Crypto Academy Season 3 Week 6 Homework Post for (@stream4u) Blockchain

Professor @stream4u gave detailed information about Blockchain this week. I have read the course paper and now I am preparing the homework.

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1) What is Blockchain and What are the types of Blockchains / Explain in detail the types of Blockchain?

We can define the blockchain as an online designed ledger. A blockchain creates blocks and each block contains information. A newly created block is linked to the previous block, and this continues indefinitely. Since the blockchain has a transparent structure, it is quite possible to follow the money movements, works of art, smart contracts that take place on the blockchain. Although blockchain technology is mostly used in the financial field today, it is also frequently used in fields such as health and sports.

Information on the blockchain is saved in a way that cannot be changed or hacked. When a change is requested in a block, a mismatch will occur in the previous and next blocks. So it will be easier to spot.

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In blockchains, blocks are produced in certain time periods. In Bitcoin, this is an average of 10 minutes. A block is created every 3 seconds on the Steem blockchain. Each block has a unique hash value. Think of it like a fingerprint or an identification number. Hash is a value that is not reproduced again.

In general, we can examine the blockchain in 3 structures. These; Block, Node and Miner.

Block
Blockchains are linked to each other by structures called blocks. Each block contains data and an encrypted code for the previous block. The name of this code is Hash. In the Bitcoin network, all blocks except the 1st block contain the code of the previous block.
To create Hash in the Bitcoin network, the encryption system called SHA -256, developed in 2008, is used.

For example, after a change in any block in the Bitcoin network, it will also cause changes in all subsequent blocks. Therefore, due to this nature of the blockchain, it is not possible to make changes to blocks under normal conditions.

Node
While explaining the Node, I will proceed through the Bitcoin structure. Nodes connect to the Bitcoin network and help spread information about each new block that occurs there. Every node does not do the same operation, they have different authorizations. Nodes differ from each other in terms of their authority. While some nodes read the current data in blockchains, other nodes are responsible for keeping track of the accuracy of transactions that occur within a certain time period.

Miners
Miners verify blocks and transactions that occur in the blockchain network. The goal of the miners on the Bitcoin network is to solve complex math problems and get their share of the newly created bitcoins and transaction fees. While mining with personal devices was very easy in the past, special equipment is required for mining today. The higher the number of miners or the power of miners in the Bitcoin network, the more secure the Bitcoin network becomes.

It is possible to classify blockchains in 4 different ways. These; Private Blockchain, Public Blockchain, Hybrid Blockchain, Consortium Blockchain.

a) Public Blockchain

It is a public blockchain type. It is a type of blockchain where cryptocurrencies such as Bitcoin gain popularity and are adopted by everyone. It allows anyone to join the network, create addresses, add records, mine, develop the network.

There are no predetermined rules or restrictions in these blockchains. This is why it is commonly known as permissionless blockchain. In addition to its completely open and transparent feature, it does not contain a private validator node.

Everyone has the opportunity to mine on this type of blockchain network. This requires downloading all chain data. As such, a copy of the chain is created in all miners. In this case, the network is made stronger and more secure.

It is very difficult to change any information, record, etc. on the network. Since the source codes are public, anyone can see the transfers on the network, find errors, make various suggestions for the network.

Remarkable Aspects:

• It has continuity. If a group that started the network decides to leave the network, someone else maintains the network by providing the necessary equipment.

• It is safe due to its transparency feature.

• It is available for 51% attack.

• As usage increases, scaling problem arises.

b) Private Blockchains

Such blockchains are not publicly available. The type of blockchain that is created between one or more people, where data exchange is provided and is maintained by one or more people, is called a private blockchain. Outsiders must have an idea about this chain or receive a special invitation to use the chain.

It can also be defined as a permissioned blockchain, as a special permission is required to join the blockchain.

The properties of the network are determined by the people who manage the network. In this case, it goes against the decentralized and transparent nature of blockchains.

Such blockchains are usually run by the company or organization for their own specific purposes. Therefore, it is quite normal that they do not want outsiders to gain access.

