BlockChain Technology – A Solved Mystery

Are you curious about Bitcoins and Blockchain technology? These are the most trending terms since 2016. Every search engine is showing it as a top trend in multiple countries. Media companies are attracted to this trend because of its increased exposure. Non-tech savvy people have become interested in this technology because of the media.

There are many people who are looking for a clear understanding of these two technologies. They have gone through many blogs and articles, however, they are still struggling. I have observed that the main problem is due the fact that there exists a lack of communication between techies and non-techies. People want a clearer understanding of the technology without having technical knowledge. I’m here to bridge that gap in order to better understand the concept of Blockchain technology.

I will explain Blockchain technology with the help of some examples. These examples would be relevant to an average person. This would explain problems we currently face and how we can use Bitcoin and Blockchain technologies to overcome our problems.

 

Let’s start with a simple example

Your best friend JOE is on a business tour to a foreign country. After a few days, he calls you and says that he needs some money for his expenses and if you can help him.

 

Payment Request

You let him know that you are transferring some money to him. You just need to call your account’s manager to ask him to transfer $1000 from your account to your friend’s account. In this whole process, you have to be careful about the account holder’s name and account number. There is a chance of human error by typing the incorrect account number as well as a technical error.

Firstly, the account’s manager checks your account balance. If your account’s balance is sufficient, the account’s manager makes an entry manually in the register (ledger) and informs you that the payment has been transferred to your friend.

The Transaction Register

After confirmation of the transaction, you call back your friend and inform him that money has been transferred. He just needs to go to the bank and withdraw the amount with ease.

Payment Sent

Reliance on the third Person:

In this example, you must have noticed that the account’s manager is playing an important role. Both of the friends are relying on him.

Suppose if the manager does not transfer the money? Furthermore, what if the manager makes wrong entry and debits the wrong amount from your account? Remember, the entry was made manually in the journal register. So there are chances of human error in all this process.

However, you must be thinking that what is wrong to put your trust on the account manager/bank (third party)? So, why don’t you ask yourself a few questions? What if the account’s manager is found to be corrupt? What if the bank is not answering your queries in time or the fund’s transfer process is taking too long, and there are dozens of formalities to fulfill prior to transferring the funds?

Possible Problems:

Let’s discuss some possible causes for these problems. Keep in mind that these problems can occur unintentionally or intentionally both.

  • What if the register (in which entry was made) gets burnt in an accidental fire?
  • What if your account manager had written the wrong amount than the real transferred amount? Say he makes entry of $2000 instead of $1000?
  • What if he did not even make any entry in the register at that time and then forget to write it later on?
  • What if the bank is holding the transaction for some reason and your friend does not get money in time?
  • What if he did not transfer any amount and made an entry?
  • and what if he makes all the above-mentioned mistakes habitually?

No reliance for keeping a register:

Have you ever assumed that you could transfer your money without any bank? Suppose that the transfer of money is just a game of making an entry in your register. So, let’s focus on the register for the moment.

As the name suggests ‘no reliance,’ it means you are your own account’s manager and account holder at the same time. Now you must be thinking, how you can do both jobs at the same time? You would also be worried about managing the work at both ends. Calm down! We are going to discuss it in depth.

Tim Draper states that “the Bitcoin world is this new ecosystem where it doesn’t cost that much to start a new Bitcoin company, it doesn’t cost much to start owning Bitcoin either, and it is a much more efficient way of moving money around the world.”

Tim Draper

Methodology for keeping a register with you:

The Blockchain will allow you to get rid of any third parties, be it the account’s manager and/or the bank.

Bitcoin enables certain uses that are very one of its kind, offering “possibilities that no other currency allows. For example the ability to spend a coin that only occurs when two separate parties agree to spend the coin; with a third party that couldn’t run away with the coin itself.”

Pieter Wuille

The first requirement for blockchain technology is to have sufficient people. These people would work on their own behalf without depending on a third entity. This group of people will be responsible for retaining their registers up-to-date.

