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Miners – Cryptocurrency

Miners - Cryptocurrency

Miners &, Cryptocurrency

Te our previous article wij discussed the general principles of how blockchain works. You came to understand that without decentralization and immutability, you can’t have an effective blockchain, or at least not a public one.

Te this article wij are going to expand on why miners and cryptocurrency are an essential byproduct of blockchain technology. After reading this article, you should have a better understanding of what the miners do, why they are necessary and, perhaps of greatest rente to you, why the virtual cryptocurrency created ter the mining process has instant real-world monetary value.

Wij will assume ter this article that you already have a basic understanding of the hashing and Merkle tree concepts that are necessary to achieve immutability ter blockchains. If you do not, wij recommend that you go back and read our article on that subject matter now.

Hacking the Hash

  1. Find out which block ter the chain contains my most latest account balance and switch that value. Let’s say that block is 25 blocks behind the most latest block on the chain.
  2. Next I would need to recalculate the hash values of all 25 successive blocks te the chain until I reach the final block, the hash value of which will match with the fraudulent switch I made.
  3. Ultimately, I need to repeat this process on at least 51% of all knots participating ter the Bitcoin blockchain so that when next queried, they all reach a overeenstemming that I have millions of dollars worth of Bitcoin ter my account.

Given that te reality the block you need to switch could be millions of blocks back te the chain and that the knots you need to hack would number ter the thousands or ems of thousands, the odds of being able to successfully treat that much hashing te a lifetime are practically non-existent. It would take a supercomputer of immense power to even stand a chance. Now consider that this would have to be done inwards a window of a few seconds to a few minutes before a fresh block is added to the chain (disrupting your calculations) and you will understand why it is practically unlikely to hack a blockchain ter this manner.

Even so, the code contributors and founders of popular blockchains like Bitcoin and Ethereum weren’t pleased with even those odds and therefore they have mandated that before a fresh block can be added to a chain, it’s final hashed value vereiste be even more difficult to calculate than the hashed value of a block’s gegevens plus it’s predecessor’s hash. They manage this by setting a difficulty target that basically requests that the hashed value of a block plus a value called a nonce vereiste result te a string of characters beginning with a predetermined number of zeros.

For example, a SHA-1 hash of “Polyrific” looks like this:

If you wished to guess the word that wasgoed hashed into the value above, you would have to run a brute-force algorithm to hash different combinations of letters through the SHA-1 protocol until you had the same hash spil above. Te relative terms, this wouldn’t take too long.

The difficulty rule, however, dictates that the hashed value of “Polyrific” plus a nonce value voorwaarde equal a hash that is led by a certain number of zeros like this:

The more leading zeros, the more difficult it is to create a nonce value that, when hashed with the original block value, will produce the keurig response. Moreover, there is no known mathematical way to arrive to the keurig nonce value–you have to attempt millions and millions of different combinations until it produces the juist outcome. This is the process of mining, and it makes alteration of any block ter the chain without switching the value of the chain’s most latest block computationally unlikely.

Numerous transactions from numerous, unrelated participants go into a single block. It’s not feasible to request that people simply attempting to send money to someone else do so by coordinating with other people making transactions at the same time and together running calculations to guess a nonce value. That’s where the miners come te.

Miners

Miners do the hard work of finding the keurig nonce of each block to the benefit of everyone with pending transactions which voorwaarde be bundled ter a block and added to the chain before they are finish. Without the work that the miners do, blockchains would be less secure because it would become computationally possible (however not effortless) for a hacker to alter the interlaced hash values of a chain. Because there are so many miners out there, fresh blocks can be added to the chain within a few seconds, however Bitcoin manipulates the difficulty of the work so that blocks are added toughly every ten minutes.

A miner can be anyone from an individual running open-source mining software on their huis PC, to large warehouses of specialized mining equipment where hundreds or thousands of machines toil away at producing blocks to be used ter the chain.

For every nonce guessed by a miner, a block is produced that can be added to the chain. It’s label is that hash value wij have discussed that contains DNA from the block that came before it spil well spil the hashed value of its own contents plus the nonce value, all producing a hash value with the onberispelijk number of leading zeros that will te turn be hashed-in with the next block on the chain.

The amount of Bitcoin that will everzwijn be minted is limited to 21,000,000 and, overheen time, the difficulty ter finding a juist nonce value will increase thereby making blocks tighter to create and Bitcoin more scarce. This is the origin of the mining analogy–as time progresses, precious metals and stones are increasingly difficult to find.