Notable Aspects:

• Transactions take place much faster as the network is not heavily used.
• It is against the spirit of being decentralized.
• There is a safety hazard. Having a small number of nodes creates a security hazard.

c) Hybrid blockchain

This type of blockchain is somewhat complex. It combines both private and public blockchain features. Blockchain developers combine an open system with an invitation-based system. It has a system such as who will be open to certain parts of the information recorded in the blockchain, and which part will be open to everyone.

There is both transparency and privacy in this blockchain. While there is a traceability in transparency, there is a limitation in privacy.

Blockchains like Dragonchain and Xinfin are examples of Hybrid blockchains. There is an advantage in some matters. There is also a state of privacy when transacting on a public network.

Such blockchains are highly resistant to 51% attacks. The properties set at the beginning in the blockchain can be changed later.

Highlights:

• Transactions on the network are very fast and cheap.
• The network is not transparent because some information is protected.
• Suitable for use in real estate and retail industry.

d) Consortium Blockchain
Another name is the Federated Blockchain. It is similar to the hybrid blockchain. Because it carries the features of private and public blockchain. Blockchain manages not a single group, but multiple groups. It is not fully public, the permission is blockchain.

Pre-authorized entities determine who can send transfers and transactions and access data on the network.

Due to the common responsibility of all participants, it is an ideal blockchain structure especially for businesses.

The most important feature that distinguishes this blockchain from other blockchains is that it is a consensus.

Blockchain is flexible. The visibility of the blockchain can be limited to validators only, or it can be designed publicly.

If predetermined groups act honestly on the blockchain network, the security of the network is preserved. The security of the network depends on the authorized groups.

It is an ideal type of blockchain for multiple organizations operating in the same sector. Thus , the cost is reduced . It will also save time.

If its visibility is restricted by everyone, there will be no security threat issues. Data and information on the network is difficult for malicious people to obtain.

Running consortium blockchains is quite difficult. Because it is not easy to convince all stakeholders and bring them together.

2). What are the benefits of blockchain?

Today, blockchain has begun to be considered an important invention. For some, this may be one of the greatest discoveries in human history. Although it is mostly used in financial systems, blockchain is now used in many sectors.

Blockchain has many benefits. It is very beneficial for people / organizations because it provides transparency and traceability, eliminates intermediaries, provides speed and reliability, and saves on many issues.

Transparency
Although some blockchain types have transparency issues, we know how important transparency is in popular blockchain types. In terms of transparency, everyone can see and monitor the data in the blockchain and therefore trust the system. Today, it is not possible to talk about transparency in many projects, for example in the financial system.

Immutability
Immutability is one of the useful methods of blockchain. In blockchain, data is kept in blocks. The blocks are also connected to each other. The newly generated block is connected to the next. In this way, the data is preserved without any changes. It is not possible to change the data saved on the network in the blockchain. If a change is attempted or an error occurs, it is immediately recognized and easily tolerated. Due to this aspect, possible fraud protection is provided.

Security
Cryptography is quite successful in securing data on blockchains. One of the cryptographic functions is hash. Hashes have unique properties. The hash value of each newly created block is generated according to the hash of the previous block. The hash in any block has the properties of its own block's data and also inherits the hash properties of previous blocks. In other words, both new data is recorded and old data is moved to the previous block without changing it. There is such a secure structure in blockchains.

Decentralization
It is one of the most remarkable and beneficial aspects of blockchain. The decentralization feature of the blockchain also increases the security of the network. Decentralization increases freedom and makes users feel more comfortable in the network. Since the majority of blockchains are decentralized, blockchains should be considered as decentralized.

Productivity
Traditional systems are people-oriented. They are the people who direct the studies and initiate the studies. It is error-prone and takes a lot of time to work. This is not the case with blockchains. Efficiency is high.

Fees
Due to the presence of intermediaries in traditional systems, transaction fees and commissions are quite high. The absence of intermediaries in blockchains has minimized transaction fees.

Speed
In traditional systems, transactions are slow or delayed due to both the concept of overtime and the presence of intermediaries. Blockchains work 24/7, there is no concept of overtime. Therefore, you do not need to wait for hours or days to make a transaction. In some bitcoin projects, a transaction takes place within seconds.

