Other than the way how you interact with databases, the technology concept behind the Blockchain is very similar to that of a typical database. The software applications to be made in future by software engineers are actually what the concept of Blockchain is for the developers.
There are basically five key concepts on which the complete phenomenon of Blockchain is based in & out. We actually need to know about this computing paradigm because it is the catalyst for the creation of decentralised application.
Let’s discuss the five concepts in a nutshell.
Blockchain Decentralised Consensus
The concept of Decentralised Consensus came in to break the old standard of Centralised Consensus in which a central database would be available to rule the transaction validity. In the current system of decentralised consensus, the Bitcoin protocol transfers authority and trust to a completely decentralised virtual network that makes its nodes to be sequentially and continuously recorded for transactions on a public block that has a unique chain, so known as Blockchain.
The best part of this is that when the Blockchain and Cryptography is combined you can be sure that there could never be a duplicate recording of the transaction under any condition. To make the information complete you should know that consensus makes the first layer of the decentralised architecture and it is the actual basis of the underlying protocol that governs the operation of the Blockchain.
What is Blockchain?
To be very simple in explanation, Blockchain is a place where you are able to store your transaction data in a semi-public mode. You may tell it a linear container space which is known as a Block where in anyone can verify about the holding of the block, but the only access to the data would be reserved to you. This is because you hold the unique private keys to the data absolutely secured. Other than the Header being public the blockchain behaves absolutely like a database.
The data stored in the blockchain is as a value token or a crypto money balance which acts as an alternative value transfer system. The encryption system is so strong that no central authority or third party can tamper with it.
The public/private hegemony is the Yin-Yang of the blockchain which gives freedom of public visibility with private inspection. It is very much like the address of your home which you can publish publicly but that would never reveal the privacy of your home from inside at any cost. Moreover as you have claimed this address no other has the right to claim the same address. You may also understand blockchain as a software design approach that is used to bind a set of peer computers that are meant to obey the same consensus.
These are actually the building blocks for all kinds of decentralized applications. A smart contract is also called as a Crypto-contract, a computer program that directly controls all the digital currency transfers between the parties under specified conditions.
Alike the traditional contract a smart contract also defines the penalties and rules that is implemented around the agreement done. This procedure includes the granting of information in the form of input assigning value to the input based on the rules set in the contract.
For an example this process determines whether a value should be reversed to the person from whom it was originated or should go to the other designated person. Just because that the system is super immutable and has a secured technology Blockchain proves to be the ideal store house for smart contracts.
The starting point that one should assume during the application of a smart contract is that a third party are not required for the completion of the transaction. Both the parties abide by very simple rules which are embedded in the transactions itself.
The smart properties are very much aware of their owners since they are digital assets that are typically linked to the Blockchain. In the core of the Blockchain technologies they are self-verifying and self-executing and autonomous functioning agreements.
The combination of the concepts of decentralized consensus, smart contracts and blockchain make you realize about the capacity that spread the resources and dealings laterally, in a flat in the peer group which in turn builds a profound level of trust among the computers.
Along with the necessity of central organisations and institutions as important authorities, you may also get a convinced number of central functions collected via smart contracts that are usually oversaw by decentralised consensus on a Blockchain.
The Blockchain being unambiguous validator of transactions it makes the peer to peer in trusting one another since the compliance, rules of belief, governance, authority, contracts, law and agreements come on top of the expertise.
In the close future you are about to find that smart contracts and smart properties are going to be created and dispensed and executed regularly between both the consenting parties. This would be done without any of them knowing the fact that Blockchain knowledge was the most trusted intermediary. The new Crypto driven paradigm is based on the ‘Trusted computing’ which is the basic key tenet.
Proof of the work
Being the core of the Blockchain operation is the vital concept known “Proof-of-work” making it stand as an unambiguous authenticating process for every transaction. The “Proof-of Work” is actually the right to contribute in the process of transaction in the system of Blockchain. This is basically regarded as the best ever hurdle to stop the users from making changes in the archives on the Blockchain deprived of redoing any data on the proof of work.
The Cryptographic hashes that are the strength of the proof of work ensuring the authenticity works as the crucial building block since they cannot be undone.
It should be also kept in mind that the proof of work is quite expensive in maintaining and has also possibilities of security and scalability issues in future since it works on the miner’s incentives which could get declined in future.
Replacing this comes an upgraded version “Proof-of stake” which is inexpensive than the proof of work but could proof highly expensive if ignored. Sid by side to preventing the underlying Blockchain to get forked it also determines who should get to inform the consensus.
In order to create a smooth operating dispersed world there would be number of initiative to create decentralised apps. To reach this goal the developers need to study how to write everything about Blockchain and new vocabularies revolving around the crypto related agendas. They also have to acquire how to pen decentralised applications that are duly Blockchain technology enabled.
