What does a blockchain block consist of? What is blockchain? complex mathematical algorithms

The St. Petersburg International Economic Forum, held in June 2017, was dedicated to the development of blockchain technology. It gathered a record number of participants and attracted the close attention of the Russian leadership. Understanding the importance of the digital economy and the development of “high” technologies, Russian President Vladimir Putin became interested in blockchain technology and took part in a discussion on this issue. Of course, if the country's leaders are interested and pay attention to some issue or technology, then many ordinary users want to know what it is? Therefore, this article is intended to explain in simple and understandable language what kind of technology this is, why it is needed, what prospects its use opens up?

The word blockchain translated from English means “chain of blocks”. This concept first appeared as the name of a distributed database, which was implemented in . Blockchain is a method of storing various data or a digital ledger of contracts, deals and transactions. In other words, everything that requires a separate independent record and, if necessary, verification. It can store data on loans issued, property rights, traffic violations, marriages and divorces. In a word, almost everything. Its main difference and undeniable advantage is that this registry is not stored in any specific place. It is distributed throughout the world through several hundred and even thousands of computers. On this network, any user has free access to the current version of the registry. Thus, it is completely transparent to absolutely all participants.

All digital records made are combined into “blocks”, which are then chronologically and cryptographically linked into a “chain” using complex mathematical algorithms. Each such block is connected to the previous one and contains a specific set of records. New blocks are added strictly to the end of the chain.

In a more simplified way, a blockchain can be thought of as a large ledger that records the movement of information or funds from one account to another. All users of this technology have equal access to the system. All operations formed into data blocks are saved by all network participants, and each block contains a link in the form of encrypted data from the previous block.

Infographic “How does blockchain work?”

System reliability and security

The encryption process, or hashing, is performed by a large number of computers that operate on the same network. If their calculations all produce the same result, then the block receives a unique digital signature – a signature. The formation of a new block leads to an update of the registry and it cannot be changed in any way. This means that you cannot fake it, but you can only add new records. It is important to remember that the registry is updated on all computers on the network simultaneously.

The distribution of blockchain databases among many computers makes it impossible for hackers to hack it. After all, to do this they must gain simultaneous access to copies of the database on all computers on the network. The technology also makes it possible to secure personal data, because the hashing process is irreversible. Even if you manage to change the original document or transaction, they will immediately receive a different digital signature, which will signal a discrepancy in the system.

Why do we need mining and miners?

The idea behind blockchain technology is quite simple. This is a colossal public database with no central management. If we take the now well-known ones, then miners are responsible for checking their transactions. This is the name given to the system participants who confirm the authenticity of completed actions and form blocks from transaction records.

Since the mining process is accompanied by solving complex mathematical problems, miners need to have very powerful computers in their arsenal. In their hands is a distributed database, which consists of a “chain of blocks.” This nature of the database allows you to control transactions without the participation of any financial regulators.

Recently, many of us are increasingly faced with the concept of blockchain. What kind of system is this? Unfortunately, not everyone knows about this, although it has very promising chances for development and implementation in everyday life. Let's try to describe what blockchain is in simple words. To top it all off, several examples of the use of new technology will be given, and the advantages and disadvantages of the global information structure will be discussed.

Blockchain: what is it?

The system itself appeared relatively recently. If you do not delve into the main technical aspects of operation yet, blockchain technology is a clearly structured database with certain rules for constructing transaction chains and access to information, which excludes data theft, fraud, violation of property rights, etc.

In addition, when working with it, only two parties are involved, without the involvement of intermediaries for conducting transactions of any type. If we talk about what a blockchain is, in simple words, the technology can be compared to a kind of transparent safe, say, made of impenetrable glass, into which every registered client (user) can put something. At the same time, everyone else sees exactly what is put there. But you can only take something from the safe if you have certain access rights, roughly speaking, a key known only to the person for whom it is intended. As is already clear, the safe cannot be hacked or broken. But, in fact, this is a rather primitive comparison.

In a sense, the blockchain system can be represented as a kind of global ledger, in which the basic rules for storing and distributing information are described using mathematical means, excluding access to it from the outside even at the level of registered clients or administrators. It is not difficult to guess that this system does not have any one manager as such.

How does blockchain work?

The main principle of the functioning of the new technology is the transparency of transactions performed with the impossibility of changing them by persons who do not have authorized access to it. The ancestor is considered to be the Bitcoin system, which was once created in the form of a self-regulating cryptocurrency that does not require servicing by financial institutions or banks. It used the blockchain platform to record any type of transaction. Any blockchain wallet works in a similar way, for example, the same Qiwi system.

You can understand the basic principles of the functioning of a global database using the example of the structure of DNA. It has its own chain of transaction blocks (transactions, payments, etc.). Moreover, after any transaction is completed and confirmed (according to established mathematical rules), a new block is added to the chain. And each such block, like a DNA cell, contains information about the entire network as a whole. Thus, blockchain technology inherently makes it impossible to add a fake block or remove an existing one, since this will be immediately visible throughout the system. Roughly speaking, you cannot add something to the structure that should not be there. When a block is deleted, the system reacts in the same way to changes in the global structure. So it turns out that fraud, attempts at unauthorized intervention, or even piracy are almost completely excluded.

Main Applications

At the stage of its emergence, blockchain technology (from the English block chain) was used exclusively for cryptocurrency, and a little later it was adopted by some banking structures.

