Blockchain And Decentralization
What Is Blockchain ?
Blockchain is a peer-to-peer based Distributed Ledger which is a growing list of records called blocks that are linked to each other using cryptography.
Terminologies Explained :-
Peer-to-Peer :- In a P2P network the “peers” are computer systems which are connected to each other via the internet. Files can be shared directly between system on the network without the need of a central server.
Distributed Ledger :- A distributed ledger is a consensually shared and synchronized digital data across multiple sites, institutions, or geographies accessible by multiple people.
Cryptography :- It is a process of converting ordinary plain text into ciphertext and vice versa. Cipher text can’t be read until it has been converted into plaintext (decrypted) with a key.
What Is Block :-
A BLOCK records some or all of the most recent blockchain transactions that have not yet entered any prior blocks. Thus a block is like a ledger or record book. Each time a block is ‘completed’, it gives way to the next block in the blockchain.
Types Of Blockchain :-
A Blockchain has multiple use cases and depending on the application, the type of Blockchain that will be needed or can be used may vary.
Public :- Everyone has access to this Blockchain. Anyone can transact, mine and make changes to it. Eg: Bitcoin, Ethereum.
Private :- Not everyone can have access to this Blockchain. Not everyone can read, write or make transactions or operations to this Blockchain. Eg: Hyperledger.
Hybrid :- A Combination of Public and Private Blockchain. Provides flexibility and scalability.
Consortium :- It is a semi-decentralized type of blockchain where a blockchain network is managed by more than one organization and also a combination of Public and Private Blockchain.
Features Of Blockchain:-
Decentralized
The network is decentralized meaning it doesn’t have any governing authority or a single person looking after the framework, instead a group of nodes maintain the network making it decentralized.
Distributed Ledgers
The ledger on the network is maintained by all other user on the system. this distributes the computational power across the computer to ensure a better outcome.
Immutable
Every node on the network has a copy of the digital ledger. To add a transaction every node needs to check Its validity. If the majority thinks it’s valid, then it’s added to the ledger. This Promotes transparency and make it corruption-proof.
What Is Blockchain Protocol :-
A blockchain protocol is a common term for consensus methods. These methods are different systems that are implemented to reach consensus and validate transactions within a blockchain network.
Blockchain Protocols :-
PROOF-OF-WORK
Lots of cryptocurrencies, including bitcoin, use proof of work (POW) as their consensus algorithm. As a result, miners are taking part in a POW scheme.
PROOF-OF-STAKE
POS allows all coin holder to contribute to the network easily. As long as you hold coin in your wallet, activate stalking, and leave your computer on (contributing a relatively minima amount of computing power), you will receive staking rewards by acting as a miner.
PROOF-OF-WEIGHT
Proof of weight is another blockchain protocol gaining interest with projects that have more literal applications. For example: a file storage project would most likely use a proof of weight type of scheme.
DELEGATED PROOF-OF-STAKE
DPOS has been introduction to scene after POS and stands for delegated proof of stake.
The reason for this name is because there are delegates (or nodes, or participants) elected by votes to represent others and add new blocks to chain.
What Is Decentralization?
In blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network. Decentralized networks strive to reduce the level of trust that participants must place in one another, and deter their ability to exert authority or control over one another in ways that degrade the functionality of the network.
Benefits Of Decentralization
Provides a trust less environment.
Improves data reconciliation.
Reduce point of weakness.
Optimizes resource distribution.
What Are Dapps?
Decentralized applications (dApps) are digital applications or programs that exist and run on a blockchain or P2P network of computers instead of a single computer.
Unlike traditional apps that have a centralized controlling authority, dApps run on a decentralized blockchain.
What Is Defi?
The Decentralized Finance (DeFi) or Open Finance movement takes that promise a step further. Imagine a global, open alternative to every financial service you use today savings, loans, trading, insurance and more — accessible to anyone in the world with a smartphone and internet connection.
This is now possible on smart contract blockchains, like Ethereum. “Smart contracts” are programs running on the blockchain that can execute automatically when certain conditions are met.
These smart contracts enable developers to build far more sophisticated functionality than simply sending and receiving cryptocurrency. These programs are what we now call decentralized apps, or dapps.
Defi is now one of the fastest growing sectors in crypto. Industry observers measure traction with a unique new metric — ἜΤΗ locked in DeFi”.