A blockchain is just an verifiable chain of transactions using cryptography and some agreed upon protocol. Each “block” in the chain is a block of data that follows a format specified by the protocol. The protocol also decides who can push blocks and how to verify a block is valid. The advantages it has comes from the fact the protocol can describe a method of giving authority across a pool of untrusted third parties, while still making sure none of them can cheat. Currently the most popular forms are Proof of Work (PoW) and Proof of Stake (PoS).
Bitcoin for example is just an outgoing transaction to a specific crypto key (which is similar to a checking account) as a reward for “mining” the block, followed by a list of transactions going from a specific account to another account. These are verified by needing a special chunk of data that turns the overall hash of the entire block to a binary chunk containing a number of 0 bits in front, which makes it hard to compute and a race to get the right input data. This way of establishing an authority is called Proof of Work, and whoever is first and gets their block across the network faster wins. Other cryptocurrencies like Ethereum use Proof of Stake where you “stake” currency you’ve already acquired as a promise that you won’t cheat, and if someone can prove you cheated your stake is lost.
The problem it solves is not needing a trusted third party to handle this process, such as a government agency or an organization. Everyone can verify the integrity of a blockchain by using the protocol and going over each block, making sure the data follows the rules. This blockchain is distributed so everyone can make sure they are on the same chain, else it’s considered a “forked” chain and will migrate back to the point of consensus. This can be useful for situations where the incentive to cheat the system for monetary or political gain outweigh the cost of running a distributed ledger. It can also be useful when you don’t want anyone selectively removing past data as the chain of verifiability will be broken. The only issue with this is you need some way to reach a consensus of who gets to make each block in the chain, as someone need to be the authority for that instant in time. This is where the requirement of Proof of Work (PoS) or Proof of Stake (PoS) come in. Without these or another system that distributes the authority to create blocks, you lose the power of the blockchain.
Examples I’ve heard of are tracking shipments or parts (similar to how the FAA already mandates part traceability) and medical records. This way lots of organizations can publish records relating to these to a central system that isn’t under any single entities control, and can’t change their records to suit their needs.
These systems are not fool proof though, PoW has the ability to be abused using a 51% attack and PoS requires some form of punishment for trying to cheat the system (in cryptocurrency you “stake” currency and lose it if you try to cheat the system). Both of these run into issues when there is no incentive to invest resources into the system, a lack of distribution across independent parties, or one party has sufficient power to gain a majority control of the network.
Overall you are right to be skeptical of cryptocurrency, it’s been a long time since I participated due to the waves of scam coins and general focus on illegal activities such as gambling. The lack of central authorities also perpetuates the problem of cryptoscams, as anyone can start one and there are limited controls over stopping such scams. This is not dissimilar to previous investment scams though, it’s just the modern iteration of such scams. The real question is does it solve a real problem, as Bitcoin did in the sense it helps facilitate transactions outside of government controls. You might not agree with that but it does give it an intrinsic value to a large number of people looking to move currency without as much paperwork. Now if it makes it worth $68.5k USD (at current prices) is a different story, different people have different use cases and I only highlighted one of those.
I read all the replies in kind of, an order going from simplest to what looked to be like the more complicated ones, and this seems like the least charged and best explanation of the sort of, externalities, and it seems like a pretty good overview of it. The other guy did a good summary of how the technology works for a dumbass like me but I’m still not sure I got all of it.
So, like, you could kind of conceive of a use for these technologies generally, right, but it would seem like, even from your explanation and also from what I kind of passively know already, this is kind of, reliant on a libertarian conception of society, which isn’t necessarily bad. I think more concerningly it also seems like both of the basic technologies, there, PoW and PoS, are vulnerable to abuse from the powerful, or from those who have more resources, with maybe PoS being less so, I dunno, still don’t really get how that one works specifically which might change it. Which is sort of, antithetical to a libertarian conception of society. I mean unless you’re an ancap but those guys are dumbasses.
So I dunno. It seems like a kind of inherently conflicted technology to me, like, paradoxical. I kinda hope someone can conceivably work out the problems of power abuse, but that would seem to be what I define as a “whole enchilada” style of issue, there.
Still, I do like the ability to freely buy drugs and circumvent the government, that’s kind of epic. Well, most of the time, anyways. Maybe not when the CIA does it, or when narcos and cartels do it, but I dunno how much either of them have tied up in crypto, it’d probably make more sense for both of them just to deal in fiat currency or trade resources or something.
