Blockchain - between Marketing and Development

in blockchain •  4 months ago 

About the Blockchain hype

Whether suitable or not, the blockchain should be used everywhere according to some marketing experts. A glance at the exact definition shows that technology and research find it more difficult to do so.

Many managers, developers and investors like to talk about the blockchain without realizing what it actually is. Time to clear up misunderstandings and at the same time point out perspectives.

To sum it up right at the beginning: A blockchain is a concept that protects a sequence of data blocks against unnoticed fraud - such as changes or rule violations - without requiring a central, trustworthy authority.

The task of detecting changes in data is ancient - in fact, you can even count the parity bits in memory chips and the common CRC checksums among them. However, the cryptographic hash functions, which promise security against attackers, represented a leap forward in quality around 1990: If only the hash value of a document is given, one cannot reconstruct the original document from it - one cannot even find two documents with the same value (so-called original image and collision resistance).

Hash values in the newspaper

Almost as old as hash functions is another idea: People submit new digital documents to an authority every day. Each day, the IT department combines them into one block. Each block contains the hash value of the previous block; the system generates and publishes the hash value of the current block, for example in the newspaper. Each block protects the previous block from unnoticed changes because it contains its hash value (see Figure 1). With the published last hash value you can detect any manipulation of any previous block. Once the hash value has been printed, not even the authority itself can subsequently change anything unnoticed, as long as a reviewer is allowed to view all data.

Unfortunately, such a chain of blocks is not yet a blockchain, although some marketing experts believe so. The principle is simple, anything but new and only works with a central instance. Without the secure knowledge of the current hash value, a fraud could also be easily carried out: Hash functions can be calculated even faster than encryption. So an attacker could change data in the middle of this block chain to his advantage, recalculate all hash values and claim from the current value that this is the right one. Consequently, you need a central authority - in the example the newspaper - that publishes the new hash value.

Renunciation of central authority

Good ideas are often surprisingly simple, as is the blockchain concept of Proof of Work (PoW): Each block contains a few freely selectable bytes that are to be used in such a way that the hash value of the block becomes smaller than a given limit. With cryptographic hash functions, this is done by pure trial and error, so it takes a lot of computation to select a sufficiently small bound. Millions of computing units can thus work in parallel. Whoever has found the right combination first may append this new block to the blockchain and send it to the other computers. Roughly speaking, this is the principle of the Bitcoin blockchain; the computers involved are called miners (because they mine Bitcoins) and receive a bonus in Bitcoin for a found block as an incentive and to cover the expenses. The algorithm adjusts the difficulty so that Miner finds a block on average every 10 minutes worldwide with the currently available computing power.

The purpose of the exercise is to avoid fraud. In order to construct a complete fake chain, a multiple of the global computing power of all miners would be necessary. In the case of Bitcoin, not even the NSA would be able to handle this, because the miners are currently calculating about 50 to 80 exahash per second - that's 50 to 80 billion terahash per second.

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