• Distributed consensus in open environments • Consensus in a Bitcoin network • CREATION OF COINS • Proof of Work (PoW) • PAYMENTS AND DOUBLE • basic introduction SPENDING • Hashcash PoW • Bitcoin PoW • BITCOIN SCRIPTS AND BITCOIN • Attacks on PoW P2P NETWORK • the monopoly problem • TRANSACTION IN BITCOIN • Proof of Stake NETWORK • Proof of Burn and Proof of Elapsed Time
• The life of a Bitcoin Miner
• Mining Difficulty, • Mining Pool. Bitcoin and Blockchain Bitcoin is a decentralized digital currency that enables instant payments to anyone, anywhere in the world. The primary objective was to design Bitcoin to have a cross- country payment system such that no government organization will have control over it. It uses a permission-less model. •A normal user role is to transfer or receive bitocoins from others within Normal the bitcoin network and validate the transactions received from other User peers and forward the valid transactions to other peers except where it received. • However, if the received transaction is for him/her, then he/she updates their wallet with the transaction amount.
•A Miner plays an important role in the bitcoin network. He listens to
all the transactions for approximately 10 minutes, validates all the transactions, combines them, and places them into a block. • Later he appends the newly generated block to the bitcoin blockchain and forwards it to the peers within the bitcoin network. Once others Miner accept the newly appended block, the system generates a reward, and this reward is the only mechanism through which money is generated in the bitcoin network. Consensus algorithm The objective of the consensus algorithm is to agree unanimously on the validity of transitions of the newly added block in the existing blockchain. video
https://www.google.com/search?q=types+of+consensus+algorithm s&source=lmns&tbm=vid&bih=757&biw=1423&hl=en&sa=X&ved=2a hUKEwimwqrJl_OAAxXlz6ACHRa8BZQQ0pQJKAJ6BAgBEAY#fpstate=i ve&vld=cid:5869abca,vid:sXP-8pD7PG4 Blockchain Double Spending Double spending means spending the same money twice. As we know, any transaction can be processed only in two ways. One is offline, and another is online. Offline: A transaction which involves physical currency or cash is known as an offline transaction. Online: A transaction which involves digital cash is known as an online transaction.
Bitcoin handles the double- spending problem by implementing a confirmation mechanism and maintaining a universal ledger. The Monopoly Problem Proof of Work depends on the computing resources available to a miner. If a miner can possess a huge amount of computational resources, then there is a possibility that the miner can control the entire network or gain control over the network. It may happen that a minor can gradually generate a lot of blocks in the current blockchain. If a huge number of blocks in the blockchain go from a particular miner, then that particular miner can control the entire flow of transactions in the blockchain. This particular problem is called the monopoly problem in the bitcoin network. Such a monopoly can increase over time from an economic perspective. Attacks On The Proof Of Work (PoW):
1.Sybil Attack The attacker tries to fill the network with the clients under his control and the attacker can succeed in his intention. Here ,the attacker can actually control or get the monopoly over the network. Consequently, he can compromise the distributed consensus, which is based on the Proof of Work mechanism. A more powerful attacker can include multiple nodes in the different networks that can collectively compromise the entire ecosystem. 2.Denial of Service (DoS) Attack The attacker sends a lot of data to a particular node. As a consequence, the node will not be able to process the normal bitcoin transactions. This is a typical denial of service attack in the bitcoin network.
To solve denial of service attack, the bitcoin architecture proposed a set of rules, and a few of those are as follows: No forwarding of orphaned blocks No forwarding of double-spend transactions No forwarding of same block or transactions Disconnect a peer that sends too many messages Restrict the block size. Limit the size of each script. IMPACT OF DoS: 3.Breaking Bitcoin Proof of Work (PoW)
Bitcoin PoW is computationally difficult to break but not impossible.
