Cryptocurrency and Blockchain

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4 years ago

In community: Cryptocurrency and Blockchain(7b7f)

Before discussing cryptocurrency, let's take a look at some of the most commonly used currencies in our daily lives:

For many years now people have been trading things according to their needs. One of the oldest and most common forms of transaction was the exchange system. But there have been a number of problems with the criteria. Suppose Mr. Shafiq, a fruit trader, needs a sack of rice and in return he has to give him a sack of cotton. But Mr. Shafiq has no cotton. Since Mr. Shafiq does not have any cotton, the exchange cannot be done here.

In order to get rid of this problem of exchange system, everyone felt the need to invent a system where all kinds of goods would have an ideal price. Gold can be mentioned as an example. Gold was still considered a unit of wealth measurement many years ago. Earlier, gold was traded directly, but at one time it was transformed into a paper currency system as per the needs of the people.

Thus different currencies like money, dollar, pound, euro etc. have come in different countries. According to the demand of the country's economy, the government or the central bank can print this currency and release it to the market for human consumption. Banks or banking systems are designed to handle the financial transactions or exchange of assets of individuals or organizations in accordance with the laws of the country. But this did not solve the problem. Whoever hears the horrible stories of big bank robberies in the history of the world, a cold current flows in their hearts! Yet time passes, and man is no longer in a position to give up. One by one they discover their own needs. Today we will talk about such a surprise.

We will try to imagine a hypothetical scenario before moving on to the main discussion.

You have many kinds of hobbies from a very young age. One of these hobbies is art and culture. In other words, sitting in this modernized civilization, you have a special interest in rare paintings. Collecting from a very young age. So you have a small museum with paintings you have collected over the years. There are 60 hobbies, there is a lot to pay for it. Collecting these things and keeping them in your own collection is a lot of trouble. Because all sorts of people keep an eye on these, many times big organized crimes or accidents happen with them. Towards the end of university life or when you are too busy with a job or you don't want to take pains like before, you don't want to give up hobbies again. So for some time now I have been thinking of a way to preserve all the art of collection in such a way that,

First of all to ensure the quality of the product.
Financial transactions and legal matters can be done at home without any hassle, quietly and in the shortest possible time.
A transparent transaction process when selling.
Strict product safety.

That is, if a thief steals some of your art and goes out to sell it, then he is caught by the law enforcement agencies for selling the stolen items and if the thief escapes, then the person who bought it is caught in the crime of buying the stolen items.

The exchange system can no longer meet your needs. But banking system can solve this problem if you want. But that's what I said about the tragic history of big bank robberies. On the other hand, the kind of financial security that you and the banks are not able to provide at the moment.

Let us explain with an example the role of the bank in terms of what we are talking about.

For now, we are trying to explain the importance of banks here. Suppose you send money to an Egyptian archaeologist for a job related to your painting. So you know or have heard that most of the time they resort to many kinds of immoral ways with money. So you can't trust them to pay. If the businessman refuses to take the money! So in this case you need a reliable institution where you can exchange money with ease. This means that the money in your account will go to the account of that person in Egypt through another institution, and the institution will keep a record of that transaction so that neither of the two can raise any question about this transaction. The middle institution is the bank.

What if you could have paid the Egyptian businessman in any way without resorting to a third party or bank? Here we are basically thinking of a process that will ensure any money transaction through more transparency and accountability than a bank. Even that system will not have the possibility of hunky or any kind of looting.

In fact, the name of this technology is blockchain, which is currently seen by the world's leading technologists as the banking technology of the future, and some banks in some influential countries are already investing billions of dollars behind this technology. The blockchain system and the first cryptocurrency for it, Bitcoin, was designed and developed by Satoshi Nakamoto. The word 'who' is probably not correct here, as Satoshi Nakamoto's identity is not yet known. It can be the codename of an individual, group, establishment or company.

So far so good. Now you must be wondering what this blockchain is again! So let's talk a little bit about blockchain

What is a blockchain?

A block is made up of all the encrypted information of the transactions of money or assets being transacted all over the world in a given period of time. A blockchain is a completely unchanging distributed and decentralized laser arranged in sequence with that block. Everything seems to be cloudy, isn't it! Many of us now know Bitcoin. An example of the blockchain we are talking about here is the Bitcoin blockchain. Bitcoin is a cryptocurrency that is managed using a blockchain.

