Learn about the technology behind cryptocurrencies
- by Antoniy Yushkevych
- in Security
Since its inception, the internet has been working within a certain structure. There are servers that host sites that are then used by clients to download data and send requests to. This system works well and has been for dozens of years, however, there is one major issue with it.
The centralized server structure means that only one machine has full control over the storage of data on it. If this server was to be compromised, the attacker would single-handedly have all the control over the data stored there as well as the network the server is part of.
The distributed ledger technology, which blockchain is a part of, has the potential to completely change the way data is stored online. Progress, however, requires time and just how Linux needed over a decade to become a cornerstone in modern application development, blockchain will most likely take years to become a more efficient way to exchange information between open and private business networks.
What is Blockchain?
Blockchain is a system of recording information in a way that makes it nearly impossible to hack it.
Put simply, a blockchain is a system of unchangeable time-stamped records of data that is managed by a group of computers that are not under single ownership. Each record of this data is called a block and is secured and bound to one another using cryptography (i.e. the chain).
What is so unique about this system that differs it from previous technologies and has the potential to change the way the internet is run?
A blockchain network has no central authority, meaning that the information is open for anyone to see and pre-existing blocks cannot be changed by any single entity unless that entity has control over more than 50% of all the systems in the blockchain network. Blockchain can only be updated by a consensus between the majority of the computers and once a new block is entered, it can never be erased.
Why the sudden rise in popularity of blockchain in the past couple of years? The answer is bitcoin (and all the other cryptocurrencies). Although nowadays we see many different uses for blockchain technology, the origins of it lie within bitcoin. It was developed as a simple and verifiable method of transactions of money without a central governing authority.
As of lately, cryptocurrencies have been the craze when it comes to online money transfers. The lack of transfer fees and complete anonymity allowed bitcoin as well as other cryptocurrencies to rise to popularity.
Another reason why bitcoin has gained so much traction lately is the lack of centralized control over transactions. Each one is approved by the entire blockchain and thus is nearly foolproof. It is a simple yet ingenious way of passing information from A to B in a fully automated and safe manner. One party to a transaction initiates the process by creating a block. This block is verified by thousands, perhaps millions of computers distributed around the net.
The verified block is added to a chain, which is stored across the net, creating not just a unique record, but a unique record with a unique history. Falsifying a single record would mean falsifying the entire chain in millions of instances. That is virtually impossible. Bitcoin uses this model for monetary transactions, but it can be deployed in many other ways.
Blockchain as a service
For offering the benefits of blockchain-based services to a wider audience, the technology has started being offered in the cloud as a service business model. On the operational front, it is more or less similar to the SaaS, PaaS, and IaaS models which enables using cloud-based apps and storage.
It allows businesses of all types and sizes to access blockchain-based technologies without investing in the in-house development. The BaaS model enables companies to access the blockchain provider’s service wherein they can develop blockchain applications at a minimal cost. This benefit is what has made it a key part of the blockchain technology trends.
The only limitation of the BaaS solution for business is that it asks for a certain level of centralization since the transactions have to be funneled through the host’s blockchain services. And because the answer to how blockchain is used in business lies at the center of decentralization, companies tend to be wary of its adoption.
A BaaS provider sets up and manages the blockchain technology and infrastructure for a customer. A client pays some fees to the BaaS provider for setting up and handling blockchain connected nodes on their behalf. A BaaS provider manages the back-end for the client and their business.
It is the responsibility of a Blockchain-as-a-Service operator to keep blockchain infrastructure running. A BaaS operator also takes care of the activities like proper allocation of resources, bandwidth management, and hosting requirements. Using a BaaS model, clients can focus more on their core areas and the functionality of their blockchain without worrying about performance and infrastructure-related issues.