However, today in its development the new system penetrates quite deeply into our everyday life. Platforms for developing business applications based on blockchain technology can even control compliance with copyrights, tracking the production processes of a particular product for compliance with the stated standards, not to mention absolutely all financial transactions.

Main platforms for building business applications

Among the most advanced and frequently used platforms on which business software products can be created are the following:

• EmcSSH.
• EmcSSL.
• Emc InfoCard.
• EmcTTS.
• Emc DPO.
• Emc Atom.
• Emc DNS.

Let's consider each of them separately.

EmcSSH

From the point of view of the EmcSSH platform, which is an additional extension of SSH technology for network administration, blockchain is a kind of specialized storage of public keys (passwords) and lists of users entitled to authorized access.

For example, a network user has access to several machines. This is done using a password-protected secret key file stored on the blockchain, which eliminates the possibility of hacker attacks called MIM (“man in the middle”). If the impossible happens - the file is stolen, then the user can instantly change it to a new one or block access.

This technique is most effective in cases where it is necessary to manage a large number of servers, a network of ATMs, remote computer terminals, etc. What is most interesting is that such global control can be carried out regardless of geographic location, and with the same simplicity as when working on a regular local network.

EmcSSL

It is an extension of the custom SSL protocol. For him, blockchain is a place where so-called digital fingerprints of certificates of individual users or organizations are stored.

When entering, for example, a bank’s website, and exchanging information between the user and the online banking system, the user’s authorization occurs precisely on the basis of such certificates, which makes it impossible for third parties to steal passwords, codes or keys. If a client loses a certificate, the procedure for restoring it is simplified quite greatly, although it has some inconveniences in terms of restrictions imposed (the restoration service is paid, and the process itself requires quite a lot of time).

Emc InfoCard

This platform is based on a system of electronic business cards, inextricably linked with user SSL certificates. Unlike the latter, such business cards are convenient because the information they contain can be changed.

When entering a certain Internet resource that supports this technology (for example, a blockchain wallet), authorization occurs precisely on the basis of a virtual business card, and information from it is downloaded automatically. The convenience of such a system is that when the data in a business card changes, it changes on all resources where it is registered, simultaneously and completely automatically. So the user no longer has to re-fill registration fields on a huge number of sites manually.

EmcTTS

The TTS system is a means of recording posted documents of any type in time, creating a fingerprint of the moment of their publication.

This technology is indispensable in legal matters when it is necessary to prove the authenticity of a document, contract, patent or even copyright publication. Using a time stamp, you can easily check not only the date of issue or publication, but also the time with an accuracy of up to a second. And in jurisprudence this can sometimes play a key role.

For example, there are two companies that have entered into an agreement to provide some services. The first one, after signing the contract, published it using TTS technology. The second company did not know about this, and after some time it began to arbitrarily make changes to the contract, citing an allegedly lost copy of its own, and even stating that some clauses were spelled out in the current edition it proposed. There is nothing easier than proving the first company right by the temporary imprint of the publication.

Emc DPO

The DPO system is another offshoot of the core technology used to prove rights to any property, physical or intellectual.

Simply put, based on unique numbers or characteristics, the use of such technology can confirm, for example, the right to own a car, house or apartment, land, software development, etc. Cadastral numbers, registration certificates, serial numbers can be equally used software licenses, and in some cases, say, for real estate - location, etc. With such a system, re-registration of property rights is very simple. It is enough to perform a simple operation to change data in the blockchain. As is already clear, access to such processes can only be obtained by persons who have the right to do so, and outside interference is excluded.

Emc Atom

Atom is a system designed to conclude transactions between two parties without the participation of a third party or intermediaries.

To be clear, in some cases, when transferring property rights or concluding contracts, two parties are forced to contact a notary, a law office, a bank and other organizations. In this situation, their participation is not required. Registration in the case of a transaction with property, when the seller has received money, and the ownership has been re-registered to the buyer, and is a confirmation of the legality of the transaction with a preliminary verification of the ownership of the property by the seller, and in the future - also with confirmation of the ownership of the new owner. True, this approach can only be used if both parties trust each other unconditionally.

Emc DNS

Finally, another platform is an alternative system for distributing domain names in networks, preventing attackers from attacking the DNS.

It is believed that with the use of such technology, any distributed network connected to the Internet becomes practically invulnerable.

Fast transactions

This type of technology is designed to facilitate micropayments with minimal cost and expense. Such calculations can have extremely small amounts (even fractions of kopecks).

Since all transactions carried out are virtual, the system allows you to remove any restrictions on speed in the so-called TPS metric, despite the fact that any calculation has its own cost, expressed either in monetary terms or in the resources consumed to complete it.

Advantages and disadvantages of the system

Finally, it remains to be said that the advantages of the blockchain system are quite clearly expressed. The most important thing in technology is impeccable reliability and, as stated, absolute safety. Despite this, today there is active debate about the feasibility of widespread implementation of such technology. Bankers, by the way, are in no hurry to use it because of the low speed of operation, which initially depends on traffic, although they admit that speed has a lower priority compared to the reliability and security of the operations being carried out.

But any consumer, using blockchain technology, can even independently check the quality of the purchased product by tracking the entire production and supply chain to ensure that the purchase actually meets the specified standards.