At the same time the end users also need to understand and get thorough with how to produce as well as use the smart contracts in the most effective manner. When the Bitcoin concept was originated the Blockchain knowledge had several drawbacks and in order to push these limits outside of money oriented services which in turn created way for a multiple Blockchains world.
The decentralised applications developed will originate in variety of sizes, flavours and difficulty levels. We also need to be ready for this and view beyond making the internet money service at the same time fulfilling the Blockchain’s potential in the becoming of a new growth environment.
You should remember here that decentralised applications are not for all and it does not also made for decentralised application paradigm as well. But it should be noted that a number of applications does fit the paradigm distributed by Blockchain. These may be easily called as “Blockchain apps”.
Let’s understand the Blockchain Apps in an End-User Manner:
The flow starts with the Currency segment. This is the part which supports money transfers, tips, payments and funding applications. In this part an end user naturally visits an exchange to use or to conduct transactions also benefitting someway from the reductions in transaction costs, speedy settlements and central intermediaries.
Though the connections are centralized today, we can easily expect another fresh generation of trusted decentralized exchanges. And via dumb bitcoin wallets and the aptitude to unveil smart contracts they could become smarter.
The next step is the Pegged services which represent a very interesting section because this feature uses the atomic unit of the Blockchain. This Value store ability and they also shape unique off chain services on top of that. To understand, the decentralized identity and decentralized ownership both is a flat blockchain process which can be equally useful to any extra vertical sectionslike music, videos and photography.
The next is the Smart Contract that is small plans or writings that is governed on a legal or contracts and run on a blockchain. It is a simple procedure of devolution. They come in use in a diversity of ways such as for gambles, escrow, family trusts, proofs of work delivery, time stamping, etc.
In the actual essence they deal with only moving of certain assets and values from an owner to the other which would be naturally built on some conditions or incident between people and things. The smart contracts are actually intermediate state actually intermediate state existing between groups and we could trust them in order to confirm and actbuilt on the reason.
A Distributed independent organization apart from all legal issues is combined on the blockchain since its governance is very much dependent on the part-nodes, part users, part owners. Each user of the DAO is also an employee and by the credit of their effort they tend to donate to the DAO value appreciation and their activity levels. In context of argue, bitcoin itself can be called as the ‘uber DAO’.
Undoing the ecosystem’s system effects
The ‘network effects’ concepts in Bitcoins and Blockchain is misread one because the inner makings of these are highly difficult to grasp exactly. In order to understand if network effects exist or not we may need to understand them even more than of the outside.
The topic related to network effect comes into notice while discussing the virtues of Bitcoin against other activities in the process of cryptocurrency. The observers of this phenomenon get into the illusions that there are ‘Silos’.
It would be better if we could roll back the network effects related judgement and start sympathetic the various components of it; let’s discuss:
- Interconnectivity: The presence of a strong interconnectivity is must systems or groups within the network.
- Size: The size of the network effects needs to be large and with scales.
- Engaged users: If not daily, at least about 30% of the users are active and comes back to avail the facility at least once in a week.
- Network effects: With the usage and on joining of other new members the service value for each worker increases. This value is again spread on the network that was formed.
- User experience: The user experience of the network effect needs to be unique, new and able to create good value is spread on the network created.
- Defensibility: There are entry barriers erected to service that gets more valued with every new user and switching costs also raise.
- Monetization: The atomic value of the unit emerges and becomes the basis of every maintainable economic activity.
Bitcoins Vs Blockchains
The other most effective side of Bitcoin news is the supremacy argument is that the network used by the bitcoin is not required to be replaced by the internet since it is already that of the global network. All what Bitcoin does is to lay itself on the internet in order to achieve network effects.
In other Blockchain platforms, if you are required to use a particular browser you would avail only partial access to the internet. While the real network effect of bitcoin may get better that is not to be understood that we can’t have blockchain platforms. A capital ‘E’ Ecosystem is necessary and not small ‘e’. The current update on the developer’s part is that they are creating app services that would be blockchain-agnostic in future.
The technologies around the blockchains cannot be regarded as distraction or fragmentation; rather the multiplicity of experimentation and innovation must be supported and celebrated.
The most updated Bitcoin news is that crypto-led computer technology is concept that may go far beyond a scenario of One-currency type. Bitcoin is programmable and yes blockchain is also denoted as programmable value, governance, ownership, contracts, trust and assets.
Though it would be too early for us to decide about Cryptocurrency landscape, it may end like a social media, dozens of huge players, numerous other companies as beneficiaries, millions of end-users which are definitely going to be a good thing.
But to get there we have to always remember the golden rule i.e. without users, there is no network effect.