Now, you must be thinking that how many people would be required? A minimum of three people is required, however, even more than 10 people can work under this methodology.

Let’s assume a group of 10 people in our example. After a mutual agreement, these people surrender their banks which eliminates the role of a third party.

These people will work for each other’s interest. They will be solely responsible for any mistake or negligence. Everyone in the group works with an anonymous identity. No one knows the origins, identity, and nationality of the other person.

Team Members In A Blockchain

Here are the steps to be performed to proceed with this methodology:

Step 1 – Must have a blank file:

Every member of the group must have an empty file with them to take an initial start. Day by day, each member will keep adding pages to their empty file. After a few days, this file would form a register. This register would work as a record for all the transaction no matter how many transactions are happening on a daily or weekly basis. In the end, there would be a record of even a petty transaction. Remember, every group member will be making an entry of a transaction in the network, i.e., if a transaction happens, all the group members will write it down in the file.

Step 2 – Make the entry quickly at the spot:

It is evident that every group member must be sitting with a pen in hand along with the file. Remember that this file contains the blank pages. Everyone must be alert to make the entry at any time.

Example:

Let’s have a much better understanding with the help of an example:

“Suppose Person 2 wants to send $10 to Person 9.

Sending Payment In Blockchain

The Person 2 will loudly announce that “Please be attentive, I am going to transfer $10 to Person 9. Kindly note it down in your file containing the pages.”

Every member will check out whether Person 2 has enough amount to transfer $10 to Person 9. If he/she has sufficient balance, then every group member will take a note of this transaction on their pages. After everyone has taken a note of the transaction, the transaction would be considered to be complete.

First Transaction On Page

This example indicates the easiness behind this system. No one can deny this reality:

“Bitcoin is the most important invention in the history of the world since the Internet.”
Roger Ver

Step 3 – Continuation of transactions:

As the time moves on, every person would make transactions according to their needs. Whenever any transaction takes place with any single person, he/she would announce it loudly so that others could listen and record it in their files. This process will continue unless everyone in the group runs out of space. For instance, the page in the file has space of 10 transaction entries. Then after the 10th entry, every group member will be run out of space on the page.

When The Page Gets Filled

Step 4 – Save the record:

When you run out of space on a page, then do not stop. Quickly put the page in the folder, attach the new page, and start the process where you stopped the last time.

Step 5 – Seal the folder carefully:

a record. This seal will be protected with the help of an exclusive key, or you can say a password. This password will be decided after mutual consideration of all group members present in the network at that time. This sealing will allow you not to be worried about the old records. No one would be able to re-open it for editing. One more thing, as the seal is made by the mutual agreement of the whole network, there is no ambiguity regarding any conflict about the content of sealed pages.

You can observe that this whole system is distributed and decentralized, in which everyone is trustworthy. In it, every other person is not depending on the middleman or third party to transfer the amount unless the entry is not made.

This was the whole crux of Blockchain technology. Optimistically, now I assume that everyone has clear understanding about this. Now you should have a clearer understanding of how Blockchain works.

Don Tapscott is the influential and authoritative author of world’s leading authorities of media and different innovations. This is his statement about blockchain:

Don Tapscott’s saying about blockchain:

Don Tapscott is the influential and authoritative author of world’s leading authorities of media and different innovations. This is his statement about blockchain:

“The first generation of the digital revolution brought us the Internet of information. The second generation — powered by blockchain technology — is bringing us the Internet of value: a new platform to reshape the world of business and transform the old order of human affairs for the better.

The blockchain is a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value — money, but also titles, deeds, identities, even votes — can be moved, stored and managed securely and privately. Trust is established through mass collaboration and clever code rather than by powerful intermediaries like governments and banks.”

How the seal works (Blockchain):

Let’s look at an example to understand the working of the Seal and clarify the mystery behind blockchain technology.