However, it is still too early to talk about the global implementation of this technology, the emergence of which, according to many experts, is comparable only with the emergence of the global Internet. And there are still not as many applications created on its basis, not to mention the organizations that use them, as many would like. However, most experts are inclined to think that blockchain has a great future. Whether this is true or not, time will tell. We can only hope that this system will not suffer the fate of the Bitcoin cryptocurrency, which it was recently decided to abandon.

You've probably heard the term "blockchain" before, but perhaps you didn't pay much attention to it, considering it a frivolous buzzword or technical jargon. But we believe that blockchain technology is a breakthrough with very large-scale consequences that will affect not only finance, but also many other industries. In this article we will explain what blockchain is in simple words.

Blockchain (chain of blocks) is a distributed database in which data storage devices are not connected to a common server. This database stores an ever-growing list of ordered records called blocks. Each block contains a timestamp and a link to the previous block.

The use of encryption ensures that users can only change those parts of the block chain that they “own” in the sense that they have the private keys, without which writing to the file is impossible. In addition, encryption ensures that copies of the distributed blockchain are synchronized among all users.

Imagine a digital medical history: each record is such a block. This entry has a label: date and time of entry. Initially, it is considered mandatory to prohibit the modification of records retroactively, because it is necessary that records of diagnosis, treatment, etc. did not allow different interpretations and remained in their original form. Records can only be accessed by the doctor, who has one private key, and the patient, who has the other. This information will then only be accessible to those to whom one of these users shares their private key (for example, the hospital as a whole or an individual specialist). For example, blockchain technology can be used in a medical database.

Blockchain technology is inherently secure at the database level. The concept of block chains was proposed in 2008. It was first implemented in 2009 as a component of the digital currency Bitcoin, where the blockchain plays the role of the main general ledger for all transactions. Thanks to blockchain technology, Bitcoin has become the first digital currency to solve the problem of double spending (unlike physical coins or tokens, electronic files can be duplicated and spent twice) without the use of any authority or central server.

Security in blockchain technology is ensured through a decentralized timestamping server and peer-to-peer network connections. As a result, a database is formed that is managed autonomously, without a single center. This makes blockchains very useful for recording events (such as medical records) and data operations, identity management, and source verification.

Visual display of a decentralized Bitcoin server

How does blockchain technology work?

Blockchain technology is sometimes called the “Internet of Value,” and we think that’s a good metaphor.

Anyone can post information on the Internet, and then other people can access it from anywhere in the world. Block chains allow you to send any value anywhere in the world where the blockchain file is available. But you must have a private key, created using a cryptographic algorithm, to allow you access only to the blocks you “own.”

By giving someone your private key, you are essentially giving that person a sum of money, which is stored in the corresponding section of the block chain.

In the case of Bitcoin, such keys are used to access addresses that store certain amounts of currency that have direct financial value. This implements the function of registering the transfer of funds - banks usually perform this role.

In addition, another important function is implemented: establishing trust relationships and confirming the authenticity of identity, because no one can change the block chain without the corresponding keys. Changes that are not confirmed by these keys are rejected. Of course, keys (like physical currency) can theoretically be stolen, but protecting a few lines of computer code usually doesn't cost much. (Compare, for example, with the costs of storing gold reserves in the notorious Fort Knox).

This means that the core functions performed by banks (verifying identity to prevent fraud and then recording transactions so they are legal) can be performed faster and more accurately by the blockchain.

What is the importance of blockchain technology?

Today we are already accustomed to sharing information through a decentralized interactive platform of the Internet. But when it comes to transferring valuables (money), we are usually forced to again use the services of the old centralized financial institutions (banks). Yes, online payment methods have appeared almost since the birth of this network (the most obvious example is PayPal), but they usually require integration with a bank account or credit card, otherwise they cannot be fully used.

Blockchain technology offers a tempting opportunity to eliminate this “extra link.” It can take on all three important roles traditionally played by the financial services sector: recording transactions, verifying identity and negotiating contracts.

This will be of great importance because the financial services market is the largest in the world by market capitalization. The transfer of at least part of this system to blockchain technology will lead to the severing of a large number of ties in the field of financial services, but at the same time it will significantly increase the efficiency of such services.

A third potential role for this technology (contracting) could be very useful outside of the finance sector. In addition to introducing yet another currency (bitcoin), blockchain technology can be used to store any type of digital information, including computer code.

This piece of code can be programmed to execute only when both contracting parties enter their keys, thereby agreeing to the contract. This same code can take information from external data streams (stock prices, weather reports, news headlines and anything else that can be analyzed by a computer) and create contracts that will automatically register if certain conditions are met.

This mechanism is called “smart contracts”, and the possibilities for its application are almost endless.

For example, a smart thermal management system can report energy consumption data to a smart grid. When you consume a certain amount of electricity, another blockchain automatically transfers the required amount from your account to the account of the energy company. As a result, the meter operation and billing process are automated.

In our medical records example, a doctor or patient might give their private key to a medical device, such as a blood sugar monitor. This device can then automatically and safely record the patient's blood sugar levels and then, for example, exchange data with an insulin injection device, which will automatically maintain normal sugar levels based on these data.

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A transaction is considered complete and reliable (“confirmed”) when its format and signatures are verified, and when the transaction itself is grouped with several others and recorded in a special structure - block. The contents of blocks can be checked because each block contains information about the previous block. All blocks are built into one chain, which contains information about all operations ever performed in the database. The very first block in the chain is primary block(English genesis block) - is considered as a separate case, since it does not have a parent block.

