Welcome on board! We have been journeying through a range of key concepts related to decentralisation, the use of blockchain technology and the mechanics of distributed ledger technology. Our previous post explained the difference between public and private blockchains. In this article we will take a deep dive into the technical difference between different blockchain development platforms. We will explore the evolution of blockchain development platforms, and compare different platforms (in part 2).
Bitcoin
In 2009, the first decentralised currency was for the first time implemented by Satoshi Nakamoto (pseudonym for the creator of Bitcoin) which introduced a peer-to-peer electronic cash system, which solved this issue of how to move value peer-to-peer without a trusted, centralised intermediary. In his paper [15], Satoshi Nakamoto presented a method for managing ownership through public-key cryptography with a consensus algorithm for keeping track of who owns coins, known as “proof-of-work” (POW). This was a breakthrough in this space because it solved two problems [16]:
It provided a simple and moderately effective consensus algorithm, allowing nodes in the network to collectively agree on a set of canonical updates to the state of the Bitcoin ledger.
It provided a mechanism for allowing free entry into the consensus process, solving the political problem of deciding who gets to influence the consensus. Deciding who gets to influence the consensus is based upon a calculated weight which is proportional to the computing power a node brings to the consensus voting process (see [16] for more details).
Bitcoin is the most well-known application of blockchain. Figure 6 is an example of how blockchain works in context of Bitcoin. Steps one to six shows the flow of processes which takes place within a blockchain transactional process.
One of the main differences between Bitcoin and newer networks is that Bitcoins POW consensus is slow and does not scale very well, with only around 4 transactions per second (tps) [17], compared to Visa’s 1700 tps as reported by [18] in 2019.
Let’s explain how other networks innovated in this space:
There are 2 methods of consensus:
1. Proof-of-work
Bitcoin relies on Proof-of-Work. The concept “proof-of-work” was first introduced as a type of consensus system in the network to slow down the rate of block-creation. Proof-of-work is a mathematical problem that needs to be solved. Once the problem has been solved (verified) by nodes (called miners), a new block is added to the chain, which gets updated throughout the entire distributed ledger in the network. In the Bitcoin blockchain architecture, it takes ± 10 minutes to determine the proof-of-work.
If a node tries to tamper with a block, it needs to recalculate the proof-of-work for all the following blocks in the entire network and take control of more than 50% of the nodes on the peer-to-peer network [3] before any changes can be made. Of course this makes the network secure and tamper-proof.
Proof-of-work is also referred to as “mining”.
Miners are rewarded with a “transaction fee” or a coin linked to the newly created block, for their dedication of processing power and other resources to verify the new block. This reward can be in the form of digital coins (cryptocurrency) or tokens (which will be discussed in a next post). Users are rewarded for their participation in the specific blockchain use case.
2. Proof-of-stake
Since the announcement of the Bitcoin blockchain, an alternative approach has been proposed, called “proof-of-stake” (POS), which calculates the weight of a node based on its currency holdings and not computational resources. POS is popular due to being far more environmentally friendly than POW because it consumes less energy and processing power.
POS is a lot more scalable than POW networks because of vastly improved transaction speeds and negligible transaction costs.
You’ve already braced a lot of waves in working through all of these articles and concepts. Let’s drop anchors here and cover the rest of this topic in a next instalment. Part 2 will focus on other blockchain development platforms such as EOS, Ethereum and Telos.
** This was Part 1 of a 2-part explanation of blockchain developers. The next instalment will be published on medium.com and on our website.
References:
[3] Redka, M., 2021. The Future of Blockchain: Potential Use and Global Impact. [Online] Mlsdev.com. Available at: <https://mlsdev.com/blog/the-future-of-the-blockchain-technology-use-cases-geographical-expansion-potential-risks-and-challenges> [Accessed 22 June 2021].
[8] Genov, E., 2021. The Longest Running Blockchain has Existed on NYT Pages Since 1995. [Blog] Toshi Times, Available: <https://toshitimes.com/the-longest-running-blockchain-has-existed-on-nyt-pages-since-1995/> [Accessed 23 June 2021].
[15] S. Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System”, Bitcoin.org. [Online]. Available: https://bitcoin.org/bitcoin.pdf. [Accessed: 06- Jul- 2021].
[16] “Ethereum Whitepaper”, ethereum.org, 2021. [Online]. Available: https://ethereum.org/en/whitepaper/. [Accessed: 06- Jul- 2021].
[17] Bitcoin SV, “9,000 Transactions Per Second: Bitcoin SV hits new record”, Prnewswire.com, 2021. [Online]. Available: https://www.prnewswire.com/news-releases/9-000-transactions-per-second-bitcoin-sv-hits-new-record-301217145.html. [Accessed: 06- Jul- 2021].
