Blockchain Explained

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What is blockchain technology?

Blockchain technology is a distributed ledger technology that allows a network of users to share and store data in a secure and transparent way. is based on a network of computers that work together to verify and record transactions, which are then stored in blocks. Each block is linked to the previous block in a chain-like structure, which is why it’s called a blockchain. Once a block is added to the chain, it cannot be altered or deleted, ensuring that the data stored on the blockchain is immutable.

How does blockchain work?

Blockchain technology uses a consensus mechanism to validate and verify transactions. Each node in the network has a copy of the blockchain, and every time a transaction is made, it is broadcast to the network. The nodes then work together to validate the transaction, which involves verifying that the transaction is legitimate, checking that the sender has sufficient funds, and ensuring that the transaction has not already been recorded on the blockchain. Once the transaction is validated, it is added to a block, which is then added to the chain. This process is repeated for every subsequent transaction.

What are the benefits of using blockchain technology?

Blockchain technology offers several benefits, including increased security, transparency, and efficiency. Because the blockchain is decentralized, it’s more secure than traditional centralized systems, as there is no single point of failure. The transparent nature of the blockchain also makes it easier to audit transactions and ensure that they are legitimate. Additionally, blockchain technology can automate many processes, reducing the need for intermediaries and making transactions more efficient.

What are the applications of blockchain technology?

Blockchain technology has a wide range of potential applications, including in finance, healthcare, supply chain management, and more. In finance, blockchain technology can be used to create decentralized currencies like Bitcoin, as well as to improve payment systems and streamline cross-border transactions. In healthcare, blockchain technology can be used to securely store and share patient data, while in supply chain management, it can be used to track goods from production to delivery.

What are the challenges of implementing blockchain technology?

One of the main challenges of implementing blockchain technology is scalability. As the number of transactions on the blockchain grows, it can become slower and more resource-intensive to verify and record them. Additionally, the regulatory environment around blockchain technology is still evolving, which can create uncertainty for businesses and investors.

How is blockchain different from traditional databases?

Blockchain technology differs from traditional databases in several ways. First, it’s decentralized, meaning that there is no central authority controlling the data. Second, the data on the blockchain is immutable, meaning that once it’s recorded, it cannot be altered or deleted. Finally, the consensus mechanism used to validate transactions on the blockchain is different from traditional databases, which typically rely on a central authority to validate transactions.

What is cryptography, and why is it important in blockchain technology?

Cryptography is the practice of secure communication in the presence of third parties, also known as adversaries. In the context of blockchain, cryptography is used to ensure the authenticity, integrity, and confidentiality of data stored on the blockchain.

What is the role of cryptography in blockchain?

Cryptography plays a crucial role in blockchain technology by ensuring the security and integrity of the data stored on the blockchain. Cryptography is used to create digital signatures, which are used to verify transactions and prove ownership of assets.

In blockchain, cryptography is used to create a secure and transparent network that can facilitate peer-to-peer transactions without the need for intermediaries. This is achieved through the use of public key cryptography, which enables users to securely sign and verify transactions.

How is public-key cryptography used in blockchain, and what does it ensure?

In blockchain, public-key cryptography is used to create digital signatures, which are used to verify the authenticity of transactions. When a participant wants to send a transaction, they use their private key to create a digital signature that proves they are the owner of the assets being sent. The signature is then verified by other participants on the network, using the sender’s public key. If the signature is valid, the transaction is accepted and added to the blockchain.

One of the most important cryptographic techniques used in blockchain is public-key cryptography. In this scheme, every participant has two keys: a public key and a private key. The public key is used to encrypt messages, and the private key is used to decrypt them. When a participant wants to send a message to another participant, they use the recipient’s public key to encrypt the message, and the recipient uses their private key to decrypt it. This ensures that only the intended recipient can read the message.

What are hash functions, and how are they used to ensure the integrity of data on the blockchain?