A block consists of a header and a list of transactions. The block header includes its hash, the hash of the previous block, transaction hashes and additional service information. In the Bitcoin system, the first transaction in a block always indicates the receipt of a commission, which will be the reward to the miner for the created block. Next comes a list of transactions formed from a queue of transactions that have not yet been recorded in previous blocks. The criterion for selecting from the queue is set by the miner independently. It doesn't have to be a timeline. For example, only transactions with a high commission or involving a given list of addresses may be included. Transactions in a block use tree hashing, similar to generating a hash for a file in the BitTorrent protocol. Transactions, in addition to charging a commission for creating a block, contain within the parameter input a link to a transaction with a previous state of data (in the Bitcoin system, for example, a link is given to the transaction for which the spent bitcoins were received). Operations to transfer a commission to a miner for creating a block do not have “input” transactions, so any information can be specified in this parameter (for them this field is called Coinbase parameter).

The created block will be accepted by other users if the numerical value of the header hash is equal to or less than a certain target number, the value of which is periodically adjusted. Since the hash result of the SHA-256 function is considered irreversible, there is currently no algorithm for obtaining the desired result other than random search. If the hash does not satisfy the condition, then the nonce parameter in the header is changed and the hash is recalculated. Usually (statistically) a large number of recalculations are required. When a candidate is found, the node broadcasts the resulting block to other connected nodes, which validate the block. If there are no errors, then the block is considered added to the chain and the next block must include its hash.

The value of the target number with which the hash is compared is adjusted every 2016 blocks in the Bitcoin system. It is planned that the entire Bitcoin system network should spend approximately 10 minutes generating one block, and about two weeks for 2016 blocks. If 2016 blocks are formed faster, then the goal decreases slightly and becomes more difficult to achieve, otherwise the goal increases. Changing the computational complexity does not affect the reliability of the Bitcoin network and is only required for the system to generate blocks at an almost constant rate, independent of the computing power of network participants.

Block chain

Blocks are formed simultaneously by many “miners”. Blocks that meet the criteria are sent to the network, included in all replications of the distributed block base. Situations regularly arise when several new blocks in different parts of a distributed network call the same block the previous one, that is, the chain of blocks can branch. You can intentionally or accidentally limit the relaying of information about new blocks (for example, one of the chains can develop within a local network). In this case, parallel expansion of various branches is possible. In each of the new blocks, there can be both identical transactions and different ones included in only one of them. When block relaying resumes, miners begin to consider the master chain, taking into account the hash difficulty level and chain length. If the complexity and length are equal, preference is given to the chain whose final block appeared earlier. Transactions that were included only in the rejected branch (including reward payments) lose their confirmed status. If this is a Bitcoin transfer transaction, it will be queued and then included in the next block. Transactions for receiving rewards for creating cut blocks are not duplicated in another branch, that is, the “extra” bitcoins paid for creating cut blocks do not receive further confirmations and are “lost”.

The blockchain is formed as a continuously growing chain of blocks with records of all transactions. Copies of the database or part of it are simultaneously stored on many computers and synchronized according to the formal rules of building a block chain. The information in the blocks is not encrypted and is available in clear text, but the absence of changes is verified cryptographically through hash chains (an element of the digital signature).

The database publicly stores, in unencrypted form, information about all transactions signed using asymmetric encryption. To prevent repeated spending of the same amount, timestamps are used, implemented by dividing the database into a chain of special blocks, each of which, among other things, contains the hash of the previous block and its own serial number. Each new block confirms transactions, information about which also contains additional confirmation of transactions in all previous blocks of the chain. It is not practical to change information in a block that is already in the chain, since in this case you would have to edit information in all subsequent blocks. Thanks to this, a successful double-spending attack (repeated spending of previously spent funds) is extremely unlikely in practice.

Most often, a deliberate change in information in any of the copies of the database or even in a sufficiently large number of copies will not be recognized as true, since it will not comply with the rules. Some changes can be accepted if they are made to all copies of the database (for example, deleting the last few blocks due to an error in their formation).

To more clearly explain the mechanism of operation of the payment system, Satoshi Nakamoto introduced the concept “ digital coin", defining it as a chain of digital signatures. Unlike the standardized denominations of regular coins, each “digital coin” has its own denomination. Each Bitcoin address can be associated with any number of “digital coins.” With the help of transactions, they can be divided and combined, while maintaining the total amount of their denominations minus the commission.

Before version 0.8.0, the main client used Berkeley DB to store the block chain; starting with version 0.8.0, developers switched to LevelDB.

Transaction confirmation

As long as the transaction is not included in the block, the system believes that the number of bitcoins at a certain address remains unchanged. At this time, it is technically possible to execute several different transactions for transferring the same bitcoins from one address to different recipients. But as soon as one of these transactions is included in the block, the system will ignore other transactions with the same bitcoins. For example, if a later transaction is included in a block, the earlier one will be considered erroneous. There is a small chance that when branching, two similar transactions will end up in blocks of different branches. Each of them will be considered correct; only when the branch dies, one of the transactions will be considered erroneous. In this case, the time of the operation will not matter.

Thus, the entry of a transaction into a block confirms its authenticity, regardless of the presence of other transactions with the same bitcoins. Each new block is considered an additional “confirmation” of transactions from previous blocks. If there are 3 blocks in the chain, then transactions from the last block will be confirmed 1 time, and those placed in the first block will have 3 confirmations. It is enough to wait for several confirmations so that the probability of transaction cancellation becomes very low.

