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BTC, the technical analysis behind it - what is bitcoin blockchain?

Time : 30/06/2022 Author : kflyeu Click : + -
        Bitcoin blockchain is the integration of bitcoin (BTC) and blockchain. One or a group of people called Satoshi Nakamoto created the bitcoin protocol in 2008 to decentralize control over money when centralized entities fail. A publication called bitcoin white paper outlines a set of computing rules that identify a new type of distributed database: blockchain. The network was launched in January 2009. The most famous cryptocurrency bitcoin is the cryptocurrency for which blockchain technology is created. Like the US dollar, cryptocurrency is a means of digital exchange, which uses encryption technology to monitor the establishment of monetary units and verify financial transfers.
        Bitcoin blockchain refers to the data stored in information "blocks" and then linked together in a permanent "chain". A block is a collection of bitcoin transactions in a specific period of time. Piles of blocks are stacked together, and each new block depends on the previous block. As a result, a blockchain was formed, resulting in the word "blockchain". Each time a new block is added, the previous block is made immutable. This ensures that each block is more secure over time, which is an example of how bitcoin technology has changed the way banks and financial transactions. However, bitcoin blockchain is not just cryptocurrency: it is the technology established by most cryptocurrencies (including bitcoin).
        Bitcoin blockchain is unique because it ensures that all transactions are accurate. Every action in the blockchain is recorded, and there is no omission in the network. Once an action is recorded and stored in one of the information blocks, it will be time stamped and protected, and the whole record can be used by anyone in the system. Bitcoin blockchain is also decentralized, which means that it is not stored in a host computer or controlled by a company. It is distributed on many computers in the network. In the bitcoin blockchain, there is a code called hash. Hash is unique for each block in the blockchain. Hashing allows each network user to identify each block and guide them to move in the chain, because each block has its own hash and the hash of the previous block.
        Considering the latter, the key parts of blockchain include records, blocks, hashes and chains. Block record and transaction record are two kinds of records in blockchain. A block contains the latest bitcoin transactions that have not been recorded in any previous block. Transaction records include asset, price and ownership data, which are recorded, approved and settled in seconds on all nodes. In essence, hash is a fixed length string generated by transforming input data of any length in the blockchain network. Blocks are similar to pages in ledgers or logbooks. Chain refers to blocks linked together in the network. Stuarthaber and W Scottstornetta proposed the concept of blockchain technology in their paper "how to timestamp digital documents".
        In this article, they explained the use of a continuous timestamp chain to securely record information. The creation of bitcoin is mainly to promote the exchange of bitcoin cryptocurrency. However, early adopters and inventors soon found that it had greater potential. With this in mind, they designed a bitcoin blockchain to store more than just data about token movement. Bitcoin technology uses peer-to-peer (P2P) transactions, so that it can operate without any bank or third party to manage every financial activity. It allows online payments to be sent directly from one party to the other without going through any financial institution. The term peer-to-peer means that computers as part of the network are equal to each other, there is no "special" node, and all nodes share the burden of providing network services.
        It consists of thousands of bitcoin nodes running the protocol. The agreement is responsible for establishing and protecting blockchains. The formation of point-to-point networks is possible because users' data is related to the people or entities they are interacting with, and they are responsible for maintaining the normal operation of distributed networks. Then, information about individuals or entities will be transferred from their bitcoin wallet to their location and IP address, which represents peer-to-peer bitcoin interaction. Bitcoin represents a digital, trustless form of money, and it is also a movement towards decentralized financial services. Before bitcoin, a trusted third party is needed to save the ledger &mdash& mdash; Record keeping system of company or personal financial data &mdash& mdash; To record who owns how much.
        Everyone has a copy of the account book of the bitcoin network, so there is no need for a third party. Every bitcoin transaction takes place in the bitcoin blockchain network, which is the digital space where bitcoin mining and hashing power generation take place. Hashing capability is the processing capability that your computer or hardware uses to execute and solve various hashing algorithms. These algorithms are used to create new cryptocurrencies and allow them to trade with each other. This process is called mining. Usually, bitcoin owners purchase their cryptocurrency supply through the cryptocurrency exchange, which is a platform to promote the trading of bitcoin and other cryptocurrencies. Decentralized ledger is an integral part of blockchain network.