Example:

Suppose there is a machine. This machine is covered from four sides by thin walls. Whenever you try to push a box containing something in it inwards, it will come out of the machine with something else inside the box. This process is typically known as ‘Hash Function.‘ However, we will not go into its depth and will discuss it non-technically. Right now, we have to focus on the Magic machine and its basic functions.

The Magic Machine (aka Hashing Function

Let’s imagine three more examples to get a clear understanding of its functioning one by one.

eXAMPLE # 1:

Let’s assume that you insert the number 4 inside the machine from the left side. Then we will find that machine will give us an unexpected output which is (dcbea). Now you are thinking that how a single digit converted into 5 alphabets? Well, it is an unsolved theory for now. Because we assume to be limited on non-technical logics only. Anyhow this process is irreversible. If you try to insert the alphabets (dcbea) into the machine and hope to get number 4 as output, then you will not succeed. However, whatever you do, the entrance of 4 from the left side will always give you the same word, i.e., dcbea.

hash(4) == dcbea

eXAMPLE # 2:

Let’s try another example using a different number. What if we replace the number 4 with the number 26? After entering this number into the machine from the left side, you will get 94c8e from the other side. It sounds interesting because the resultant word contains digits also.

hash(26) == 94c8e

Hash (26) = 94c8e

eXAMPLE # 3:

Why not try with the following question this time:

“Is it possible for you to tell me that what should we enter from the left side of the magic machine to get the desired result? This desired result is assumed to be three leading zeroes. For instance, 000dc, 00075,000tp or anything like these combinations. Now your mind has to start projecting the unknown input. It can be any digit or any word for getting the desired output.

Predicting the input

We cannot evaluate that what input from the left side gives us the projected output on the right side of the machine by remaining in the orbit of non-technical concepts. So, we are not able to answer the above question.

Optimistic approach:

But let’s try to find it out. Just take the every number in the universe and put it inside the machine.

Try everything to calculate the input

After various attempts, we will end up with a number that will produce the prescribed output on the right side.

Resultant Value

It was very time consuming and a hard process to get the required output. We get it after making countless probabilities. Every time you try and does not get the desired result, just go on and try again and again. However, it will be an easy way to get the desired results at every time. As its one of the confirmed things that machine always pushes out the same word for a number on every single attempt.

The positive thing about the machine:

The positive thing about the machine is that:

“Given an output, it is extremely difficult to calculate the input, but given the input and the output, it is pretty easy to verify if the input leads to the output.”

I hope this property of the Magic Machine (or Hash Function) will remain in our minds throughout the whole further discussion.

relation of Hash Function with Sealing a page:

Such magic machines are used to produce a seal for our pages. As always, we will take a start with an assumed scenario.

  • Suppose A hands over two boxes to you. The first box contains the number 20893. Can you find out a number which would be added to the number in the first box and machine gives us a word starting with three leading zeroes?

Predicting Output

This is the same situation which we have faced in the previous example. In that example, we have learned that the calculation of all likely numbers with every other number would give us the desired result. After many attempts, we will end up with a number that would satisfy our needs. This number, for instance, is 21191. It is added to 20893 in this way:

Adding Numbers For Predicting Output

In the end, it would be entered into the machine. It will give us the word which ultimately fulfills our desire.

Now, the number 21191 will become the seal for the number 20893. Suppose a page which contains the number 20893 written on it. To seal that page and make sure that no one can use it to change the contents of it, we will attach a label ‘21191’ on top of it. Soon after attaching the sealing number (21191) on the page, the page gets a seal.

The sealed number

This sealing number is termed as Proof of Work. It is termed as this because it is the result of the attempts which had been made to calculate it. Therefore, it is commonly called as “Sealing number” for our purposes.

Verification of Seal:

If someone wants to counter check the transparency of this system, then he must add the content of the page with the sealing number (i.e., 21191 & 20893) and then feed it to the magic machine. In case, the machine gives you altered words as an output (i.e., Number that does not start with three leading zero’s as discussed in the example), it means that content of the page has been compromised. But if machine gives us the same words with three leading zero, then it indicates that the contents are in their real form.