To reduce the impact of such situations on the network, there are restrictions on the disposal of newly received bitcoins. According to the service blockchain.info, until May 2015, the maximum length of rejected chains was 5 blocks. The required number of confirmations to unblock a received message depends on the client program or on the instructions of the receiving party. The Bitcoin-qt client does not require confirmations to send, but most recipients have a default requirement of 6 confirmations, which means that you can usually actually use what you receive in an hour. Various online services often set their own confirmation threshold.

The protocol allows you to use bitcoins received for creating a block after 100 confirmations, but the standard client program shows the commission after 120 confirmations, that is, you can usually use the commission approximately 20 hours after it is accrued.

"Double Spending"

If you control more than 50% of the total computing power of the network, then there is a theoretical possibility, at any confirmation threshold, to transfer the same bitcoins twice to different recipients - one of the transactions will be public and confirmed in the general manner, and the second will not be advertised, its confirmations will occur blocks of a hidden parallel branch. Only after some time the network will receive information about the second transaction, it will become confirmed, and the first will lose confirmation and will be ignored. This will not result in a doubling of the bitcoins, but a change in their current owner, with the first recipient losing the bitcoins without any compensation.

The openness of the block chain allows you to make changes to any block. But then it will be necessary to recalculate the hash of not only the changed block, but also all subsequent ones. In fact, such an operation would require at least as much power as was used to create the modified and subsequent blocks (that is, all the current power), making this possibility extremely unlikely.

As of December 1, 2013, the total network capacity exceeded 6000 THash/s. Since the beginning of 2014, an association of miners (pool) Ghash.io For a long time, it controls over 40% of the total power of the Bitcoin network, and at the beginning of June 2014, more than 50% of the network power was briefly concentrated in it.

Double spending of bitcoins has never been recorded in practice. As of May 2015, parallel chains have never exceeded 5 blocks.

Complexity

The requirement for block hashes is determined by a special parameter called “difficulty”. Since the computing power of the network is not constant, this parameter is recalculated by network clients every 2016 blocks in such a way as to maintain the average speed of blockchain formation at the level of 2016 blocks per two weeks. Thus, 1 block should be created approximately once every ten minutes. In practice, when the computing power of the network increases, the corresponding time intervals are shorter, and when it decreases, they are longer. Time-based difficulty recalculation is possible due to the presence of the time of their creation in the block headers. It is written in Unix format according to the system clock of the block author (if the block is created in a pool, then according to the system clock of the server of this pool).

Applications outside of cryptocurrency

Currently, representatives of various fields are showing interest in blockchain technology. At the same time, the degree of interest of companies in different sectors of the economy varies significantly. The financial sector is actively preparing for the widespread implementation of blockchain, while manufacturing enterprises are ignoring this technology.

Banking sector, investments and exchanges

In the Russian banking sector, companies such as VTB and Sberbank are showing interest in the technology.

Payment systems VISA, Mastercard, Unionpay and SWIFT announced developments and plans to use blockchain technology.

Land Registry

In the first half of 2018, an experiment will be conducted to use blockchain technology to monitor the reliability of information from the Unified State Real Estate Register (USRN) in Moscow.

Identification

In 2014, the Bitnation company was founded, providing traditional government services such as identification cards, notaries and a number of others.

Finland identifies refugees using blockchain technology.

Estonia has a blockchain-based e-citizenship system.

Means of payment

Criticism

The international interbank system for the transfer of information and financial transactions SWIFT announced the danger of unrealistic expectations regarding the hype around blockchain technologies and distributed registries in the banking environment.

The Chinese Academy of Information and Communications Technology (CAICT) recently completed a study on blockchain projects and found that about 92% of them fail, with an average completion time of 1.22 years.

Russia

In July 2017, work was planned in the Novgorod region to launch a pilot project to introduce blockchain technology into the work of Rosreestr. Vnesheconombank and the Agency for Housing Mortgage Lending were to participate in the project.

On October 19, 2017, it became known that the Moscow government is ready to provide Rosreestr with a computing server to implement blockchain technology when registering real estate.