3).Explain Blockchain Distributed ledger.

Even in the earliest periods of history, traders use ledgers for the goods they buy, sell, pay, pay, and track. As technology improved, traders began to use more advanced ledgers.

The data to be tracked in the distributed ledger is not stored in one central place. In the past, ledgers used by merchants were stored in one place or in limited places, which was quite dangerous. In distributed ledgers, multiple copies of the same ledger are kept and protected simultaneously by different people. This creates a decentralization.

Many users on the network have a copy of the same ledger. Even if the notebook is tried to be destroyed by others, this is not successful because there are many users in the same copy.

In distributed ledger technology (DLT), by providing consensus among all network users, everyone in the network sees the same data at the same time.

Cryptography is used to verify the information, data and data that are created and transferred between peers on the network. Digital ledgers for DLT would be a very accurate definition.

There can be many assets tracked or tracked on the digital ledger. These; money, stocks, commodities, title deeds, vehicle sales documents, election results, artistic works, videos.

Distributed ledger technology is revolutionary in terms of computing.

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• Forgery is prevented through distributed ledger technology.
• Information, data is always up to date.
• The data is reliable as anyone can monitor it transparently.
• Since there is no central system, no intervention can be made.
• The most important feature of the distributed ledger is that it is distributed. Data is not stored in one place, in a single center. Each participant in the network has a copy of the data.

We can count Hedera Hashgraph, Directed Acyclic Graph, Holochain, Tempo Distributed Ledger as the next generation distributed ledger technology.

4). What Is Blockchain Double Spending and how Bitcoin handles this problem?

It is one of the potential threats to Bitcoin. Of course, other digital currency projects also have such a problem. It means sending the same assets in a blockchain network to two different recipients. So imagine you have 5 BTC. You can normally send all of these 5 BTC to a single recipient. However, in a double spend event, 5 BTC is sent to both receiver X and receiver Y.

If sufficient precautions are not taken in cryptocurrency projects where such events are experienced, the trust in the project will be damaged. Therefore, a strong protection of the system against such network damaging events is required.

Centralized systems are easier to solve for double spending than decentralized systems. Because in central systems, it is sufficient to have a manager for the rules to be determined and the precautions to be taken.

The double spending problem in centralized systems can be avoided with eCash, developed by cryptography expert David Chaum.

In decentralized systems, avoiding double spending is a bit more difficult and troublesome.

Double spending in bitcoin

A double spending event in any cryptocurrency project will cause a huge loss of prestige for the cryptocurrency project. Therefore, there is a design that does not experience double spending events in Bitcoin.

Popular methods used in double spend events are the 51% attack, race attacks, and Finney attacks.

51% attack
This attack occurs when any group captures more than 50% of the hash rate. Thus, malicious people can change the order of transactions and prevent some transactions from taking place. A very high degree of technological facilities and energy are required for such a transaction to occur in Bitcoin. There has been no 51% attack on Bitcoin so far. If this had happened, Bitcoin wouldn't be as popular today. However, in some other projects, a 51% attack occurred.

Ethereum Classic has experienced 51% attacks 3 times in 1 month last year. More than 7,000 blocks were affected.

Race attacks
This attack takes place on the account with the same fund. It happens like this. Two conflicting transactions are published one after the other regarding the same fund. Only one of these published transactions is approved. The purpose of the malicious person is to approve the transaction that will work for him here and to invalidate the other transaction.

Finney attacks

The malicious person adds the transaction to the block, but does not broadcast it on the network, does not spend it. Instead it spends its assets in another transaction but publishes it in the previously mined block. Thus, the first transaction becomes invalid. Finney attacks are unlikely to happen. Because a certain sequence of events has to happen one after the other. At the same time, the buyer must accept the unconfirmed transaction. Therefore, some exchanges or buyers do not approve transfers until transactions have been confirmed a certain number of times.

Vector76 attack: I explained in detail in question 6 this type of attack that can cause double spending.

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How Bitcoin handles Blockchain Double Spending

It is quite easy to prevent double spending events in centralized systems. In decentralized systems this is more difficult to prevent. Participants in the network, miners, need to make everyone aware of ethical behavior to prevent fraudulent transactions.

