1. Basic Concepts
Blockchain is a decentralized digital ledger technology. Its core idea is to connect data in the form of blocks to form a chain. Each block contains the hash value of the previous block, the corresponding timestamp, and transaction information, forming an immutable chain system.
We can think of blockchain as a continuously growing public ledger that records transaction information between all participants. This ledger is composed of a series of connected "blocks", with each block containing a certain number of transaction records.
The decentralized nature of blockchain means that there is no single manager (such as a bank in real transactions), but it is maintained by multiple nodes in the network. This distributed structure increases the security and resistance to attacks of the system.
2. Operation Mechanism
How does blockchain achieve linking?
Block - can be understood as a cube that stores data, hash value (seal), and the hash value of the previous block.
Hash value - can be understood as a "fingerprint". Both the previous block and the following blocks have fingerprints. If the fingerprints of the previous and following blocks can match, that is, the hash values correspond, then these two blocks can be linked. If the hash values do not match, the blocks cannot be linked.
Block
Pre-Hash
Each block forms a hash value through computer calculations and stores it in the pre-hash of the second block. The hash value is unique. If the content of the block changes, the hash value will also change.
Block Time
Records the time when a block is formed.
Records
Records all information that needs to be saved.
It can be transaction information or other information.
3. Three Consensus Mechanisms
What is a consensus mechanism?
The consensus mechanism refers to the verification and confirmation of transactions through the voting of special nodes in a short period of time. When several unrelated nodes reach a consensus on a transaction, we can consider that the entire network can reach a consensus on it.
Why do we need a consensus mechanism?
In a distributed system, different hosts form a network cluster through asynchronous communication. In order to ensure that each host reaches a consistent state consensus, state replication needs to be performed between hosts. In an asynchronous system, various problems may occur, such as host failures that cannot communicate, or performance degradation, and the network may also experience congestion and delays. Similar faults may cause error messages to propagate in the system. Therefore, it is necessary to define fault-tolerant protocols in the default unreliable asynchronous network to ensure that hosts reach a safe and reliable state consensus. Therefore, in order to construct a decentralized ledger based on the Internet using blockchain, the primary problem to be solved is how to achieve consistency and correctness of ledger data on different ledger nodes. This requires drawing on existing algorithms for achieving state consensus in distributed systems, determining the mechanism for selecting accounting nodes in the network, and how to ensure that ledger data forms correct and consistent consensus throughout the network.
Proof of Work (PoW)
Bitcoin uses this consensus mechanism. In PoW, miners (computers) find a hash value that meets specific conditions through a large amount of computation, so this process is called "mining". The miner who finds the correct answer first can receive the reward for creating the block. In simple terms, the more work you do, the faster you calculate, and the higher the probability of obtaining the right to record transactions.
Proof of Stake (PoS)
Currently, Ethereum uses this consensus mechanism. PoS also requires finding a reasonable hash value through calculation. However, in PoS, the validators are selected based on the proportion of cryptocurrency they hold (usually the local token of the blockchain), so validators who hold more tokens are more likely to receive the reward for creating blocks.
Delegated Proof of Stake (DPoS)
Similar to a board of directors voting, token holders vote for a certain number of nodes and delegate them to perform verification and accounting. In this algorithm, token holders can delegate their voting rights to others to represent them in the generation and verification of the blockchain. It is equivalent to delegating your voting rights to a professional investor who can vote on your behalf for company decisions.
4. Classification
Public Chain (Open to Everyone)
A public chain refers to a blockchain that anyone in the world can read, send transactions that can be effectively confirmed, and participate in the consensus process to determine which blocks can be added to the blockchain and clarify the current state. Public chains are usually considered "completely decentralized". Public chains protect users from the influence of developers, have low access barriers, and default to public access to all data. Public chains include Bitcoin, Ethereum, Hyperledger, and smart contracts, with Bitcoin blockchain being the ancestor of public chains.
Private Chain (Open to Individual or Entity)
A private chain refers to a blockchain whose write permission is only in the hands of one organization. The read permission may be open to the public or restricted to a certain extent. Private chains have the characteristics of very fast transaction speed, better privacy protection, significantly reduced transaction costs, or even zero costs, and help protect the basic products from being destroyed.
Consortium Chain (Open to Specific Organizations or Groups)
It is only open to members of a specific group and limited third parties. Multiple pre-selected nodes are designated as accountants within it, and the generation of each block is jointly determined by all pre-selected nodes.
5. Characteristics
Decentralization
Blockchain technology does not rely on third-party management institutions or hardware facilities (such as WeChat's ledger is managed by Tencent, and Taobao's ledger is managed by Alibaba). It has no central control. In addition to the self-contained blockchain itself, through distributed accounting and storage, each node realizes self-verification, transmission, and management of information. Decentralization is the most prominent essential feature of blockchain.
Openness
The foundation of blockchain technology is open source. Except for the private information of the parties to the transaction being encrypted, the data of the blockchain is open to everyone. Anyone can query blockchain data and develop corresponding applications through public interfaces, so the entire information is highly transparent.
Independence
Based on negotiated specifications and protocols (similar to the hash algorithm used by Bitcoin), the entire blockchain system does not rely on other third parties. All nodes can automatically and securely verify and exchange data in the system without anyone's intervention.
Security
As long as you cannot control 51% of all data nodes, you cannot arbitrarily manipulate network data. This makes the blockchain itself relatively secure and avoids subjective human changes to data.
Anonymity
Technically speaking, the identity information of each block node does not need to be public or verified, and information transmission can be anonymous.