Blockchain And CryptoCurrency: A Student's Overview -3

3 PRIVACY AND CONSENSUS

A very important thing to note in a cryptocurrency environment is that the users are anonymous. Or in a more refined way of speech - are independent to create fake user names. This achieves one of the primary motives to set forth a block-chain driven system - privacy. The user is free to set a name and hence create new signatures as he pleases. Just a quick fact : Creating a new username is not necessarily creating a new account. And the latter is not just very easy to make.

(We shall be dealing with the fact that he can actually not do as he pleases later on in this segment )

You may learn more about public and private keys and signatures from the following portals:

Comodo.com: Keys

GeekForGeeks

Medium : Digital Signatures

We shall discuss Signatures when we shall learn how transactions occur. At the moment, we are just trying to build a blockchain ecosystem fit for monetary transactions.

Well, a very important question that was left in the last segment was why should I as an investor(or a person who holds money) agree to participate in an environment where I do not know anyone? It is because - just like you know no one, nobody knows no one, at least in theory. And the scope and scale of the network make it rather improbable that a lot of people on the network know a lot of other people in person. Additionally, this is exactly what helps in creating the best feature we have for cryptocurrency transaction environments - Consensus.

So, what is Consensus?

On a bitcoin network, nobody knows no one(let's hop on the stream with this assumption). And yet there should be a public validation of every transaction and finally a public validation of the blocks that are added to the chain. (Let us for a moment try to think why**)On the bitcoin network, when more than 50% of the peers on the network agree to the validity of a block, only then is the block added to the network.

So, what will happen if I just let one person validate blocks? Well, the answer is very simple - Centralisation...

We don't like that. Do we? It shall lead to that one person be immensely powerful in the network.

So, what? Just Centralisation right?

Well, Centralisation often leads to corruption. One very important reason why the system of consensus works is that :

1.      Blocks are immutable. So, once a block has been added to the chain, it is rather difficult to corrupt the information on the network.

1.      A hacker cannot theoretically make at least 51% of the network to agree on the addition of a corrupted block.

There have been rare cases of corruption in the bitcoin network ever since its conception in 2009. i.e the system has worked well till date.

In short, the network is private and as long as human beings are concerned with themselves alone - safe.

Why so confident?

Well, a major reason for this confidence in the network also comes from the encryption techniques employed. This shall be dealt in the next segment where we shall learn about encryption, miners and why are they so eager to create blocks etc.

We'll meet in the next segment.