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This article is a continuation of my previous article, “Decrypted blockchain”, which generally presented the blockchain technology. In this second article, I will focus on the main properties of transaction management in a blockchain.
Transaction management in a blockchain
The first step of a blockchain transaction is the integration of information characterizing this transaction (amount transferred, the issuer’s available funds, recipient, etc.) in a block. A block is formed of various transactions.
To this purpose, the transaction must be validated by various network nodes called miners in blockchain jargon. They check transaction compliance by solving a complex cryptographic problem that consumes computing power (the blockchain’s energy impact).
This verification is a result of a collective effort thanks to a block validation method called Proof of Work. The Proof of Work (PoW) is the result of the cryptographic problem to solve so that new information is added to a block. This result is difficult to obtain and needs a lot of computing power. By contrast, its verification consumes few resources, which can be done by the highest number. The Proof of Stake is another block validation method. It is based on the person’s assets (as well as their storage period) and can be generally defined by a percentage of monetary creation. It is a parallel method used to reach a decentralized consensus and which has the benefit of consuming little energy (Peercoin, NeuCoin or BlackCoin are PoS currencies). The use of one method does not exclude the other. Quite the opposite. They can be used together.
This operation is called mining. Once the miners reach a consensus on the validity of the Proof of Work, the transaction is integrated into a block. This block is further added to the blockchain.
There is a broad consensus on the different network players behind the addition of new blocks. Namely, the disintermediation vector, reflected in the collective validation of the Proof of Work or Proof of Stake.
Blockchain and transaction security
In terms of transaction security, the code of a new block is built based on the code of the last block preceding it in the blockchain. As a result, the modification of a block would involve the modification of all the blocks in a chain, which is impossible. Moreover, in a blockchain, the blocks are replicated in the network nodes (in the case of the Bitcoin blockchain, there are on average 5 200 nodes spread over the planet), and not on a unique server (to date, the Bitcoin blockchain weights 45 GB3). This decentralized architecture acts as a structural defense against data theft risks.
Miners allocate part of their computing resources available on their personal machines for solving cryptographic problems necessary for block mining. Of course, they don’t do it for free. They are remunerated. The first miner to validate a block wins tokens that depend on the concerned blockchain.This financial reward system entails a competition among miners to be the first to solve the problem and put forward a Proof of Work. This competition makes miners invest in powerful machines and thus increase the blockchain’s computing power.
Moreover, the blocks of the blockchain are hosted by network nodes: some of them have a local, exhaustive and identical copy of the entire blockchain. This is why the blockchain resembles a big decentralized ledger. The reward for the creation and issuance of a cryptocurrency remunerates infrastructure costs.
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