Blockchain is a disruptive technology that is already being integrated by major corporations and governments. It features robust security and transparency and will probably become incorporated in many areas of the financial and industrial sectors of our economies. A blockchain can reduce corruption and create better governance terms while increasing efficiency and reduce costs. Its high transparency and ability to securely store data without the possibility of tampering them are attributes highly regarded by governments and execs.
There are differences between blockchains and while one system might work as it should have, others might be too complex to be efficient, or too centralized to be totally secure.
Satoshi Nakamoto announced Bitcoin in 2008 on the cryptographers mailing list. He didn't use the word blockchain on the white-paper but instead was using the term Proof Of Work Chain, as it was the HashCash invention of current Blockstream CEO Adam Back that drives it.
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On the core of the Bitcoin's blockchain lies consensus.
This is how decisions are taken and how Bitcoin remains secure. The consensus is a set of rules which all entities around Bitcoin follow. If an individual or an entity is not following these rules his participation is excluded and not recorded on the blockchain until he behaves according to them.
The security of Bitcoin means that any malicious participant won't accomplish his goals and will also have to pay a cost for the consumed electricity. Proof of Work transforms energy (electricity) into Bitcoins. It is used to verify transactions in the Bitcoin network and unless all the Consensus Rules are met a certain transaction or block won't be validated by the rest of the network.
Bitcoin is autonomous. It is not run by any individual, a certain party of developers, miners, or exchanges. Its governance is a result of the decisions of the overwhelming majority of all the constituencies surrounding the Bitcoin world.
These constituencies are:
- Developers
- Miners
- Wallets and Users
- Exchanges
- Merchants running nodes to validate transactions
While mining and hash rate decides if an improvement proposal is to be integrated into the network or not, the rest factors should also accept the changes on the nodes they are running. Exchanges or Wallets if they don't accept the changes, then the proposal will have failed as the miners won't be able to store or sell their rewards.
This is consensus and how a decentralized and autonomous blockchain system works in general.
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The problem appears when the centralization of a blockchain allows the creation of an entity that controls it and decides the fate of upgrades and mining. In cases like this, there is a probability that the ruling entity may be in charge and take decisions without consulting the rest entities. Corporate blockchains exist today as IBM blockchain and are also selling private blockchain solutions running on top of their blockchain to governments and other corporations
Centralization reduces security and increases the possibility for an entity to be able to tamper with the blockchain and access or alternate data.
Bitcoin is the number one cryptocurrency for so long because tampering with its blockchain is impossible. There is no case of anyone acquiring 51% of Bitcoin's hashrate and this can't happen for long enough to manage to attack the chain, invalidate blocks, reverse transactions, and double-spend them.
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Such a theoretical attack would require vast hashrate produced using hundreds of thousands of ASIC equipment, a secure place (giant warehouse) cooled at the correct temperature, and a power source to supply the electricity. And this activity will require to run for many hours to reach to certain blocks and the deeper someone would require to go in the blockchain, the harder it will be for them.
Even if someone manages this the network would almost instantly become obsolete and the price of Bitcoin will reach zero in seconds. Any Bitcoins acquired will worth nothing. The hypothetical attacker would have managed to destroy the Bitcoin network while having managed to gain nothing. It is an attack that has no winner. It is only a LOSE-LOSE situation.
The reason Bitcoin is valued so high is because almost all other networks have so far suffered this kind of attack.
Bitcoin Cash, Ethereum Classic, Bitcoin Gold, Verge, Vertcoin, ZenCash are a few of the blockchains that have suffered a 51% attack so far, have seen transactions reversed and coins double spend in exchanges.
This is the real danger of blockchains. Being utilized poorly without being completely decentralized and running on consensus rules. In cases like this, the network is vulnerable, data in the blocks (which can be anything, from election results to medical data) can be tampered and altered and blockchains can also be attacked.
Corporations and governments that consider integrating blockchains will need to overhaul their current centralized networks and perhaps the results won't be what they are expecting. The cost is too high as well, as many servers will be required to validate and securely store the data.
What we observe right now are private blockchains with corporations as Amazon and IBM developing and running them. The current centralized ERP systems can't process quickly big data and a blockchain is more efficient for this reason. These corporations do not need decentralization as a vehicle for financial freedom, something that Bitcoin provides. They just need a part of the LEDGER for their private use cases. Although I doubt that any private and corporate blockchain will be able to interact or offer the same transparency a decentralized one does.
While open-ledgers as blockchains will probably be the future, centralization will probably mean that they won't be unhackable and a person in charge would certainly mean that tampering is possible. Right now the only system the world has that is provable tamper-free, not susceptible to corruption, and unhackable is the decentralized autonomous blockchain network of Bitcoin.
First Posted on Uptrennd - Reposted on Publish0x
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