A blockchain, as the name suggests, is a chain or series of blocks that records data in time stamped hash functions so that the data cannot be changed afterwards. Because a blockchain works in a decentralized way with copies of the data in the hands of many users, the entire database remains secure and transparent. Even if a certain user is hacked and his or her crypto coins are stolen, it will not affect the rest of the network. This is why Bitcoin for example already uses blockchain, just like all other cryptocurrencies.
What is a Blockchain?
A blockchain is simply a kind of database, in which Ripple transactions can be stored. These transactions can be payments but can actually be all kinds of data such as certificates, title deeds, medical data or smart contracts. All information on a blockchain is encrypted using cryptography. Blockchains use two types of cryptographic algorithms: asymmetric keys and hash functions. Traditional databases are centrally organized which means that the data is stored in a certain location and this is the responsibility of a certain organization. Think, for example, of the servers of Google or the cloud computing services of Amazon Web Services (AWS). However, a blockchain does not work in the same way. With a blockchain, there is no single point of failure (SPOF) and there are multiple nodes or nodes that keep the same copy of the database. Blockchain also uses an asymmetric cryptography mechanism to transmit transactions and verify transaction authentication. The transaction is signed with the sender’s private key before being sent over the P2P network. Only valid transactions can be stored in a block. Blockchains generally use the SHA-256 hash algorithm as their hash function.
What is a Hash?
A hash is a mathematical function that converts an arbitrary length input into a fixed length encrypted output. So regardless of the original amount of data or file size, the unique hash will always be the same size. In Bitcoin, the string is generated by the SHA-256 algorithm. Secure Hashing Algorithm (SHA) -256 is both the hash function and mining algorithm of the Bitcoin protocol, referring to the cryptographic hash function that yields a 256 bit long value.
What is the Blockchain Trilemma?
A blockchain wants to be as secure as possible and to do this in the most efficient way possible. However, a balance must always be struck between the following 3 concepts: decentralization, scalability and security. The trade-off between these 3 concepts was called “The Blockchain Trilemma” by Vitalik Buterin, the founder of Ethereum. According to him, blockchain developers are always confronted with this trilemma. For example, like Bitcoin, if you want to focus on the security of the blockchain and its decentralization, you always have to make concessions regarding scalability. The question is therefore what is the priority as you have to make compromises, because it is never possible to succeed in achieving decentralization, scalability and security without having to make concessions at one of the three pillars.