The blockchain prizes cryptographic tokens, or cryptocurrency, to the miners for each block that is added to the chain ter this manner.

Cryptocurrency

Understanding the concept of cryptocurrency, how it is valued, the need for it’s existence, and how it is created te the very first place can for some of us be the most confounding subject on your way to understanding blockchain. Let’s demystify the subject then by kicking off with a elementary set of premises I am sure you can accept:

  1. Work has to be done to build each block (see Mining section above).
  2. Transactions need to be packed te a block te order to be added to a chain.
  3. Miners are paid by the blockchain itself do the work necessary to build thesis blocks so that transactions can be added to the chain. Payment is te the form of cryptocurrency.

Huh? How can the blockchain itself pay the miners? You can’t just invent a phony currency, arm it to people, and expect it to have value, right? Actually, yes you can. Here’s how:

If I dreamed to send you $Ten,000 US dollars and I didn’t want to do so by going through a canap or any other conventional services, I might elect to do convert my US dollars to Bitcoin (BTC) and then transfer them overheen to you through the blockchain where you would then use an exchange such spil Coinbase to convert the Bitcoin back to US dollars.

Making this transaction requires that I very first use an exchange such spil Coinbase to make a real-life transaction where I buy $Ten,000 worth of Bitcoin (which converts to toughly Trio.62 at the time of this writing). So who am I buying the Bitcoin from? They come from the miners that were awarded freshly minted Bitcoin for adding a block to the chain.

So I purchase $Ten,000 on an exchange like Coinbase and now a miner has $Ten,000 real US dollars and I now have Trio.62 Bitcoin. Ter reality, it doesn’t need to be a miner that I am directly buying from spil Bitcoin has switched forearms so often now that the Bitcoin you buy may not be freshly minted, but that is beside the point. Ter our example, the miner just went and made a down payment on a house with those cold-hard US dollars.

I transfer the Three.62 Bitcoin to you via the blockchain and you now convert it back to US dollars, also through an exchange like Coinbase. Who bought them back from you? Possibly the next person ter the line that needed Bitcoin to make a transfer on the blockchain, or perhaps it wasgoed an investor speculating that the value of Bitcoin would rise overheen time (it has, dramatically).

You see, blockchains harbor their own micro economies with the value of their currency rising and falling overheen time just like it does with the fiat currencies wij use everyday. You may think that you would only send money overheen the Bitcoin blockchain for nefarious reasons. While it is true that many participants do indeed have nefarious motives, there are many cases te which use of the Bitcoin or Ethereum blockchains makes flawless sense. It is, after all, much swifter and much less expensive than using traditional 3rd party wire transfer services and their is an inherent higher degree of trust spil well since it is cryptographically infeasible (if not unlikely) to fake a transaction–if you say you sent mij Trio.62 ($Ten,000), I just need to go take a look at the Bitcoin ledger–any of them–to confirm.

Wij hope that this article has helped you better understand how mining and cryptocurrency works. You very likely still have questions and wij are here to help. Please voeling us so that wij can help you integrate blockchain technology into your enterprise.

Related Articles

How Blockchain Works

This article is the 2nd ter our series about blockchain technology. If you toevluchthaven’t already done so, wij recommend you read Introduction to Blockchain very first.

The essential ingredients of a blockchain are decentralization and immutability. Ter this article, wij will explain both and why you can’t have a blockchain without them.

Let’s say you did that ten times so that you have ten identical chains of glued-together wooden blocks, each spelling the word “blockchain”. Now you distribute those ten chains to ten different people ter ten different locations.

Zometeen, you call each of those ten people and ask them to read back to you the word spelled out by their wooden blocks. Nine out of ten of the people read back to you the word “blockchain” thereby forming a overeenstemming of the juist value of the chain. But the tenth person to whom you talent a chain of wooden blocks has taken out a spotted and hacked into his so that it now says “block party” instead of “blockchain”.

It is evident that this chain has bot hacked into and had it’s values switched because his response does not match with that of the surplus of the group. Therefore, you can no longer trust this person and won’t be calling him again to read back the value of the wooden blocks. Instead, you add someone fresh to your group of ten who will hopefully give you the onberispelijk reaction each time you call.

Believe it or not, this is the essence of how blockchain technology works: each “block” te a chain contains gegevens that proves it’s connection to the one that came before it. If any block te the chain is altered, the collective message it comprises will be different from all the others when it should be an identical copy.