Another important cryptographic technique used in blockchain is hash functions. A hash function is a mathematical function that takes input data of arbitrary size and produces a fixed-size output, called a hash. A good hash function has the property that even a small change in the input data produces a completely different hash. This property makes hash functions useful for ensuring the integrity of data stored on the blockchain.

How does the blockchain use cryptographic hash functions like SHA-256 to ensure that the data stored on the blockchain is tamper-proof and cannot be altered without detection?

The blockchain also uses cryptographic hash functions, such as SHA-256, to create a unique digital fingerprint of each block in the chain. This ensures that the data stored on the blockchain is tamper-proof and cannot be altered without detection.

In blockchain, each block in the chain contains a hash of the previous block, as well as a hash of the transactions in the current block. This creates a chain of blocks, where each block is linked to the previous block, forming an immutable record of all transactions on the network. If someone tries to alter a transaction in a previous block, the hash of that block will no longer match the hash stored in the next block, alerting other participants to the tampering attempt.

What role does cryptography play in providing privacy and anonymity in certain types of blockchains?

In addition to ensuring the security and integrity of the data stored on the blockchain, cryptography is also used to provide privacy and anonymity for users. For example, in privacy-focused blockchains such as Monero or Zcash, cryptography is used to obfuscate transaction details and make them untraceable.

Overall, cryptography is a fundamental component of blockchain technology, and it is essential to maintaining the security, transparency, and privacy of the blockchain network.

Why is it essential to understand the basics of cryptographic techniques to fully grasp how blockchain technology works?

Overall, cryptography plays a critical role in ensuring the security and integrity of blockchain networks, and it is essential to understand the basics of cryptographic techniques to fully grasp how blockchain technology works.

What is a smart contract, and how does it work on the blockchain?

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist on a blockchain network, making them transparent, secure, and immutable.

How is a smart contract written and deployed on the blockchain?

A smart contract on the blockchain is essentially a computer program that runs automatically and can facilitate, verify, and enforce the negotiation or performance of a contract. The program code in the smart contract is stored on the blockchain and is executed by the blockchain network when certain predetermined conditions are met.

Smart contracts on the blockchain are written in programming languages such as Solidity, which is used for Ethereum-based smart contracts. Once the smart contract is written and deployed to the blockchain network, it becomes an immutable and transparent part of the blockchain’s decentralized ledger.

How do users interact with a smart contract on the blockchain?

When a smart contract is deployed on the blockchain, it is assigned a unique address that can be used to interact with it. Users can interact with a smart contract by sending transactions to its address. These transactions can trigger the execution of the code in the smart contract and can update the state of the contract on the blockchain.

An example of how a smart contract could facilitate the transfer of ownership of a digital asset on the blockchain:

For example, a smart contract could be created to facilitate the transfer of ownership of a digital asset, such as a cryptocurrency token. The contract code would specify the conditions under which the transfer could take place, such as the transfer amount, the recipient’s address, and any applicable fees.

Once the conditions are met, the smart contract automatically executes the transfer, updating the blockchain ledger to reflect the new ownership. Since the smart contract is executed by the blockchain network, it is secure and tamper-proof, and the transaction can be verified by anyone on the network.

What are some advantages of using smart contracts on the blockchain?

Overall, smart contracts on the blockchain are a powerful tool for automating complex business processes, reducing costs, and improving efficiency. They are transparent, secure, and immutable, and can help to eliminate the need for intermediaries and reduce the risk of fraud and errors.

What is the difference between public and private blockchains?

A blockchain is a distributed ledger technology that allows multiple parties to share a common record of transactions in a secure and tamper-proof manner. Each block in the chain contains a set of transactions that have been validated by the network, and once added to the chain, the blocks cannot be altered or deleted.

What is a public blockchain?

A public blockchain is a blockchain network that is open to the public and anyone can join, participate, and validate transactions on the network. Public blockchains like Bitcoin and Ethereum are decentralized, meaning there is no central authority controlling the network, and anyone can contribute to the consensus process.

