BLOCKCHAIN What is Blockchain? Revolutionary concepts such as cryptocurrencies are, more often than not, built on an underlying technological platform. For crypto, this platform is known as the blockchain. Before looking into blockchains, it is important to understand how the blocks making up the blockchain system are built and set in place. First, we must define the term ‘node’; a node is one of the many computers that are part of a cryptocurrency network. The current top cryptocurrency networks, namely Bitcoin and Ethereum, are made up of thousands of nodes and these play a key role in the transfer of information within the network. At any given moment, each node may be connected with up to 6 other nodes forming a two-way exchange system. When a transaction is made across the network, nodes will start to record the transaction details as well as to conduct a list of checks. One of these requirements is checking whether the sender has sufficient funds to make the transfer. Each node will contact 6 other nodes to pass on the new information obtained. Each of the six nodes will continue passing on the information to six different nodes until, after 5 or 6 subsequent rounds, the information about the transaction made will have reached every node in the system. For example: in the Bitcoin network there are currently around 13,000 active nodes. Every node has certainly been reached after 6 hops are completed because: 1. 2. 3. 4. 5. 6.
1 node x 6 6 nodes x 6 36 nodes x 6 216 nodes x 6 1296 nodes x 6 7776 nodes x 6
= 6 nodes = 36 nodes = 216 nodes = 1296 nodes = 7776 nodes = 46656 nodes… therefore surpassing the total number of nodes.
Furthermore, any preceding nodes in this chain will also check with their subsequent nodes for any new information to update themselves. The different nodes are connected through a randomised process, hence enhancing unpredictability, and minimising the risk of any information being hacked. This algorithm in which nodes communicate between themselves is called the ‘gossip protocol’. Following this process, which only takes a couple of seconds, the transaction is next sent over to the miners so that they can place it in a block. Each block is made up of several transactions and miners would construct these blocks and solve them through mining, which is a computational and mathematical process. After legitimising these blocks of transactions, the miners tie the block to the preceding and subsequent ones in the chain, thus building up the blockchain system. Thousands of transactions are stored in every block and one block is mined approximately every 10 minutes. Every transaction that ever took place through cryptocurrencies can be searched by its 8