        The latter shows that bitcoin is a software, a process in which a group of participants perform different tasks. Blockchain is a digital ledger of repeated transactions distributed in the blockchain computer system network. Each block on the chain contains multiple transactions. Whenever a new transaction occurs on the blockchain, the record of the transaction will be added to the ledger of each participant. This distributed database is managed by multiple participants using a technology called distributed ledger Technology (DLT). Blockchain is a DLT in which transactions are recorded using an immutable encrypted signature called hash. Then organize the transactions into blocks. Each new block contains the hash of the previous block, effectively linking them together, which is why distributed ledgers are often called blockchains.
        As a ledger, blockchain tracks every bitcoin transaction and is self validating, which means the whole node network &mdash& mdash; Different computers participating in the network &mdash& mdash; Every action will be continuously checked and protected. This is where "miners" participate in the game: their computers undertake the heavy work of maintaining the chain, so they get bitcoin as a reward. These rules are collectively referred to as bitcoin protocols. Bitcoin miner refers to a high-performance computer that solves complex mathematical problems to coin. Miners are network specific machines that can verify all transactions and prevent any malicious actors.
        Bitcoin miners compile as many transactions as possible into a block, then verify the block and use mathematical methods to add it to the chain of previous blocks. In order to provide computing power to the network, miners are paid with newly minted bitcoin. Blockchain is a kind of database, which is a collection of information stored electronically on the computer system. The content stored in databases, information or data is usually structured in tabular format to facilitate searching and filtering information. The database is designed to store a large amount of information, which can be easily and quickly accessed, filtered and edited by many users at any time. For this reason, extensive databases store data on servers composed of powerful computers.
        These servers can be built with hundreds of computers. Why? It has the computing storage and capacity required by many users to access the database at the same time. This is also different from databases, for example, drives similar to storage clouds. The following are the differences between blockchain and database. The first difference is the structure of the data. The database constructs data into tables, and the blockchain collects information into groups, called blocks, to save data sets. Each block has a specific storage capacity. When it is filled, it will be linked to the previous filled block to form a data chain. This is why it is called a blockchain: millions of blocks full of data are linked together.
        This system means that each blockchain is a more complex database, because it will create an irreversible data chain when implemented in a decentralized system. When a block is filled, it is unchangeable and becomes part of the timeline. Therefore, each block on the chain has an accurate timestamp when added to the chain. Therefore, the goal of blockchain is to allow digital information to be recorded and distributed, but not edited. This is why it is not a database itself. Once it is filled and locked, no one can change it. With the emergence of bitcoin technology, blockchain has its first practical application. Using blockchain networks has many advantages.
        First, the accuracy of the chain. Transactions that are part of the blockchain must be approved by thousands of computers. This eliminates all human participation in validation, which means fewer human errors and more accurate information recording. But what if a computer in the network makes a calculation error? Errors will only appear in one copy of the blockchain. To make it spread, at least 51% of the networks need to have the same error, which is very unlikely. Another advantage is that blockchain eliminates the need for third-party verifiers. Any member of the bitcoin network can check and verify the blockchain at any time. Blockchain data is decentralized, which means that it is not stored in a central location, but copied and spread to a large computer network.
        This makes it difficult for anyone to tamper with data, because, for example, players need to access all networks to completely destroy it. Finally, an important part of blockchain is that although anyone with internet connection can see the transaction history list of the network and access the details of transactions, no one can access the identification information of the users who conduct these transactions. In addition, every time a transaction is recorded, it will be verified through the network, which means that thousands of computers that make up it will confirm whether the purchase details are correct. Blockchain works very differently from traditional banks because it is 100% decentralized and relies on thousands of computers to verify its transactions.
        This means that it runs 24/7 a day throughout the year. The most significant advantage of all bitcoin blockchains is their transparency, because blockchains act as a public ledger for every transaction in the bitcoin network. Other differences are that the transaction speed is as short as 15 minutes or as high as more than an hour, depending on the congestion of the network. Credit card payments and check deposits may take 24 to 72 hours. The cost of bitcoin blockchain varies, usually ranging from $0 to $50. Although the fee has nothing to do with the amount of transfer, it depends on the current network environment and the size of the transaction data. Since a block on the bitcoin blockchain may only store one megabyte (MB) of data, the number of transactions contained in a single block is limited.