Public blockchains are transparent, meaning that all transactions on the network are visible to anyone, and they are typically used for applications that require a high degree of transparency and immutability, such as cryptocurrencies, supply chain management, and voting systems.

What is a private blockchain?

A private blockchain, on the other hand, is a blockchain network that is closed and permissioned, meaning that only authorized parties can join and participate in the network. Private blockchains are often used by organizations or consortiums to share data and assets in a secure and efficient manner, without exposing sensitive information to the public.

Private blockchains offer greater control and privacy compared to public blockchains, and they are typically used for applications that require more privacy and security, such as enterprise data management, financial services, and healthcare.

What are the key differences between public and private blockchains?

The main differences between public and private blockchains are in their governance, security, scalability, and transparency. Public blockchains are decentralized and open, with no central authority controlling the network, while private blockchains are permissioned and centralized, with a limited number of participants controlling the network.

Public blockchains offer greater transparency and immutability, as all transactions are visible to anyone and cannot be altered or deleted. Private blockchains, on the other hand, offer greater privacy and control, as only authorized parties can access and modify the data on the network.

What are some use cases for public and private blockchains?

Public blockchains are well-suited for applications that require a high degree of transparency, such as cryptocurrencies, voting systems, and supply chain management. Private blockchains, on the other hand, are ideal for applications that require more privacy and security, such as enterprise data management, financial services, and healthcare.

Overall, the choice between public and private blockchains depends on the specific needs of the application and the level of transparency, privacy, and security required. While public blockchains offer greater transparency and immutability, private blockchains offer greater control and privacy, making them better suited for certain types of applications.

 How does blockchain ensure security and privacy?

Blockchain security refers to the measures put in place to protect the integrity and confidentiality of data stored on a blockchain. Since blockchain is a distributed ledger technology that allows multiple parties to share a common record of transactions, it is essential to ensure that the data stored on the blockchain is secure and cannot be tampered with.

How does blockchain ensure data integrity?

Blockchain uses cryptographic hash functions to create a unique digital fingerprint of each block in the chain. This ensures that the data stored on the blockchain is tamper-proof and cannot be altered without detection. Once a block is added to the blockchain, it is immutable and cannot be deleted or modified, which ensures the integrity of the data stored on the blockchain.

How does blockchain ensure data confidentiality?

Blockchain ensures data confidentiality through the use of encryption techniques such as public-key cryptography. In a blockchain network, each participant has a public key and a private key. The public key is used to encrypt data, while the private key is used to decrypt data. This means that only authorized parties with the private key can access the encrypted data, ensuring the confidentiality of the data stored on the blockchain.

How does blockchain prevent unauthorized access?

Blockchain prevents unauthorized access through the use of consensus algorithms, which ensure that only validated transactions are added to the blockchain. In a public blockchain network, consensus is achieved through a process called mining, where participants compete to solve complex mathematical problems to validate transactions and add them to the blockchain. In a private blockchain network, consensus is achieved through a consensus protocol agreed upon by the participants.

What are the benefits of blockchain security and privacy?

The benefits of blockchain security and privacy include increased transparency, immutability, and data integrity. Blockchain technology offers a secure and tamper-proof way to store and share data, which makes it ideal for applications that require a high degree of trust and transparency. By ensuring data confidentiality and preventing unauthorized access, blockchain technology also helps to protect sensitive data and prevent data breaches.

Overall, blockchain technology offers a secure and decentralized way to store and share data, which makes it ideal for applications that require a high degree of security and privacy. By using cryptographic hash functions, encryption techniques, and consensus algorithms, blockchain ensures the integrity and confidentiality of data stored on the network, while preventing unauthorized access and tampering.

Are Quantum Computers a Threat to The Blockchain System?

You have probably heard of quantum computers before. Quantum computers will be significantly faster than any other conventional computers that we have seen so far. Quantum computers work at the particle level, exploiting complex quantum phenomena to drastically boost performance. But what does that have to do with blockchain technology? 