see also

Notes

1. Merriam-Webster Dictionary, Oxford Dictionary.
2. , With. 2-3.
3. , With. 15.
4. Marco Iansiti and Karim R. Lakhani. The Truth About Blockchain (English) // Harvard Business Review: magazine. - 2017. - No. January-February 2017 issue. - P. 118-127.
5. , With. 3.
6. Genesis Block, Block 0
7. , With. 4.
8. Finding 2016 Blocks(English) . Retrieved December 21, 2015.
9. Bitcoin Block Explorer - a site that allows you to browse the block chain(English) . Retrieved December 21, 2015. Archived July 15, 2012.
10. , With. 5.
11. , With. 2.
12. The Mission to Decentralize the Internet, The New Yorker (December 12, 2013). Retrieved December 30, 2014. “The network’s “nodes”-users running the bitcoin software on their computers-collectively check the integrity of other nodes to ensure that no one spends the same coins twice. All transactions are published on a shared public ledger, called the “block chain”.
13. (undefined) . Accessed February 22, 2013. March 13, 2013.
14. Bitcoin is under attack(English) . Retrieved December 21, 2015.
15. Number of thrown blocks(English) . Retrieved December 21, 2015.
16. Bitcoin Developer Examples(English) . Retrieved December 21, 2015.
17. (English) . Archived from the original on May 21, 2013.
18. , With. 6-8.
19. Bitcoin Charts(English) . Retrieved December 21, 2015.
20. Bitcoin security guarantee shattered by anonymous miner with 51% network power(English) . Retrieved December 21, 2015.
21. Graphs of changes in the complexity of the Bitcoin network(English) . Retrieved December 21, 2015.
22. Bitcoin hash(English) . Retrieved December 21, 2015.
23. “Our answer to blockchain”: Russian banks intend to launch their own analogue of a distributed registry (Russian), CoinMarket.News(August 4, 2017). Retrieved November 3, 2017.
24. (Russian) , CoinMarket.News(October 18, 2017). Retrieved November 3, 2017.
25. Visa plans to patent its own digital asset system (Russian) CoinMarket.News(August 21, 2017). Retrieved November 3, 2017.
26. Visa will use blockchain for international payments (Russian)
27. Mastercard is developing its own blockchain transaction system (Russian), CoinMarket.News(September 22, 2017). Retrieved November 3, 2017.
28. Mastercard launches payment network on blockchain (Russian). High tech. Retrieved November 3, 2017.
29. Chinese giant UnionPay is working on a blockchain for ATMs (Russian) CoinMarket.News(August 28, 2017). Retrieved November 3, 2017.
30. The Swift interbank system has completed testing of blockchain-based smart contracts (Russian), CoinMarket.News(July 3, 2017). Retrieved November 3, 2017.
31. “Unanimously”: SWIFT reports successful testing of Proof-of-Concept protocols (Russian), CoinMarket.News(October 16, 2017). Retrieved November 3, 2017.
32. Nienhaus, Lisa. Kryptowährung: Der Blockchain-Code (de-DE), Die Zeit(February 28, 2018). Retrieved February 28, 2018.
33. (undefined) (July 28, 2017).
34. Sweden tests blockchain technology for land registry, Reuters(June 16, 2016). Retrieved November 3, 2017.
35. The State Land Cadastre of Ukraine switched to Blockchain technology - ITC.ua (Russian) , ITC.ua(October 3, 2017). Retrieved December 13, 2017.
36. Now it’s official: the Dubai land registry has begun its “move” to the blockchain (Russian) , CoinMarket.News(October 9, 2017). Retrieved November 3, 2017.
37. Browne, Ryan. An Indian state wants to use blockchain to fight land ownership fraud, CNBC(October 10, 2017). Retrieved April 6, 2018.

A transaction is considered complete and reliable (“confirmed”) when its format and signatures are verified, and when the transaction itself is grouped with several others and recorded in a special structure - block. The contents of blocks can be checked because each block contains information about the previous block. All blocks are built into one chain, which contains information about all operations ever performed in the database. The very first block in the chain is primary block(English genesis block) - is considered as a separate case, since it does not have a parent block.

A block consists of a header and a list of transactions. The block header includes its hash, the hash of the previous block, transaction hashes and additional service information. In the Bitcoin system, the first transaction in a block always indicates the receipt of a commission, which will be the reward to the miner for the created block. Next comes a list of transactions formed from a queue of transactions that have not yet been recorded in previous blocks. The criterion for selecting from the queue is set by the miner independently. It doesn't have to be a timeline. For example, only transactions with a high commission or involving a given list of addresses may be included. Transactions in a block use tree hashing, similar to generating a hash for a file in the BitTorrent protocol. Transactions, in addition to charging a commission for creating a block, contain within the parameter input a link to a transaction with a previous state of data (in the Bitcoin system, for example, a link is given to the transaction for which the spent bitcoins were received). Operations to transfer a commission to a miner for creating a block do not have “input” transactions, so any information can be specified in this parameter (for them this field is called Coinbase parameter).

The created block will be accepted by other users if the numerical value of the header hash is equal to or less than a certain target number, the value of which is periodically adjusted. Since the hash result of the SHA-256 function is considered irreversible, there is currently no algorithm for obtaining the desired result other than random search. If the hash does not satisfy the condition, then the nonce parameter in the header is changed and the hash is recalculated. Usually a large number of recalculations are required. When a candidate is found, the node broadcasts the resulting block to other connected nodes, which validate the block. If there are no errors, then the block is considered added to the chain and the next block must include its hash.

The value of the target number with which the hash is compared is adjusted every 2016 blocks in the Bitcoin system. It is planned that the entire Bitcoin system network should spend approximately 10 minutes generating one block, and about two weeks for 2016 blocks. If 2016 blocks are formed faster, then the goal decreases slightly and becomes more difficult to achieve, otherwise the goal increases. Changing the computational complexity does not affect the reliability of the Bitcoin network and is only required for the system to generate blocks at an almost constant rate, independent of the computing power of network participants.

