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Key words to understand Blockchain

Key words to understand Blockchain
« on: 12 September , 2019, 12:58:01 pm »
Hi everyone,

As you are imagining, the purpose of this topic is to explain and summarize most mentioned the concepts and those important to understand better blockchain technology. We will analyse how they are and how they are used in blockchain, the information will be supported with visual images to make it easier to understand.

  • Hash: The information contained in each block is registered in the form of a cryptographic hash, which allows its verification in a simple way, but makes it impossible to recreate the input data.
    A hash function is one that allows us to map data of an arbitrary size to data of a fixed size in a reasonable amount of time. The values generated by a hash function are also known as hash values, hash code or hash.
    The well-known Bitcoin uses the SHA-256 cryptographic hash function, which indicates that its hashes are a fixed size of 256 bits.

  • Blocks: A block is a set of confirmed transactions and whose information has been included in the blockchain. Each block is part of the chain except the one known as the Genesis Block, which starts the chain. The blocks are formed by an alphanumeric code that links each of them with the previous one, a "package" of transactions and another alphanumeric code that links that block with the following one.

  • Miners: The well-known miners are chips or computers that provide computing power to the Bitcoin network to verify the transactions that are carried out.
    Every time a block is ready to be added to the blockchain, the miners receive a warning, to add the block to the network it is only necessary for someone to calculate an unknown quantity called Proof of Work (PoW) and the add it to the block The first one to get it informs, verifies that everything is fine and gets a reward of bitcoins that changes over time. Finding this Proof of Work is not easy, so when the warning comes up that a new block wants to get into the blockchain, the miners start competing to see who can calculate the unknown quantity before and receive that reward. To calculate this Proof of Work it is necessary to apply many mathematical operations (the algorithm is called SHA 256, you can see how it works and use it in this webpage: https://www.movable-type.co.uk/scripts/sha256.html). As mining is to try millions of combinations, who has more computing capacity, can make more attempts and have more chances to get the prize. It's a matter of luck, and having more computer capacity is like buying more tickets for that lottery. This is why miners are high capacity devices.
    The existence of hash algorithms such as SHA 256 and the addition that many miners are trying to calculate the same number, are all layers of security for Blockchain, which make no one can fake a block, because all miners have the same block to add to the chain, and when someone gets the "X", everyone checks it.

  • Halving: This term refers to the reduction of the rewards that miners received. This reward for mining is reduced to half every four years

  • Nodes: Nodes: A node is a chip or computer connected to the bitcoin network that uses software that stores and distributes an updated real-time copy of the blockchain, thus creating an active part of the blockchain and one more layer of security for the net. There are three types of nodes:

       o Broadcast nodes: These are nodes that only exchange blockchain information provided by other person.

       o Full nodes: When you install a complete node software, in addition to having a more secure wallet, you are downloading a copy of the blockchain and you
          will become one more node in the network. So you will issue transactions, verify that the consensus rules are met and propagate those of the rest of the network.

       o Mining nodes: All miners need and must have a blockchain copy, in addition to operating the software miner. These nodes, not only dedicate themselves to
          mining and contribute to creating new blocks, they also issue and propagate transactions.

  • Wallets: Wallets store the private keys that are needed to access the balances registered at an address or public key of the corresponding blockchain and be able to exchange them.

  • Smart Contract:  Smart Contracts are just like contracts in the real life. The only difference is that they are completely digital. This contracts are actually computer programs that are stored inside a blockchain which encode contractual agreements. Smart Contracts are self-executing with the terms of the agreement or operation directly written into lines of code, stored and executed on the blockchain computer. As a curiosity, this term was first used by Nick Szabo in 1997, long before Bitcoin was created.

  • Nonce: Nonce is an abbreviation for "number only used once." This unique or nonce number is a random number issued by the miners through the Proof of Work (PoW) that serves to authenticate the current block and prevent the information from being reused or changed without doing all the work again.

  • Cryptojacking: This is known as the use of remote computers to work by mining cryptocurrencies. It is usually done through malware, a virus infects a device and starts mining, leaving the device unused by the requirement to the CPU.

I hope this information to be useful. Do not hesitate to ask any question about vocabulary here!

Kinds regards,
David Corral Pazos

Re: Key words to understand Blockchain
« Reply #1 on: 15 September , 2019, 14:25:07 pm »
Hi David:

I would like to congratulate you for such a dictionary! I do not have any idea about possible words missing in this dictionary. Does anyone think something is missing?

Seizing the opportunity, I would like to formulate an open question about halving, a topic which has not been explored too much in this forum. According to most definitions, the purpose of the reduction of mining rewards aims to slow down the speed of blockchain discovery, so that there is a carest of coins and Bitcoin value increases (deflates) and miners end up receiving paradoxically more money and therefore have a profitable occupation. Nevertheless, it involves two main risks. Firstly, it concentrates the mining activity into very few hands (oligopoly), since most inefficient miners cannot afford to spend the same resources for decreasing rewards. Secondly, since halving is not a gradual process, but an abrupt process, bitcoin value tends to vary enormously depending on the proximity of the halving moment, what makes Bitcoin somehow untrustable.

Do you think Halving is doing more harm or good to Blockchain expansion?

José Javier (Veteran)