Let’s pauze this down into more technical terms.

Decentralization

Unlike the centralized gegevens sources like SQL or Oracle, finish and identical versions of a given blockchain are distributed among knots ter a network. Those knots are the ten people to whom you talent the wooden blocks. Te public blockchains such spil Bitcoin and Ethereum, this can be anyone, anywhere. Presumably, people who are running knots have some connected rente te the blockchain such spil using it to transfer money. At the time of this writing, the Bitcoin blockchain has 8,417 knots and the Ethereum blockchain has 23,669 knots. Each one of thesis knots has an entire, current copy of the blockchain.

This is of course is a generalization, but at the time of this writing, the entire Bitcoin blockchain of almost 243 million transactions constitutes only about 125GB of storage space. This would lightly gezond on most private computers.

Even with the understanding that blockchains record a vast amount of information ter a relatively petite storage space, you may be wondering about how those instances of the block chain could be efficiently compared. The response to this question is uncovered by another interesting facet of blockchains called “immutability”.

Immutability

Things that can not be switched are immutable. If you take a picture of mij wearing a bimbo hat and share that all overheen the Internet where it becomes a sensationally successful meme, it is not immutable. I can switch my hat, but I can’t switch the fact that now hundreds of thousands of other people have a copy of the picture ter which I wasgoed wearing the foolish hat.

So how do wij make a block chain immutable and also make it swift and effortless to verify it’s immutable value across thousands of knots? You use a very cool cryptography trick called a Merkle Tree.

While it has some complicated parts, the general concept behind Merkle trees is ordinary.

You take a series of values, pauze them into pairs, and sum the pairs. Now you repeat the process until you arrive to a single value.

Spil you can see the hashed value of the 9-character word “Polyrific” becomes a 40 character value spil does the hashed value of the 1,269 character Gettysburg address. Interested te learning more about how this works? Attempt it yourself: our interactive article on public key encryption provides a hands-on practice for understanding basic encryption principles.

So now substitute the single letterteken on those wooden blocks with a hash value like the ones above. Here comes an significant concept:

The hashed value on the face of each block ter your chain is derived from the the hashed output of all gegevens ter the block plus the hashed value of the block that came before it.

Spil you can see, without having the immutability assured by the hashing algorithms and the decentralized overeenstemming spil to what that immutable value is, then you can’t have a blockchain spil wij presently know it. Of course, you can have private blockchains that generally forgo the decentralized facet and concentrate on immutability instead. Thesis are often called distributed ledgers and will be discussed our article entitled ",Private Blockchains and Distributed Ledgers",.

Blockchain technology is switching the way enterprises, and the customers who support them, operate. If you would like technical guidance or implementation of a public or private blockchain, or simply help participating te an existing blockchain, then please call us at 1-833-POLYRIFIC or send us a message to learn more.

Wise Contracts

This article is part five te our five-part series about blockchain technology:

If this then that. This is the elementary boolean premise on which is built the logical structures of our lives.

Nick Szabo

A decade before a person (or persons) writing under the pseudonym “Satoshi Nakamoto” published the seminal treatise “Bitcoin: A Peer-to-Peer Electronic Metselspecie System”, another thought-leader had begun to make noise about the potential for creating self-executing contracts.

That thought leader is Nick Szabo, an American laptop scientist and legal scholar who proposed a system of converting contracts to code that could be distributed to an encrypted blockchain and self-execute when all conditions of the contract were pleased: If you pay for your huis ter utter, then the title spil automatically assigned to you. If you do not pay for your huis ter utter, then your rente is compounded and you voorwaarde proceed to make your mortgage payment each month. If you zekering paying for your huis altogether, then legal proceedings to repossess the huis will start automatically.

This sounds pretty excellent, te theory, it would even permit for a collective of the blockchain’s participants to crowd-fund the purchase of your huis by putting ter place a clever contract that assures you will pay off the balance at a given rente rate overheen time with the proportional comebacks going to each of the blockchain’s participants that helped you make the purchase. When the balance is paid off, the title goes to you. Before that time, the title to your huis exists te the blockchain but belongs to no single entity. No banks involved.

However Mr. Szabo’s idea wasgoed a little ahead of it’s time and it would be almost twenty years before his vision could become a reality.