Block chain

Blocks are formed simultaneously by many “miners”. Blocks that meet the criteria are sent to the network, included in all replications of the distributed block base. Situations regularly arise when several new blocks in different parts of a distributed network call the same block the previous one, that is, the chain of blocks can branch. You can intentionally or accidentally limit the relaying of information about new blocks (for example, one of the chains can develop within a local network). In this case, parallel expansion of various branches is possible. In each of the new blocks, there can be both identical transactions and different ones included in only one of them. When block relaying resumes, miners begin to consider the master chain, taking into account the hash difficulty level and chain length. If the complexity and length are equal, preference is given to the chain whose final block appeared earlier. Transactions that were included only in the rejected branch (including reward payments) lose their confirmed status. If this is a Bitcoin transfer transaction, it will be queued and then included in the next block. Transactions for receiving rewards for creating cut blocks are not duplicated in another branch, that is, the “extra” bitcoins paid for creating cut blocks do not receive further confirmations and are “lost”.

The blockchain is formed as a continuously growing chain of blocks with records of all transactions. Copies of the database or part of it are simultaneously stored on many computers and synchronized according to the formal rules of building a block chain. The information in the blocks is not encrypted and is available in clear text, but the absence of changes is verified cryptographically through hash chains (an element of the digital signature).

The database publicly stores, in unencrypted form, information about all transactions signed using asymmetric encryption. To prevent repeated spending of the same amount, timestamps are used, implemented by dividing the database into a chain of special blocks, each of which, among other things, contains the hash of the previous block and its own serial number. Each new block confirms transactions, information about which also contains additional confirmation of transactions in all previous blocks of the chain. It is not practical to change information in a block that is already in the chain, since in this case you would have to edit information in all subsequent blocks. Thanks to this, a successful double-spending attack (repeated spending of previously spent funds) is extremely unlikely in practice.

Most often, a deliberate change in information in any of the copies of the database or even in a sufficiently large number of copies will not be recognized as true, since it will not comply with the rules. Some changes can be accepted if they are made to all copies of the database (for example, deleting the last few blocks due to an error in their formation).

To more clearly explain the mechanism of operation of the payment system, Satoshi Nakamoto introduced the concept “ digital coin", defining it as a chain of digital signatures. Unlike the standardized denominations of regular coins, each “digital coin” has its own denomination. Each Bitcoin address can be associated with any number of “digital coins.” With the help of transactions, they can be divided and combined, while maintaining the total amount of their denominations minus the commission.

Before version 0.8.0, the main client used Berkeley DB to store the block chain; starting with version 0.8.0, developers switched to LevelDB.

Transaction confirmation

As long as the transaction is not included in the block, the system believes that the number of bitcoins at a certain address remains unchanged. At this time, it is technically possible to execute several different transactions for transferring the same bitcoins from one address to different recipients. But as soon as one of these transactions is included in the block, the system will ignore other transactions with the same bitcoins. For example, if a later transaction is included in a block, the earlier one will be considered erroneous. There is a small chance that when branching, two similar transactions will end up in blocks of different branches. Each of them will be considered correct; only when the branch dies, one of the transactions will be considered erroneous. In this case, the time of the operation will not matter.

Thus, the entry of a transaction into a block confirms its authenticity, regardless of the presence of other transactions with the same bitcoins. Each new block is considered an additional “confirmation” of transactions from previous blocks. If there are 3 blocks in the chain, then transactions from the last block will be confirmed 1 time, and those placed in the first block will have 3 confirmations. It is enough to wait for several confirmations so that the probability of transaction cancellation becomes very low.

To reduce the impact of such situations on the network, there are restrictions on the disposal of newly received bitcoins. According to the service blockchain.info, until May 2015, the maximum length of rejected chains was 5 blocks. The required number of confirmations to unblock a received message depends on the client program or on the instructions of the receiving party. The Bitcoin-qt client does not require confirmations to send, but most recipients have a default requirement of 6 confirmations, which means that you can usually actually use what you receive in an hour. Various online services often set their own confirmation threshold.

The protocol allows you to use bitcoins received for creating a block after 100 confirmations, but the standard client program shows the commission after 120 confirmations, that is, you can usually use the commission approximately 20 hours after it is accrued.

"Double Spending"

If you control more than 50% of the total computing power of the network, then there is a theoretical possibility, at any confirmation threshold, to transfer the same bitcoins twice to different recipients - one of the transactions will be public and confirmed in the general manner, and the second will not be advertised, its confirmations will occur blocks of a hidden parallel branch. Only after some time the network will receive information about the second transaction, it will become confirmed, and the first will lose confirmation and will be ignored. This will not result in a doubling of the bitcoins, but a change in their current owner, with the first recipient losing the bitcoins without any compensation.

The openness of the block chain allows you to make changes to any block. But then it will be necessary to recalculate the hash of not only the changed block, but also all subsequent ones. In fact, such an operation would require at least as much power as was used to create the modified and subsequent blocks (that is, all the current power), making this possibility extremely unlikely.

As of December 1, 2013, the total network capacity exceeded 6000 THash/s. Since the beginning of 2014, an association of miners (pool) Ghash.io For a long time, it controls over 40% of the total power of the Bitcoin network, and at the beginning of June 2014, more than 50% of the network power was briefly concentrated in it.

Double spending of bitcoins has never been recorded in practice. As of May 2015, parallel chains have never exceeded 5 blocks.

Complexity

The requirement for block hashes is determined by a special parameter called “difficulty”. Since the computing power of the network is not constant, this parameter is recalculated by network clients every 2016 blocks in such a way as to maintain the average speed of blockchain formation at the level of 2016 blocks per two weeks. Thus, 1 block should be created approximately once every ten minutes. In practice, when the computing power of the network increases, the corresponding time intervals are shorter, and when it decreases, they are longer. Time-based difficulty recalculation is possible due to the presence of the time of their creation in the block headers. It is written in Unix format according to the system clock of the block author (if the block is created in a pool, then according to the system clock of the server of this pool).