The attackers can deploy high-power servers to do more work than the total work of the blockchain. EXAMPLE: A known case of successful double-spending was discovered in Nov 2013. The GHash.io mining pool (a mining pool means a set of miners coming together collectively and are trying to mine a new block) appeared to be engaging in repeated payment fraud against BetCoin Dice, a gambling site. Types of Proof-of-Stake
Delegated Proof of Stake is a Nominated Proof-of-Stake is a variation of the
blockchain consensus mechanism original Proof of Stake mechanism first where network users vote and elect created for the Polkadot network. delegates to validate the next block. NPoS works similarly to its parent mechanism,however it also allows token DPoS uses a collateral staking holders to nominate validators to represent system. them in the block validation process. It also uses a specific democratic Only nominated validators can participate in process that aims to make the block formation, and each individual nominator can nominate up to a certain transaction process more fair. number of validators, a total of 16 for the DPoS networks use a weighting Polkadot network. mechanism to decide power NPoS networks automatically distribute the stake amongst participating validators evenly. Drawbacks of Proof-of-Stake (PoS) More Centralized than Proof-of-Work As a system that favours validators with the largest stake, Proof-of-Stake networks will tend toward centralization. With no upper limit on how much one validator can stake, this can lead to significant power being concentrated in the hands of a few very large validators. This makes for a network that is less resistant to potential 51% attacks by validator nodes.
Not Battle Tested
At the time of writing, although Proof-of-Stake has been successfully used by multiple blockchains, it has never been battle tested to the same scale as Proof-of-Work. Bitcoin and other PoW networks have secured more than $1Trillion – a figure far greater than that stored by current Proof-of-Stake blockchains. With a greater tendency toward centralization, Proof-of-Stake’s capacity to maintain security at this scale is a question worth paying attention to for users and developers alike, and will only be known over time. Blockchains Using Proof-of-Stake (PoS)
Ehthereum (ETH) Proof of Stake networks open up the Polkadot(D Tezos door for users wanting OT) (XTZ) to accrue awards.
There’s no crypto staking without Proof- Pos of-Stake. Algorand(A Tron LGO) (TRX)
Cosmos (ATOM) •OBJECTIVE: Validating transaction information and maintaining the integrity of the blockchain
• Incentive: Bitcoin reward
•Bitcoin mining is necessary to maintain
the ledger of transactions upon which Bitcoin is based.
•Miners have become very sophisticated
over the past several years, using complex machinery to speed up mining operations.
•Bitcoin mining has generated
controversy because it is not considered environmentally friendly. Every blockchain has a mining process by which miners can generate Mining difficulty fresh coins. An algorithm regulates how difficult it is for the miners to mine a certain block. This difficulty is known as mining difficulty.
Benefits of Mining difficulty
• As the mining difficulty increases, it becomes more difficult for a hacker to
conduct a malicious attack on the network. Security of the • Due to the increasing difficulty, miners use special ASIC mining computers that make trillions of guesses each second to find the correct hash for a block. network • A mining pool has scores of such systems on its floor to conduct the process. • It is very difficult for hackers to get enough computing power for majority control and launch an attack.
• A miner’s computing power differs from person to person and pool to pool. • Thus to maintain parity in the mining process, the blockchain network raises or A steady lowers its mining difficulty. • This ensures that the network is generating blocks at a steady rate. mining rate Cryptocurrency mining pools are groups of miners who share their computational resources.
Mining pools utilize these combined
resources to strengthen the probability of finding a block or otherwise successfully mining for cryptocurrency.
If the mining pool is successful and
receives a reward, that reward is divided among participants in the pool. Individually, participants in a mining pool contribute their processing power toward the effort of finding a block. If the pool is successful in these efforts, they receive a reward, typically in the form of the associated cryptocurrency.
Rewards are usually divided between the individuals who contributed, according to the proportion of each individual's processing power or work relative to the whole group. In some cases, individual miners must show proof of work in order to receive their rewards.
Rewards are usually split among the miners based on the agreed terms and on their respective contributions to the mining activity.
Anyone who wants to make a profit through cryptocurrency mining has the choice to either go solo with their own dedicated devices or to join a mining pool where multiple miners and their devices combine to enhance their hashing output.