All the branches have a large ledger to record all the transactions of the bank. And the banks that use banking software, they have this record in the database. Maybe, even in that old ledger. This large ledger is called a laser. So for a valid transaction, the entry must be in the bank ledger. A blockchain is a laser, where there are many such blocks side by side. Each block contains all the data of the transactions that have taken place in the world from time to time. This data is open but encrypted, which means everyone can see this data, but if you want to read it, you need a private key. This means that if you have transacted here, only you can read all the details of your transaction from here using its private key, no one else can. But what people will see is the amount of transactions. However, it will not be known in this way whose money went to whom. Because the money will go only with the address. There will be no identity.

The image below shows what a transaction looks like. Every block in the blockchain is completely immutable. Once a block is added to the chain, it is impossible to change it. The blocks sit side by side in the order of their creation. Each block knows which block is before it. Thus one block is connected to another. Blockchain distributed and decentralized systems, that is, all users of the same blockchain around the world, or in particular cases, have absolutely carbon copies. So even if one or a hundred servers or computers crash together, nothing will happen to the blockchain.

Cryptocurrency :

Cryptocurrency like our conventional currency and a type of currency or medium of exchange. That is, the same thing that can be done with conventional currencies, such as dollars, pounds, money, etc., can be done with cryptocurrency. This cryptocurrency is used for transactions through blockchain technology. There are many such currencies, such as Bitcoin, BitCash, Monero, Lightcoin etc. The prices of our currencies, such as dollars, pounds, money, etc. fluctuate at different times, so do the buying / selling prices.

So, by now you must have understood what cryptocurrency means. Let's talk about cryptocurrency.

Cryptocurrency (say, bitcoin) is like a network. Each peer has a complete history of all transactions and thus a record of the balance of each account. Such a transaction file says, "Shamsul gives x amount of bitcoin to Alice" and it is signed by Shamsul Haque's private key. This is basic public key cryptography. Once signed, a transaction spreads across the network and is sent from one peer to another. This is basic P2P technology. The infographic below gives an idea of how blockchain and cryptocurrency work.

The transaction is completed very quickly. But is confirmed after the specified time. Much like confirming by activating an account. This confirmation is very important in the case of cryptocurrency. As long as the transaction is uncertain, it is pending and may be forged. When a transaction is confirmed, it is perfectly set to laser. It can no longer be modified or deleted. That means you can't change the laser data anymore. This process is largely done through blockchain, as discussed earlier.

Only minors can confirm the transaction. Basically this is the work of minors in cryptocurrency networks. They receive the transaction, spread it across the network after being deposited in the laser. When a transaction is confirmed by a minor, it becomes part of an unchanging blockchain. Minors receive cryptocurrency tokens (called fees) for this work (e.g. Bitcoin). Since the activity of minors is the single most important part of the cryptocurrency-system, we will try to find out about minors.

All conventional currencies are regulated by the government of a country and the central bank. Whether the central bank is public or private like the US, it can create new currencies considering the country's economy and more. It can print new 'bank notes' directly in Bengali. In other words, the regulators can do it as they wish, even if they don't bother about who gains and who loses. For example, we have inflation because our country is printing more money than it needs.

But cryptocurrencies are created completely differently. Here comes the new currency or bitcoin through a competition to solve a cryptographic puzzle every 10 minutes. And this puzzle competition is through minors.

For those who know about encryption, SHA256 encryption should be familiar. For those who are not familiar, all you need to know is that if any data is encrypted in SHA256, a hash is available for that data. The hash is something like "000001beeca3785d515897041af0a7" for ease of understanding. Now if anything very little changes from this data, a different hash will be found. This means that if encrypted in this way, the hash for a particular data will always be the same, and will be the same on everyone's computer.

Now notice that the hash I used above has 5 zeros at the beginning. It is intentional. And that's the cryptographic puzzle I talked about a little while ago. There are countless transactions going on in the Bitcoin blockchain all over the world at the moment. About 10 minutes after the addition of a new block to the blockchain, the pending transaction data is stored on the computers of all the miners in the bitcoin system. So minor means we are ourselves and we are sitting with the computer to solve the puzzle.

Now our target is to find the hash of the previous block, the hash of the previous block and another Random Number (here it is called Nonce = Number Used Once) and find a hash pattern that has 5 zeros at the beginning like above. . Why these 5 zeros? This is called difficulty level, which means how many zeros will sit at the beginning indicates how difficult it is to solve the puzzle.

In a matter of moments, thousands of miners around the world competed to find the desired hash on their computers. This process cannot be won by any special algorithm or intelligence. Absolutely in Bengali method one has to apply one nonce or expression after another to check whether the hash of that pattern was found.

The winner of this competition is the minor who can find this hash first. Finding a hash means creating a new block for a new blockchain. Not nice? The job of the rest of the minors who can't win is to verify whether the result of the winning minor is correct. In this way, after verifying 51.8% minor, the new block is added to the blockchain as a tested or correct block.