Applications outside of cryptocurrency

Currently, representatives of various fields are showing interest in blockchain technology. At the same time, the degree of interest of companies in different sectors of the economy varies significantly. The financial sector is actively preparing for the widespread implementation of blockchain, while manufacturing enterprises are ignoring this technology.

Banking sector, investments and exchanges

In the Russian banking sector, companies such as VTB and Sberbank are showing interest in the technology.

Payment systems VISA, Mastercard, Unionpay and SWIFT announced developments and plans to use blockchain technology.

Land Registry

In the first half of 2018, an experiment will be conducted to use blockchain technology to monitor the reliability of information from the Unified State Real Estate Register (USRN) in Moscow.

Identification

In 2014, the Bitnation company was founded, providing traditional government services such as identification cards, notaries and a number of others.

Finland identifies refugees using blockchain technology.

Estonia has a blockchain-based e-citizenship system.

Means of payment

Criticism

The international interbank system for the transfer of information and financial transactions SWIFT announced the danger of unrealistic expectations regarding the hype around blockchain technologies and distributed registries in the banking environment.

The Chinese Academy of Information and Communications Technology (CAICT) recently completed a study on blockchain projects and found that about 92% of them fail, with an average completion time of 1.22 years.

Russia

In July 2017, work was planned in the Novgorod region to launch a pilot project to introduce blockchain technology into the work of Rosreestr. Vnesheconombank and the Agency for Housing Mortgage Lending were to participate in the project.

On October 19, 2017, it became known that the Moscow government is ready to provide Rosreestr with a computing server to implement blockchain technology when registering real estate.

see also

Notes

1. Merriam-Webster Dictionary, Oxford Dictionary.
2. , With. 2-3.
3. , With. 15.
4. Marco Iansiti and Karim R. Lakhani. The Truth About Blockchain (English) // Harvard Business Review: magazine. - 2017. - No. January-February 2017 issue. - P. 118-127.
5. , With. 3.
6. Genesis Block, Block 0
7. , With. 4.
8. Finding 2016 Blocks(English) . Retrieved December 21, 2015.
9. Bitcoin Block Explorer - a site that allows you to browse the block chain(English) . Retrieved December 21, 2015. Archived July 15, 2012.
10. , With. 5.
11. , With. 2.
12. The Mission to Decentralize the Internet, The New Yorker (December 12, 2013). Retrieved December 30, 2014. “The network’s “nodes”-users running the bitcoin software on their computers-collectively check the integrity of other nodes to ensure that no one spends the same coins twice. All transactions are published on a shared public ledger, called the “block chain”.
13. (undefined) . Accessed February 22, 2013. March 13, 2013.
14. Bitcoin is under attack(English) . Retrieved December 21, 2015.
15. Number of thrown blocks(English) . Retrieved December 21, 2015.
16. Bitcoin Developer Examples(English) . Retrieved December 21, 2015.
17. (English) . Archived from the original on May 21, 2013.
18. , With. 6-8.
19. Bitcoin Charts(English) . Retrieved December 21, 2015.
20. Bitcoin security guarantee shattered by anonymous miner with 51% network power(English) . Retrieved December 21, 2015.
21. Graphs of changes in the complexity of the Bitcoin network(English) . Retrieved December 21, 2015.
22. Bitcoin hash(English) . Retrieved December 21, 2015.
23. “Our answer to blockchain”: Russian banks intend to launch their own analogue of a distributed registry (Russian), CoinMarket.News(August 4, 2017). Retrieved November 3, 2017.
24. (Russian) , CoinMarket.News(October 18, 2017). Retrieved November 3, 2017.
25. Visa plans to patent its own digital asset system (Russian) CoinMarket.News(August 21, 2017). Retrieved November 3, 2017.
26. Visa will use blockchain for international payments (Russian)
27. Mastercard is developing its own blockchain transaction system (Russian), CoinMarket.News(September 22, 2017). Retrieved November 3, 2017.
28. Mastercard launches payment network on blockchain (Russian). High tech. Retrieved November 3, 2017.
29. Chinese giant UnionPay is working on a blockchain for ATMs (Russian) CoinMarket.News(August 28, 2017). Retrieved November 3, 2017.
30. The Swift interbank system has completed testing of blockchain-based smart contracts (Russian), CoinMarket.News(July 3, 2017). Retrieved November 3, 2017.
31. “Unanimously”: SWIFT reports successful testing of Proof-of-Concept protocols (Russian), CoinMarket.News(October 16, 2017). Retrieved November 3, 2017.
32. Nienhaus, Lisa. Kryptowährung: Der Blockchain-Code (de-DE), Die Zeit(February 28, 2018). Retrieved February 28, 2018.
33. (undefined) (July 28, 2017).
34. Sweden tests blockchain technology for land registry, Reuters(June 16, 2016). Retrieved November 3, 2017.
35. The State Land Cadastre of Ukraine switched to Blockchain technology - ITC.ua (Russian) , ITC.ua(October 3, 2017). Retrieved December 13, 2017.
36. Now it’s official: the Dubai land registry has begun its “move” to the blockchain (Russian) , CoinMarket.News(October 9, 2017). Retrieved November 3, 2017.