Ethereum

Ethereum is an open-source blockchain protocol very first proposed by Vitalik Buterin te 2013. Railing on a wave of blockchain enthusiasm created by Bitcoin, Ethereum is widely seen spil the next evolution of blockchain technology spil it not only permits for financial transactions, but for wise contracts spil well.

Under Ethereum’s protocol, brainy contracts can be written into the blockchain using specific programming languages to encode the contracts with boolean logic. Time boundaries can be set on the contracts so that if all conditions are not met by a given date, any pending financial transfers go back to the original parties. This is very similar to the escrow services with which wij are all familiar but recall, with blockchain technology there are no third parties. The blockchain hosts and evaluates the conditions of the contract autonomously to execute the prescribed outcomes.

Transaction fees for execution of clever contracts on the Ethereum come te the form of “gas” expenditure which is tied to the size (ter storage space) of the contract and not to enlargening profit for a third party. This is necessary to create a strong disincentive to spam the blockchain with large unwieldy contracts and it also has the effect of keeping real monetary value, originally from fiat currencies, flowing into the blockchain thereby enhancing the real-world value of Ethereum’s currency, the Ether.

Practicalities

While clever contracts sound superb te theory, their efficacy depends on the participation of all parties, including those who vereiste digitize value-backed items such spil deeds and titles. At the time of this writing, it is not clear how that will be done and the onus seems to be on the authorities that presently control thesis items–banks, governments–to lead the way. The problem is that the disintermediate nature of blockchain is at odds with banks who seek profit and governments who seek to regulate.

This is not to say that wise contracts are not feasible. It is simply significant to note that the use of them will require more than digitization of contracts and transfer of monetary value.

Enterprise Use Cases

Te our view, the most present and interesting use case for brainy contracts are those worried with eCommerce of digital assets.

Consider speelpop music: barring any contractual obligations to a record label, a chart-topping recording artist could release a fresh album spil a brainy contract. With each purchase of the album on a blockchain such spil Ethereum, the purchase price can automatically be distributed among the recording artist, the song writers, the producer, and so forward. Want to use a song from the album te your commercial? Wise contracts could treat royalties, lodge payment, and distribute the necessary licensing. The key here is that there is no central third party needed for any of this to toebijten. The record labels very likely are less thrilled about this than wij are!

Content creators te general will benefit from brainy contracts. It is no secret that authors are increasingly becoming disillusioned with large distribution channels such spil Amazon that, according to the authors, attempt to depress the price of their product via threats of limiting pre-release sales or even physical delivery. Polyrific has no official opinion on that debate, but regardless of who is right or wrong, content creators of all types can instead turn to a public blockchain spil a means of distributing their content and treating the financial distributions for each transaction.

Brainy contracts are not just for major purchases and sophisticated royalty distributions. Imagine you are a major electronics company such spil Samsung that is suggesting a $20 rebate on each fresh smartphone sold if the customer completes an online survey. Ter this situation, a clever contract can be created with each purchase and automatically credit the user their rebate once they have ended the online survey. No third parties would be necessary–no payment processors, no clearing houses to process written requests for rebates, nada.

Our aim te writing this article is not to tell you everything that you can do with brainy contracts–we don’t have that response ourselves–but instead to spark your own ideas of how you might use the technology.

Spil you go on that journey of innovation for your own enterprise, we’d be grateful if wij could join you. Please reach out via email to let us know how wij can help.

Private Blockchains and Distributed Ledgers

This article is part four te our five-part series about blockchain technology:

Private blockchains, sometimes called “distributed ledgers”, are a form of blockchain wherein all of the knots are managed by single entity. While some correctly argue that private blockchains miss the point of the principles behind blockchain technology, private blockchains do have their uses. Te this article wij will explore how private blockchains work and some of their common uses.

Private Blockchains Waterput You Te Charge

Let’s suppose for a ogenblik that your enterprise has a business need for recording transactions te an untamperable manner. Moreover, the contents of thesis transactions need to be kept private and therefore the use of a public blockchain is simply not an option. Te this case, you will need a private blockchain. Your options for creating a private blockchain are spil goes after:

  1. Create your own proprietary blockchain technology from scrape (something wij can do for you!).
  2. Branch the open-source code for an existing blockchain technology such spil Bitcoin or Ethereum and modify it to suit your needs (wij can help you do this too)
  3. Use Ethereum out-of-the-box to create your own private blockchain with rigorous adherence to Ethereum protocol. (Yep, wij can help here spil well).

