Characteristics of Blockchain
There are several key elements that distinguish Blockchain technologies, which can be summarized as follows:
Decentralization: In conventional centralized systems, a central trusted agency, say a central bank, is utilized to validate each transaction. Therefore, trust, the main issue in decentralization, is required – along with fail-over, availability, and lift resilience – where a better solution could be obtained by creating a decentralized P2P Blockchain architecture. Unlike a centralized system, any two peers (P2P) can conduct a transaction in the Blockchain network without authentication by the central agency. That way, various consensus procedures can be used by Blockchain to reduce the trust concern. Moreover, the server costs (the costs of development and operation) can be reduced, and at the central server, the performance overheads can be mitigated. In contrast, there are some trade-offs with Blockchain in many cases. For example, in consensus mechanisms such as PoW cases of Bitcoin and Ethereum, the server and energy require higher costs, while the performance is also lower.•
Persistency: Thanks to Blockchain, an infrastructure is provided to quantify the truth and validate the data of producers and consumers. Assuming a 10-block Blockchain, block No. 10 contains the previous block’s hash, and the current block’s information is used to create a new block. Therefore, in the existing chain, all blocks are linked together. Current transactions are even related to the prior transaction. Now, if any transaction is simply updated, it will significantly change the block’s hash. If any information is modified, the hash data for all previous blocks must be changed, which is a difficult task that requires a great deal of work. In addition, after a miner generates a block, other users in the network confirm it. Hence, the network will detect any potential manipulation or falsification of data. For this reason, Blockchain equates to an immutable distributed ledger which can roughly be taken as tamper-proof.•
Anonymity: To avoid the exposure of identity, a user can interact with a Blockchain network by having multiple randomly generated addresses within the network. As it is a decentralized system, users’ private information is not monitored or recorded by a central authority. Given its trustless environment, Blockchain has the potential to provide a certain amount of anonymity.•
Auditability: In a Blockchain network, a digital distributed ledger and a digital timestamp are used to respectively record and validate all transactions. Therefore, if any node in the network is accessed, previous records could be easily audited and traced. For example, in Bitcoin, it is possible to iteratively trace all transactions, making it easy for the data state in the Blockchain to be auditable and transparent. However, tracing money to its origin becomes very hard when the money is tumbled through many accounts.
Blockchain interoperability
The fast pace growth in the number of Blockchain applications created a huge number of heterogeneous solutions. However, complex interoperability issues arise due to the wide diversity of features and implementations, thereby hindering standardization. A Bitcoin exchange-traded fund is colludely brought to the market by many companies, especially in the U.S. The investment in Bitcoins would be easier to access by users and numerous international funds if the Bitcoin market is more regulated. However, due to the uncontrolled growth of cryptocurrencies, different scenarios causing a crisis may emerge, such as malicious currency exchanges or speculative attacks
Cryptocurrencies provide many APIs, most of which are not easy to use. Therefore, many solutions have been proposed towards more interoperable architectures. Blockstream is one of the continued efforts, which tries to provide hardware and software solutions to companies by coordinating transactions between different Blockchains with the major aim of creating new Blockchain-based platforms. Furthermore, exchanging and purchasing cryptocurrencies are services offered for gaining more adept. Indeed, essential security guarantees are offered by such services for managing all types of cryptocurrencies and purchases between cryptocurrencies and legal course’s currencies.