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Kindle Notes & Highlights
by
Mark Gates
Read between
February 2 - February 2, 2019
The common theme from everyday transactions is that we trust the institutions and the centralized databases they maintain to accurately keep a record of our lives.
Where the blockchain offers significant potential is within countries where people don’t trust banks, institutions, governments, currencies or each other.
A decentralized database built on the blockchain removes the need for centralized institutions and databases. Everyone on the blockchain can view and validate transactions creating transparency and trust.
Blockchain is one of the underlying technologies of Bitcoin.
Bitcoin has been created using a range of other cryptographic technologies combined with the blockchain.
Bitcoin uses a one-way blockchain technology; however, the blockchain can be used to record and transfer anything of value, not just financial transactions.
Blockchain-based systems are being used for a wide range of applications across different industries, including digital identities, social networks, voting, cloud storage, decentralized applications and more covered later in the book. There are seemingly endless possibilities for blockchain-based systems that companies and governments are currently developing.
There is no central database or authority; if a person wants to claim they are the original owner of the book, it can be traced from the latest block of transactions all the way to the first block known as the “genesis block.”
if someone wants to commit fraud by changing a transaction, they will have to change all the blocks before and after that block.
The Bitcoin network estimates that after 6 blocks are added on top of a block, it is impossible to change any transactions in that block as the computing power required would make it unfeasible to change.
After 6 blocks are added it is almost impossible to change because of the computer power needed for that to happen.
The number of blocks on top of a transaction can also be referred to as confirmations; some companies will wait for 6 confirmations before accepting a payment as assurance the transaction won’t be changed on the blockchain.
The puzzle they solve is known as proof of work. It is a mathematical puzzle that is very difficult to solve but easy to verify the answer once it has been solved.
By solving this puzzle, it acts as proof that computing power, electricity, time and resources were contributed to the network. The reward is compensation for the cost of contributing these resources to running the blockchain.
where blockchain networks could have the most potential are countries where companies, banks institutions, and governments can’t be trusted and record keeping is manual or unreliable. Being able to replace centralized databases and institutions with a blockchain network for property records could have huge benefits for people in these countries.
On the Bitcoin network, 6 blocks are accepted as confirmation the transaction won’t be reversed.
This message may have been left as proof that the date the first block was created was on or after the 3rd of January, along with being a comment about the failures within the current structure of banking and currency markets.
All computers on the blockchain network have a copy of the blockchain, reducing the risk of data loss. To manipulate the data on a blockchain requires “hacking” over 50% of the computers on the network at the same time, which is almost completely unfeasible.
Why it is hard and secure but still not full proof.
The blockchain allows intermediaries to be removed while still maintaining trust and security between the people involved in the transaction.
Blockchain networks are generally decentralized, with all people connected to the network having access to the blockchain.
As mentioned in the decentralized section of the blockchain, altering an existing transaction would require controlling over 50% of the computers on the network at the same time, which is almost completely unfeasible. If this did occur, it would also be quickly spotted by the other computers connected to the network anyway.
Blockchain has the potential to change almost every industry in the world. The projects being developed show the impact blockchain technology could have on everyday life with many companies already developing their own blockchain systems.
Blockchain-based distributed ledgers reduce the costs by replacing individual ledgers with one shared ledger, providing real-time settlement and auditing from all parties connected to the network each time a transaction occurs.
By removing intermediaries and settling transactions on a shared distributed ledger, blockchain-based ledgers can settle transactions almost instantly.
For store owners, they provide goods to the buyer but do not receive the payment for days later when the credit card company settles the transaction.
Blockchain was designed specifically for one main goal: preventing the "double spend" of electronic coins, without a central authority.
Decentralized blockchains lack privacy, which will make full acceptance difficult. Not only is the information not private, but it is also readily accessible at any given moment to anyone using the system.
The information in the transaction would show the wallet that the funds were sent from, they could then check that account and be able to see how much money you own and all your transactions into and out of that account.
You can see all transaction from that account not only the transaction between person A and B
blockchain networks are in countries such as Russia and China
Where blockchain is located China and Russia.
cryptocurrencies where someone has forgotten their private key and can’t access their money.
along with a story about how they lost their key and now can’t access the money in their wallet. These cases often happen when someone
Due to the transparency of the blockchain, if people have their public key they can see their balance and how much it is worth but have no way to access it.
With blockchain-based systems, transactions can’t be altered or reversed, and there is no intermediary to assist you if fraud occurs on your account.
make mainstream adoption more difficult. Web-based blockchain wallets are popular, where people store cryptocurrencies with a third-party company. When using third-party web-based wallets, people sacrifice the security benefits of the blockchain such as private keys in favor of traditional passwords that can be reset if they forget them anyway.
With a decentralized blockchain network like Bitcoin, changes must be agreed to by a certain majority of the network, this may be over 50% but could be as high as 70% to 80% of the network.
Risk of 51% attack Continuing on from the issue of control, if someone were able to control over 50% of the computers on a blockchain network, they would control the transactions on the blockchain. A malicious user controlling over 50% of the computers on a blockchain network is known as a “51% attack.”
if you lose your key to many blockchain-based systems, you can’t recover it. People choose to write down their private keys on paper or store it on their computer, so they don’t forget it, thus eliminating the benefits of the additional security and potentially making the system less secure.
Many people prefer to give access to their private keys to third-party intermediaries with web-wallets or similar software, which eliminates another main benefit of blockchain networks.
A block is added to the Bitcoin blockchain every 10 minutes, each block currently contains around 2,000 transactions, meaning the Bitcoin network is processing around 3 transactions a second.
Due to block size limits, the Bitcoin network is only capable of handling around 7 transactions a second. Visa has conducted tests with IBM concluding the Visa network is capable of handling over 20,000 transactions a second.
There are blockchain networks that are much faster than the Bitcoin network. However, none have the same level of popularity or acceptance as a form of payment as Bitcoin.
As mentioned previously, many people already choose third-party intermediaries to access the blockchain, and they use standard passwords to log in on a website removing main benefits of blockchain technology. Many people don’t like other people being able to see their balances or transactions or other aspects of the blockchain and prefer existing systems.
There have also been concerns by the Financial Stability Oversight Counsel (FSOC) that some blockchain-based systems could be more vulnerable to fraud than is currently understood with small-scale testing.
Regulation concerns, the cost of integration along with the lack of large-scale applications of blockchain-based systems will lead to a slow uptake in the technology from large financial institutions and governments.
Blockchain technology is just a new way of storing and managing data. It isn’t the answer to all the world’s problems, so don’t believe all the hype.
The Bitcoin network is only capable of handling around 7 transactions a second. However, the Visa network is capable of handling over 20,000 transactions a second.
The NASDAQ blockchain is operational now, demonstrating how close the world is to having blockchain systems in many industries.
Many companies are already using blockchain technology, such as the NASDAQ example mentioned earlier. Almost every major financial institution in the world is currently involved in developing blockchain technology through internal development or joint ventures with other companies.
Ripple is a payment network
The Ripple payment network is being used by major banks and financial institutions around the world as a settlement network, allowing banks to send real-time international payments at a much lower cost than existing methods.
Estonian government is pioneering digital technology for government by developing blockchains for identification and health records with other areas such as tax collection with voting planned to potentially be built on the top of these foundations.