        Another difference is the way transactions are conducted. Although blockchain allows anyone with an Internet connection to transfer money, the bank needs you to have an account, a mobile phone or a computer. All these differences make blockchain technology a huge disruptor of traditional finance and banking. They are tamper proof and decentralized fixed chains, which can not only reduce costs, but also create a transparent network in which users can feel authorized and secure. Although blockchain has many advantages, like everything else, it also has its disadvantages. First, when there are too many users on the network, the blockchain will slow down. Because of its consensus working method, it is also more difficult to expand.
        Another limitation is that the data in the blockchain is immutable. Once written, you cannot return and change the previous block. Some people may regard it as an imitation that needs self-maintenance, which means that users must maintain their wallets, otherwise they may lose access. One big limitation is that blockchain technology is not yet mature. In addition, it does not provide interoperability with other blockchains and other financial systems, and it is difficult to integrate into legacy systems. Lightning network (LN) allows participants to use their digital wallets to transfer BTCs between each other at no cost. The second layer is added to the bitcoin network to enable all parties to trade off the blockchain, which is called off chain trading.
        The second layer improves throughput without compromising the decentralization or security functions of any original blockchain. Lightning network creates a payment channel between two users in the distributed database, so that they can trade with each other, and all other users will not receive their information, thus defining offline transactions. It is considered a game changer in the cryptocurrency world because it aims to speed up transaction processing and reduce the costs associated with bitcoin blockchain. It was conceived in 2015 and is being further developed and activated. However, researchers warn that with the development of lightning network, it will become a more attractive target for attackers.
        If users are not careful, bitcoin on the developing payment network may be stolen, and it may be difficult to ensure asset security in the future. According to experts from Hebrew University in Jerusalem, bitcoin currently locked in the lightning online payment channel, which is currently about $9million, may be looted by attackers. Although the defect may be serious, researchers are optimistic that it can be repaired in the long run. Isolation witness, or segwit, refers to the process change of how bitcoin maintains transaction data in the blockchain. Isolation means separation, and the witness is the signature of the transaction. It was created to update the storage mode of data on the bitcoin blockchain.
        This allows the network to store more transactions in a single block, thereby improving transaction throughput. After the release of the updated code in 2015, segwit was launched on bitcoin in August 2017. Segwit increases the block size limit of the blockchain by deleting signature data from bitcoin transactions. When a part of the transaction is deleted, the space will be released, and the ability to add more transactions to the chain will also be released. Segwit not only improves the transaction processing speed of bitcoin, but also solves the weakness of the protocol that allows nodes to tamper with the transaction scalability problem (txid) on the network. By deleting the so-called "signature data" or "witness data" from the input field of the block, segwit increased the number of transactions that can be put into the block and fixed the transaction scalability defect.
        On the bitcoin network, the segwit update was introduced as a soft fork in August 2017. Soft forking is a backward compatible update that allows upgraded nodes to communicate with non upgraded nodes. Soft forks usually contain new rules that do not conflict with existing rules. However, due to the high cost of operating nodes (especially in developing countries), the upgrade was shelved on November 8th, 2017. Gregmaxwell, the core developer of bitcoin, proposed the taproot improvement scheme in January 2018. Three years later, on June 12, 2021, the block mined under the miner's support signal reached 90% of the standard.
        This means that 1815 of the 2016 blocks mined in the entire two-year period have been met. The weekly time frame has some coded data left by miners to prove their support for the upgrade. Taproot is a soft fork, which improves bitcoin's script to enhance privacy and increase the anonymity of the network. When users do not use taproot, anyone can detect transactions. When using taproot, they can "hide" their transactions. Taproot can even completely hide the running of bitcoin scripts. Since October 2020, taproot has merged with bitcoin core library.
        One of the most significant changes in the network is to replace bitcoin with Schnorr Signature
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