved that incentive-based decentralized technology can work. Now that we know blockchains are a viable technology, we can explore the advantages that transitioning to decentralized networks provides.