VERIFICATION OF SEAL

We will use the same procedure to seal all of our pages. We will also arrange them in their respective files.

The final stage of Sealing Page:

Finally, we are going to seal the page. But before doing this, we will figure out a number. This number will be affixed to the list of transactions. After this, we will enter it into the machine. The magic machine will give us the resultant number containing three leading zeroes from the right side.

After hearing the sealing number, everyone in the network will verify it. If the result is the required output, then everyone will label their pages with this output number. In the end, files or folders will be put away in a safe place.

Announcing Sealing Number

What if the sealing number is not the required output? Well, such a situation is also not unusual. Let’s assume that person 7 does not get the required output. The main causes behind this situation could be:

  • He might have misheard the transactions that were announced in the network,
  • It may be because he miswrote the transactions that were announced in the network, or
  • He might have tried to cheat when writing transactions, either to favor himself or someone else in the network

In such a situation, simply just copy the sealing number from your fellow along with all the content on the page as your page is useless and you cannot put the page into the file and proceed further.

Sealing number is basically decided upon the mutual agreement of the members. Here is an incentive of deciding sealing number also. Let’s say, the person who will decide it and announce to others will get a credit of $1 to his account balance. It is the result of his/her calculation by using his own resources solely.

Security of the sealing numbers:

Recall the moment when I told you that A gives two boxes. The first box had number 20893 inside it and the second one was empty for you to calculate. However, the blockchain uses three boxes instead of two in reality. Two of these boxes are preoccupied, and the third one is to be calculated.

When you insert the content of all these boxes inside the machine after adding them, the output from the right side of the machine must meet the required criteria.

From our previous discussion, we already know that the first box contains the transactions while the second box has the sealing number. Now, the important question is what is inside the third box? The third box is filled with the outcome of the machine for the antecedent page.

Security Of The Sealing Number

This algorithm makes sure that each page depends on its antecedent page. Hence, making changes in a sealed page quite complicated. To keep the chain consistent, the culprit must modify the content of all the pages including their sealing numbers.

Let’s say one person out of ten tries to cheat and alter the content of the blockchain (Pages in the folder) for his own benefit. To do so, he will have to adjust/modify all the pages and create new sealing numbers as well. Therefore, one culprit cannot harm the network as we already know the difficulty to create a sealing number. Furthermore, the work rate of one guy cannot beat 9 people.

The outcome of this double-crossing will result in the creation of another chain in the network that would never be able to catch with the regular chain.  Therefore, we can say that “The longest chain in a network is the honest chain.”

Longest chain is the honest chain.

Possible Failure of the Blockchain

Have you ever given it a thought that what would happen if 5 or more people try to cheat for their own good? Well, that is the only vulnerable part of the blockchain technology. If something like this happens, the system will collapse, and it will fail to fulfill its purpose.

We can safely assume that this would be the only reason behind the failure of the blockchain if it ever will happen. It’s unlikely to happen. However, we must know the weak spots of a system.

Final Thoughts:

As the network grows in the blockchain, the incentives get multiple of your efforts. Also, the cooperation among all network members promotes the honesty and a diligent working environment.

About the author

Asif Amod

I am a webtrepreneur, full stack developer and a technology evangelist. I have been coding from a young age. I also speak to databases and make servers do what I say, I am passionate about continuous learning. I thrive on challenges that require lateral thinking - no matter what language or technology. I have founded and Co-founded a number of startups and have created SaaS web applications for different industries. I am currently open to discussing and explore other opportunities.

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By Asif Amod

About Me

I am a webtrepreneur, full stack developer and a technology evangelist. I have been coding from a young age. I also speak to databases and make servers do what I say, I am passionate about continuous learning. I thrive on challenges that require lateral thinking – no matter what language or technology. I have founded and Co-founded a number of startups and have created SaaS web applications for different industries. I am currently open to discussing and explore other opportunities.

Member of The Internet Defense League

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