Well, blockchains are not infinitely secure. They are secure from the point of view of currently available computers. But theoretically, someone could break their encryption. After all, it is just a very, very hard math problem, with too many calculations for normal computers to break. With significantly more computing power, we could recalculate the keys and crack the encryption. Lucky for us, machines capable of that are not yet commercially available. 

Quantum computers have the potential to pose a threat to the security of blockchain systems.

Quantum computers are still in the early stages of development, and there are no practical quantum computers available yet. However, quantum computers have the potential to break many of the cryptographic algorithms that are used to secure the blockchain. For example, the widely used public-key cryptographic algorithms such as RSA and elliptic curve cryptography (ECC) could be broken by quantum computers.

The SHA-256 hash function used in Bitcoin and other blockchain systems is currently believed to be quantum-resistant. However, it is possible that new quantum algorithms could be developed in the future that would be able to break SHA-256 and other currently quantum-resistant hash functions.

To address the threat of quantum computers, researchers are developing new cryptographic algorithms that are believed to be quantum-resistant. These algorithms are designed to withstand attacks from quantum computers and maintain the security of blockchain systems. For example, the National Institute of Standards and Technology (NIST) is currently running a competition to develop quantum-resistant cryptographic algorithms.

In addition to the development of quantum-resistant algorithms, some blockchain projects are exploring the use of quantum technology itself to enhance the security of blockchain systems. For example, the Quantum Resistant Ledger (QRL) project is developing a blockchain that is resistant to both classical and quantum attacks by using quantum random number generators and other quantum technologies.

In conclusion, while quantum computers have the potential to pose a threat to the security of blockchain systems, there are ongoing efforts to develop quantum-resistant cryptographic algorithms and explore the use of quantum technology to enhance the security of blockchain systems. As the development of quantum computers continues, it is important for blockchain developers and researchers to stay informed and continue to innovate in order to maintain the security and integrity of blockchain systems.

Quantum computers

Now, let’s talk about quantum computers. They already exist. IBM [IBM], Microsoft [MSFT], and Google [GOOGL] all have one. Most of these are still very small and not used primarily as development models. We measure their processing power in qubits. Qubits are difficult to translate into normal bits. That is because for some operations they are as fast as normal bits and for other types of computations, they are orders of magnitude faster. The fastest quantum computer today has 72 qubits, which was built by Google. It is currently undergoing tests and the engineers claim that it will be fast enough to demonstrate the quantum. That would be the point at which a quantum computer becomes faster than any traditional supercomputer. From a technical perspective, they are a revolution. 

Normal computers use bits. Bits can be either 1 or 0. Qubits can also be anything in between, as they can be both at the same time but with different probabilities. This property is called superposition. It means that Qubits can store much more information at once. As a result, quantum computers can compute certain things much faster. 

What is the biggest obstacle right now?

There are many challenges, one of which is cooling. They need to be close to absolute 0, which is -273 degrees Celsius. This is because there are a lot more quantum states than just 0 and 1. To accurately measure what state we are dealing with, we need to take out variations. And that is easier at lower temperatures, because electrons move slower. This requirement makes them very expensive and cumbersome. But these hurdles will be overcome. 

Blockchain vs. quantum computers

As soon as quantum computers become popular, we might have a problem. Private and public keys are used to secure blockchains. Three mathematical problems are used for their encryption, and all three of them share one crucial property. By knowing their input (encryption key), it is easy to create their output. But with only their output available, it is very hard to guess their input. At least for now. 

Quantum computers will have enough processing power to reverse those calculations in a much shorter time than conventional computers. Quantum computers could crack regular encryption standards even by brute force, running through each mathematical combination one-by-one. 

So, what do we do?

Well, there are multiple suggestions. One is to add a safe quantum layer to current blockchains. A safe quantum layer means that we can keep using blockchain encryptions as we do now. Another suggestion would be to use quantum blockchains. That is a blockchain that is built specifically for quantum computers. 