Bitcoin has created a solution to this because of the structure of the blockchain. Due to distributed ledger technology, each user on the network has a copy of the data. This copy is open to all users and all transactions are followed transparently.

Due to the transparent and distributed ledger structure of the blockchain, transactions attempting to double spend are immediately tracked and blocked by users following the network.

Double spending on Bitcoin is something that is impossible under normal circumstances. If a transaction tries to be made again in the Bitcoin network, structures called nodes easily detect them and conclude that the transaction is fake.

Again, I have to point out that double-spending in Bitcoin requires a huge amount of hash power. Because of this aspect, Bitcoin is quite far from the danger of double spending.

5). Practical + Theory, Visit Blockchain Demo and check section Blockchain, then explain in detail how Blocks Hashes Work in Blockchain, what will happen when any middle of the block gets changed, try to give screenshot for each possible details.

First, let's visit the website https://andersbrownworth.com/. Then let's explore the site a bit.

At the top there is a section called 'Hash'. The SHA256 hash generator gives a different hash to the entered data. Each data has a different hash value.

Click here then. Enter some data in the blank. I wrote ''Stream4u Crypto Professor'' in the blank.
Hash of this data: be7119c84e3f3ba20948d3e21dc2d7888d37a0e00dfb061ffb92639ad4143996

Let me make some changes to this data. For example, let me write letters in lower case. Let's see if the hash will change or will it stay the same?

I replaced the uppercase letters in the data I entered earlier with lowercase letters. (steam4u crypto professor)

As you can see in the screenshot, the hash value has changed. 2daa6b53b077d1bc86820d8f973478b8588f0384594c830c3c133d648638a17e

Hash has Block on the side. Let's explore it now.

As you can see in the screenshot, there are sections such as Block number, Nonce, Data and Hash.
Nonce is not a very popular term.
Meaning : Number used only once
Nonce: Number Only Used Once

Although it is a randomly generated number, its intended use is authorization.

The hash value always starts with zero. There may even be a large number of consecutive zeros.

The data section is empty. If I enter any information in the blank, the hash value will change and the screen will turn red.

Previous Hash:
0000f727854b50bb95c054b39c1fe5c92e5ebcfa4bcb5dc279f56aa96a365e5a
New Hash:
b6957fc02b65d2fbd0059d29d353effee69f3f4e0797bd7c2ba8e9b89b0308ff

Now I will click "Mine" to find the value of the Nonce and generate the hash value.

We found the correct Nonce value. Then we have a hash value.

Nonce: 49152
Hash: 0000a36033297b25213b52855444fa28cd7ad356d78c18aabc345ec365f16903

Now it's time to explore the Blockchain part.

It has a nonce value. The data section is empty. The previous block value is 0000..... Because this is the genesis block and there was no block before that. Therefore, the previous blocks did not have a hash value. The block has a hash value. This hash value starts with 0000...

Now I will try to change the data in the blocks.

I wrote STEEM in the blank. As you can see, there has been a change in all values except the prev hash. Hash values have changed.

Changing the data in Block 1 changes the hash value in all blocks. Because any block carries the information of the previous block.

The data entry in block 1 has been changed. Re-mining is required to verify this.

I clicked mine. A new nonce value has been created in block1. In addition, a new hash value has emerged. This just validates the data in block 1. Other blocks stay that way. The block 1 hash value is the same as the block 2 prev hash. However, this does not mean that Block 2 has been confirmed. If it had been validated, the Nonce value would have changed as well. The nonce value in block 2 is still ''35230''

Currently block 2 is an invalid block. I want to confirm it. For this to happen, mining must be done again.

I clicked "Mine" to verify block 2.

Block 2 screen turned green. The old nonce value has changed. A hash value starting with 0000. has been generated.

Block 2 hash and Block 3 prev hash are the same, but block 3 is still unconfirmed. Because the screen is red. The Nonce value is still outdated. And the hash value does not start as 0000. So this indicates that it is an invalid block. It must be mined for it to be valid.

6). What Is Race Attack in blockchain? OR What Is Finney Attack in blockchain? OR What Is Vector76 Attack in blockchain?