A blockchain is just an verifiable chain of transactions using cryptography and some agreed upon protocol. Each “block” in the chain is a block of data that follows a format specified by the protocol. The protocol also decides who can push blocks and how to verify a block is valid. The advantages it has comes from the fact the protocol can describe a method of giving authority across a pool of untrusted third parties, while still making sure none of them can cheat. Currently the most popular forms are Proof of Work (PoW) and Proof of Stake (PoS).
Bitcoin for example is just an outgoing transaction to a specific crypto key (which is similar to a checking account) as a reward for “mining” the block, followed by a list of transactions going from a specific account to another account. These are verified by needing a special chunk of data that turns the overall hash of the entire block to a binary chunk containing a number of 0 bits in front, which makes it hard to compute and a race to get the right input data. This way of establishing an authority is called Proof of Work, and whoever is first and gets their block across the network faster wins. Other cryptocurrencies like Ethereum use Proof of Stake where you “stake” currency you’ve already acquired as a promise that you won’t cheat, and if someone can prove you cheated your stake is lost.
The problem it solves is not needing a trusted third party to handle this process, such as a government agency or an organization. Everyone can verify the integrity of a blockchain by using the protocol and going over each block, making sure the data follows the rules. This blockchain is distributed so everyone can make sure they are on the same chain, else it’s considered a “forked” chain and will migrate back to the point of consensus. This can be useful for situations where the incentive to cheat the system for monetary or political gain outweigh the cost of running a distributed ledger. It can also be useful when you don’t want anyone selectively removing past data as the chain of verifiability will be broken. The only issue with this is you need some way to reach a consensus of who gets to make each block in the chain, as someone need to be the authority for that instant in time. This is where the requirement of Proof of Work (PoS) or Proof of Stake (PoS) come in. Without these or another system that distributes the authority to create blocks, you lose the power of the blockchain.
Examples I’ve heard of are tracking shipments or parts (similar to how the FAA already mandates part traceability) and medical records. This way lots of organizations can publish records relating to these to a central system that isn’t under any single entities control, and can’t change their records to suit their needs.
These systems are not fool proof though, PoW has the ability to be abused using a 51% attack and PoS requires some form of punishment for trying to cheat the system (in cryptocurrency you “stake” currency and lose it if you try to cheat the system). Both of these run into issues when there is no incentive to invest resources into the system, a lack of distribution across independent parties, or one party has sufficient power to gain a majority control of the network.
Overall you are right to be skeptical of cryptocurrency, it’s been a long time since I participated due to the waves of scam coins and general focus on illegal activities such as gambling. The lack of central authorities also perpetuates the problem of cryptoscams, as anyone can start one and there are limited controls over stopping such scams. This is not dissimilar to previous investment scams though, it’s just the modern iteration of such scams. The real question is does it solve a real problem, as Bitcoin did in the sense it helps facilitate transactions outside of government controls. You might not agree with that but it does give it an intrinsic value to a large number of people looking to move currency without as much paperwork. Now if it makes it worth $68.5k USD (at current prices) is a different story, different people have different use cases and I only highlighted one of those.
I read all the replies in kind of, an order going from simplest to what looked to be like the more complicated ones, and this seems like the least charged and best explanation of the sort of, externalities, and it seems like a pretty good overview of it. The other guy did a good summary of how the technology works for a dumbass like me but I’m still not sure I got all of it.
So, like, you could kind of conceive of a use for these technologies generally, right, but it would seem like, even from your explanation and also from what I kind of passively know already, this is kind of, reliant on a libertarian conception of society, which isn’t necessarily bad. I think more concerningly it also seems like both of the basic technologies, there, PoW and PoS, are vulnerable to abuse from the powerful, or from those who have more resources, with maybe PoS being less so, I dunno, still don’t really get how that one works specifically which might change it. Which is sort of, antithetical to a libertarian conception of society. I mean unless you’re an ancap but those guys are dumbasses.
So I dunno. It seems like a kind of inherently conflicted technology to me, like, paradoxical. I kinda hope someone can conceivably work out the problems of power abuse, but that would seem to be what I define as a “whole enchilada” style of issue, there.
Still, I do like the ability to freely buy drugs and circumvent the government, that’s kind of epic. Well, most of the time, anyways. Maybe not when the CIA does it, or when narcos and cartels do it, but I dunno how much either of them have tied up in crypto, it’d probably make more sense for both of them just to deal in fiat currency or trade resources or something.