Once you have created your private blockchain, you will be the gatekeeper ter charge of approving and adding knots spil participants te the chain. Thesis “nodes” may live on employee machines, perhaps te regional offices, te playmate or vendor offices, anywhere you like. You will also be te charge of setting the hashing difficulty and assigning hashing work to miners.

Basically running your own private blockchain puts you ter charge of how the chain operates.

Murder, Evidence, &, Private Blockchain

Imagine for a ogenblik that a powerful local businessman is indicted for murder. The victim died of a gunshot wound but no murder weapon wasgoed found. However, the detectives did find gunpowder residue on the businessman’s mitts and they placed a sample of that residue te the evidence locker at the local police station. Days straks, the murder weapon is found te a nearby pond. The detectives are certain of the businessman’s guilt and they simply need to test the residue from the recovered gun’s barrel to see if it matches the residue found on the businessman’s forearms the day of the murder. So they have the forensics team run the sample from the gun against the sample taken from the businessman’s palms and–they don’t match. How could that be?

It turns out that the businessman is a strong supporter of both the mayor and the police chief. The residue collected from the businessman’s forearms wasgoed substituted by someone at the police department before the murder weapon wasgoed found. The chemical analysis of the residue originally taken from the businessman’s arms does not match the analysis of the fraudulent sample with which it wasgoed substituted. The forensics team runs a 2nd chemical analysis, this time on the phony residue, and detect that the results do not match the analysis of the original test they ran against the sample–the real sample. Something is up.

Inject the private blockchain. Unbeknownst to the crooked individuals that interchanged the residue sample te the evidence locker, the forensics team had hashed the chemical analysis values from the original residue sample and encrypted them into the department’s private blockchain. When interchanged te the blockchain with the results of the original chemical analysis, the chemical analysis of the phony residue fully switches the most latest hash value of the chain. All of the scattered knots ter the chain–each bearing their own identical copy of the chain with timestamped evidence of what wasgoed hashed into it and when–reach a overeenstemming that something has switched!

The forensics team knows that someone tampered with the evidence, but how do they prove that te a court? It will be their word against that of a very slick defense attorney who will attempt and persuade the jury that the very first time the forensics team ran the sample they were perhaps the victim of a faulty machine or maybe one of them made a mistake and analyzed the wrong sample.

Here’s the thing: recalculation of the chain after interchanging the blockchain’s hashed value of the chemical analysis taken from the businessman’s arms on the day of the murder for with the hashed value of the chemical analysis taken from the murder weapon several days zometeen, results ter the same hash value on the end block for all participant knots. The odds of that happening by accident make the implication unmistakable: someone tampered with the evidence.

Thanks to the proof demonstrated by the blockchain, the jury is persuaded te no uncertain terms that someone had tampered with the evidence te order to help acquit the business man. With circumstantial evidence piling up against him, it becomes more difficult for the jury to overlook the businessman’s guilt.

Private blockchains and distributed ledgers do not have to carry all of the gravity of ensuring that guilty criminals are ultimately convicted. Ter regular enterprise use, you may need them to simply track custody and use of a chunk of equipment, or the balance of raw materials on forearm and into which products those raw materials were incorporated. Aside from being a tamper-proof snapshot of transactions, the clean structure of transaction gegevens te blockchains lends itself well to gegevens science and machine learning algorithms that can help you better manage your supply, custody, and distribution chains providing you insights that before now wasgoed unlikely.

If you’d like to know more about how wij can help you incorporate a private blockchain into your business, please voeling us .

Introduction to Blockchain

Bitcoin. Cryptocurrency. Ethereum. Hashing. Mining. Dogecoins. You may have heard thesis terms threw about te the past year or two and wondered what they are all about and why there is so much fuss about them. Well, you are te luck, this series of articles is meant to demystify the technology related to all of thesis buzzwords: blockchain.

While the technology behind blockchain can take a little effort to wrap your head around, the general concepts are effortless to grip. Spil you read this series of articles, do your best to go with the flow without attempting to understand everything at once for if you do that, you are likely to end up frustrated and still out-of-the-loop.

Let’s start our journey to understanding blockchain technology by very first looking at some problems that it solves:

  • Wiring money to other people, especially te other countries, is slow, requires one or more third parties, and is expensive.