However, then all nodes of the blockchain would have to be used by quantum computers as well. That would require a quantum network to connect these nodes. It would be a robust approach but might take a while to realize. I have one thought to calm you down: the good news is, quantum computers would affect all encryption layers on the internet. Emails, chats, websites, hospitals, banks, and servers are all secured in similar ways. It is fair to say that all of mankind is therefore in the same boat. That is why hopes are high, that we will develop quantum safe encryption before quantum computers become a real threat. The idea is always to make encryptions so hard to crack, that it would be too costly to try so. Governmental organizations are already paying attention. They started investing in developing quantum-proof security. One such player is, for example, the European Union. On the bright side, there are already some solutions. NEO and IOTA have already announced that they are developing quantum-safe encryption. Cardano is soon to follow suit. Many crypto projects have quantum security on their roadmap, but it will take a few years until this is relevant. That is why most blockchain projects still have it quite low on their priority list. 

Axie Infinity – A Dominating Blockchain Based Game

New evidence reveals that blockchain-based gaming is gaining traction at a faster rate than other applications such as non-gaming tokens and decentralized finance (DeFi).

According to the Blockchain Game Alliance’s (BGA) most current Blockchain Game Report, more than 804,000 unique active users connected to blockchain-based games in July. While the novel sector is experiencing speculative behavior, which is increasing volatility, the gaming industry is rapidly expanding its user base.

Now, Axie Infinity [AXS] really seems to dominate the sector, but what is it exactly?

Axie Infinity, the blockchain-based game inspired by Pokémon, was launched in 2018 by a technology-focused game studio Sky Mavis. Based on a concept pioneered by CryptoKitties, Axis is an Ethereum-based collection game that has been growing since it was launched. 

It also features social networks and job platforms due to the strong community and play to earn opportunities that have come from its early success. 

How does it work?

In the ecosystem of Axie Infinity, the game characters, Axis are NFTs with unique appearance owned and controlled by players. Players can store them in their personal wallets, transfer them to other Ethereum addresses, or use blockchain-based marketplaces to trade with other players. In addition to Axies, the game also includes virtual lands and items, which are all ERC-721 tokens. 

The token

AXS Token is also called Axie Infinity Shards. It was introduced to the gaming ecosystem as an ERC-20 governance token in November 2020. It has a 270 million supply in total with a circulating supply of 60.9 million. Players receive Axie Infinity tokens by staking tokens, playing games, and participating in key governance votes. 

Its function is to align the motivations of game players and developers in novel and exciting ways. Meanwhile, it can decentralize the ownership and governance of Axie Infinity. Players are able to lock their tokens to get newly created AXS. Moreover, AXS will be accepted as currency by AXIS NFT Marketplace, and can be used to determine eligibility for certain sales and auctions conducted by the AXIS team. 

Features

Let us discuss some features of Axie Infinity as well, for example “battling”. The key difference between Axis and traditional games is that the new mode of play is called “play for money.” Players can earn from achievements such as competing in PVP battles to win leaderboard prizes. 

The Axis team released the Alpha version of the card-fighting game in December, 2019. As of September 2021, the app has amassed over a million downloads and over 30,000 daily active users. 

Another feature is called “breeding”. In Axis world, each Axie has 6 body parts as well as a body shape. For each part, an Axie possesses 3 genes: dominant, recessive, and minor recessive gene. The dominant gene determines Axie’s appearance. In reproduction, each gene has a chance to be passed on to offspring. The dominant gene had a 37.5% chance of being passed on to offspring. The recessive gene has a 9.375% chance, and the minor recessive gene has a 3.125% chance. 

Closing thoughts

Blockchain gaming might not be as fun as traditional gaming, but it could be much more useful. Axie is constantly growing alongside its native token, AXS. This growing popularity could result in massive opportunities for both the developers and gamers. Sky Mavis Chief Operating Officer and co-founder Aleksander Leonard Larsen said that the game has lasting appeal and they see it as more of a social network than a simple game. That is definitely a good sign.