I talked a little bit about Rice Attack, Finney Attack on double spending. The Vector76 attack is also one of the attack types that can cause double spending.

Vector76 attack is also known as single confirmation attack. It emerged as a combination of Rice Attack and Finney Attack. It can reverse a previously confirmed, confirmed transaction.

Have you ever made a Bitcoin transfer? When transferring bitcoin, some exchanges require the transfer to take several confirmations from the miners in order for the transferred bitcoin to be credited to the account. The goal here is to block the Vector76 attack.

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A malicious or attacking miner creates two nodes. The miner tries to create two transactions, one too high and one too low. The attacker then prevents and tries to stop the block with high volumes sent to an exchange or other address. After these transactions, it sends the previously mined block directly to the stock market. Then, with the help of other miners, it will show the block it created before as the main chain and confirm these transactions.

After this transaction, the exchange confirms the high value. After this action, the attacker sends the lower value transaction to the mainnet and confirms the transaction. When this happens, a high-value transfer takes place to the attacker's account.

The probability of this attack is high because the transaction difficulty is simple. However, the stock market or similar organizations do not accept payment after the 1st approval. An incompetent attacker can also do harm in some cases.

7). Explain the limitations or disadvantages of blockchain.

Blockchain is truly a revolutionary invention. Conscious people are excited by blockchain technology. Apart from that, blockchain has some limitations and disadvantages.

High energy and environmental pollution:
Devices are required for blockchains that work according to the well-known Proof of Work consensus algorithm. The devices are quite costly. A high energy is also required for engraving. This high energy has great harm to the environment. It also causes climate change.

Faulty transactions:
The person has made many mistakes in his life. Even when sending money to a friend from the bank, we can send money to someone else with a little distraction. We can call the bank and say that the transaction was incorrect and cancel the transaction. Transactions cannot be changed in blockchains. In this respect, you may suffer great losses due to the wrong actions you will take.

High transaction fee:
In some blockchain networks, such as Bitcoin and Ethereum, high transaction fees are charged for transfers. Some banks we complain about sometimes do not charge transaction fees for transfers. You pay high transaction fees for transfers on the Ethereum and Bitcoin network.

Slow transactions:
For example, transactions on the Bitcoin network are not fast and have scalability issues. Today, many central institutions process faster, but within working hours.

Complexity:
Blockchain technology is quite complex for normal people. Imagine how difficult it would be for uneducated or unconscious people? Blockchain technology takes a long time to be adopted and understood.

Security of assets:
In order to protect your assets in the blockchain network, you need to keep the private keys given to you thoroughly. If you lose it to anyone or lose your private keys, you will lose your assets as well.

Not popular:
There are many people who haven't discovered blockchain yet. Therefore, there will be some problems regarding its applicability.

Difficult to follow:
It is almost impossible to track the transfers that take place on some blockchains. Not everyone in this life has good intentions. Transfers may have been made for malicious purposes or illegal transactions.

Conclusion

The most basic technology that enables cryptocurrencies to exist is blockchain technology. Although we learned about blockchains with cryptocurrencies, the history of blockchain predates Bitcoin.

It is truly a wonderful and revolutionary event that all participants in the network, through the blockchain, carry out their transactions without mutual trust due to the structure of the network. It is quite impressive that the blockchain provides this with a sense of trust among people nowadays, where it is very difficult to achieve.

Blockchain is seen as a powerful technology because of its distributed ledger structure, transparency, and traceability of transactions. Providing all these transactions in a decentralized structure is increasing the interest in blockchain. In fact, blockchains are not completely decentralized. We learned these in blockchain types.

According to some, for blockchain technology to revolutionize, all circles must work in coordination with each other. These circles are organizations, developers, governments and individuals.

Blockchain seems to be quite suitable for solving current problems today. However, there are many other problems that need to be resolved. There will be such disadvantages as it is still an early period. For example, the problem of scalability, the opposition of states to cryptocurrencies is a big problem.

Considering the advantages and disadvantages of blockchain, it looks like it will be quite beneficial for humanity.

Cc:
@steemitblog
@stream4u