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OSN-211©2021
Blockchain is a data storage technology consisting of a combination of two words, namely Block which means group and Chain which means chain.
The name reflects how blockchain works, which uses computer resources to create blocks that are connected to each other for the purpose of executing transactions.
As the name implies, blockchain is a sequential chain of blocks that are assembled and distributed together.
Each block consists of a ledger (ledger ) and 3 (three) elements, namely Data, Hash, and Hash from the previous block.
The type of data used in this technology depends on the purpose of the blockchain itself.
Hash contains data in the form of a signature or fingerprint or signature. Hash is used to identify the block and its entire contents in a unique code. The hash of the previous block is the part that carries the trail of the previous information while securing the blockchain chain .
Blockchain is a technology for digital data storage systems.
How Blockchain Works
Blockchain starts when a block receives new information. The blockchain system consists of transactions and blocks containing a series of cryptographic hashes and previous block hashes to form a network. Blockchain works by recording immutable information.
The decentralized nature of blockchain means that this technology does not need to rely on external authorities for validation and integrity of data authenticity. This process is a decentralized process that usually takes place between network nodes to ensure the information is valid.
After the decentralization process, the data will be added into a new block. Each block contains a unique hash or code. Although the average blockchain transaction is an investment, the fact is that blockchain can store various types of information in the same block.
Blockchain Utilization
Blockchain technology can be utilized in the financial sector. The reason is, this technology can be likened to a digital cash book that can be accessed by anyone, anytime, and anywhere easily without the need to ask for approval from a financial institution like a bank.
Blockchain technology has indirectly facilitated the entire transaction process. Transactions are also more secure and transparent so as to minimize data misappropriation, such as bribery or corruption.
Cryptocurrencies and Blockchain
Cryptocurrency is a dispersed system, over which no one person or company controls it. Blockchain code is not located on a central server operated by a company, but is spread across thousands of computers on the blockchain network.
Blockchain Advantage
1.
More Transparent System
Blockchain technology effectively keeps track of information and transactions. In fact, the system is proven to be safe and transparent. The reason is, when the transaction takes place, public access can be seen by all parties without the need to login.
Compared to the banking system the blockchain system is very different. With blockchain technology , user information and funds cannot be used without the owner's knowledge.
2.
Better Data Protection
The blockchain database is append only , can only add and cannot be repaired. As a result, the blockchain system is difficult for hackers to penetrate .
3.
Better Audit
Blockchain allows users to know the audit trail of assets owned so that the risk of embezzlement of funds can be minimized.
4.
Prevent Middleman Fees
The presence of blockchain indirectly eliminates middlemen or brokers who often increase transaction costs. Thanks to blockchain, all recording and verification activities are directed and immutable .
3 Pillars of Blockchain Technology
1.
Decentralization
Before Bitcoin and BitTorrent existed, we were more used to centralized services. The idea is very simple. You have a centralized entity that stores all the data and you have to interact only with this entity to get any information you need.
Another example of a centralized system is a bank. They keep all your money, and the only way you can pay someone is through the bank.
2.
Transparency
One of the most interesting and misunderstood concepts in blockchain technology is “Transparency”. Some people say that blockchain gives you privacy while some others say it is transparent.
3.
Immutability
Immutability in the context of Blockchain is that once something enters the Blockchain, it cannot be tampered with or hacked. Can you imagine how valuable something like this is to the Financial Institute
BLOCKCHAIN AND
LAYER
To compete with legacy payment processing systems, blockchain networks must become highly scalable — capable of hosting an exponentially growing number of users, transactions, and data. Only by incorporating sufficient scalability into its structure can blockchain networks replace other legacy systems.
1.
The Layer-1 solution
adds utility to the native blockchain to optimize its performance.
2.
Layer-2 solutions are third-party protocols that integrate with the underlying Layer-1 blockchain to increase transactional throughput.
Blockchain Scalability
Blockchain decentralization refers to a meaningful distribution of computing power and consensus across the network, while security reflects the defense of blockchain protocols against malicious actors and network attacks. Both are considered non-negotiable for blockchain network functionality.
Also important is scalability, which refers to the ability of a blockchain network to support high transactional throughput and future growth. Scalability is very important as it represents the only way for blockchain networks to compete fairly with legacy and centralized platforms with fast turnaround times.
Layer-1 Scaling Solution
In a decentralized ecosystem, Layer-1 networks refer to blockchains, while Layer-2 protocols are third-party integrations that can be used in conjunction with Layer-1 blockchains.
Layer-1 solutions change protocol rules directly to increase transaction capacity and speed, while hosting more users and data. Layer-1 scaling solutions can require, for example, increasing the amount of data contained in each block , or speeding up the rate at which blocks are authenticated, thereby increasing overall network throughput.
Layer-2 Scaling Solution
Layer-2 refers to a network or technology that operates on top of the underlying blockchain protocol to increase its scalability and efficiency. This category of scaling solutions requires moving part of the transaction load of the blockchain protocol to a contiguous system architecture, which then handles the network processing load and only then reports back to the main blockchain to finalize the results. By abstracting most of the data processing into incremental architectures, the base layer blockchain becomes less dense — and ultimately more scalable.
The parent chain delegate works to the child chain which processes it and returns it to the parent upon completion. The underlying underlying blockchain does not take part in the functioning of the secondary chain network unless dispute resolution is required.
State Channel (Government)
State channel facilitates two-way communication between blockchain and transactional channel off-chain d an increase the capacity and speed of the overall transaction. Status channels do not require validation by Layer-1 network nodes.
Instead, it is a network-adjacent resource that is closed by means of a multi-signature or smart contract mechanism.
When a transaction or set of transactions is completed on a state channel, the final "state" of the "channel" and all of its built-in transitions is logged to the underlying blockchain.
Liquid Network
Government Channel
In the Trilemma Blockchain tradeoff, state channels sacrifice some degree of decentralization to achieve greater scalability.
Sidechains:
A sidechain is a transactional chain adjacent to a blockchain that is typically used for large batch transactions.
The sidechain uses an independent consensus mechanism — that is, separate from the original chain — which can be optimized for speed and scalability. With the sidechain architecture, the main role of the main chain is to maintain overall security, confirm batch transaction records, and resolve disputes.
Side chains are distinguished from state channels in several integral ways. First, sidechain transactions are not private between participants — they are publicly recorded to the ledger. Furthermore, side chain security breaches have no impact on the main chain or other side chains.
Building a sidechain may require substantial effort, as infrastructure is typically built from the ground up.