Thesis are just a few of the problems solved by blockchains. They have no central authority so there is no single entity te control of your finances, healthcare, insurance claims, etc. They maintain a very limited assets of information about you, essentially just your blockchain ID and your account balance. They can contain “smart contracts” which are contract conditions written te code that automate fulfillment of the contract (I total my car, the fair market value is automatically released to my account from the insurance company without argument). Wire transfers do not require a third party and are near-instant.

Blockchains indeed do a loterijlot of fine things but if you are like most people, you are very likely already thinking ahead, with a dubious expression on your face, spil to how all of this could be possible. After all, the idea is amazingly disruptive. We’ll get you there.

Collective Spreadsheets

Have you everzwijn used one of those nifty collective Google sheets that permit you to share the spreadsheet with a coworker and view that coworker’s updates to the sheet te real time? Blockchains are kleuter of like that except the gegevens ter them is not stored on Google’s, or anyone else’s, database. Instead, everyone who participates te the blockchain keeps a accomplish copy of the spreadsheet on their own machine.

When one person, let’s call hier “Jane” makes a switch to the spreadsheet, the blockchain software running on hier machine broadcasts out a message about that switch to all other peer-to-peer blockchain users so that their spreadsheets are updated spil well. There is no central database and no central authority controlling the information flowing te and out of the spreadsheet. Of course te the real world, blockchains are a bit more complicated than this, but let’s proceed with the spreadsheet analogy spil it makes the general concept clear.

Suppose that Jane wants to send some money to another peer on the blockchain named “John” te order to pay for a chunk of decorative kunst he sold hier. You can’t actually send fiat currency (like US dollars) through a collective spreadsheet so Jane purchases 100 units of the blockchain’s cryptocurrency–let’s call it Polycoin–from a currency exchange such spil Coinbase.com. Once Jane pays hier fiat currency to Coinbase, they transfer 100 Polycoins to hier account directly on the blockchain and the collective spreadsheet is updated so that it now shows that Jane has a Polycoin balance of 100.

Note that John, who just joined the blockchain, has an initial balance of 0 Polycoins. Jane now sends John the 25 Polycoins she owes him and the collective spreadsheet is once again updated.

Now John has a balance of 25 Polycoins and Jane has a balance of 75 Polycoins.

Also note that the balance on the Coinbase account is 25 Polycoins higher since John exchanged his 25 Polycoins with Coinbase for fiat currency. Once again, the collective spreadsheet is updated for everyone.

The thing is, there is no historical record of a transaction that led to Bob’s account balance going from 0 Polycoins to 1,000,000 Polycoins. When the other participants te the blockchain (Jane, John, and Coinbase) see this, they reach a overeenstemming that Bob’s wishful thinking does not reflect reality and Bob’s switch is threw out, resetting his balance to zero and restoring order to the galaxy.

Te the real world, no one is literally monitoring every transaction ter a blockchain. Instead, each participating knot te a blockchain checks to make sure that advanced cryptographic evidence proves that all transactions are genuine. This check occurs every time a fresh block of transactions is added to the blockchain. Unless a majority of knots reach the same cryptographic conclusion (math stuff) spil to the authenticity of a submitted block of transactions, the transactions will not be permitted to come in the chain.

Eruption of Disruption

Assuming that you can accept on faith for the uur that blockchains are spil this article describes them: identical copies of software and gegevens distributed across a network of thousands of knots that suggest a hack-proof method of transferring money from one peer on the network to another , then you are very likely embarking to realize just how potentially disruptive this technology might be.

Obviously, you no longer would need banks to transfer funds on your behalf. Ter fact you wouldn’t need them at all. But, spil you will see ter the other articles for this series, the disruption goes further. “Smart Contracts” could substitute the need for notaries and escrow companies while downright upending the business of managing deeds and titles to real property.

Given the odds of significant disruption te the financial industry, it isn’t surprising to see that major financial institutions are scrambling to either embrace blockchain technology on their own terms, run wipe campaigns against it, or lounge legislative bods to waterput te place regulations that restrict the legal use of blockchain technology. Ter fact, it is said that blockchain technology will do to the finance industry what the Internet did to the Media: it will switch it totally.

Across this series of articles wij hope to help you achieve a better seize on how blockchain actually works and how it can be used so that your enterprise is not left ter the dust spil yet another game-changing technology jiggles us to the core.

Wij can advise you and even implement for your enterprise the blockchain technologies discussed within this series. Please call us at 1-833-POLYRIFIC or send us a message to learn more.

How Public Key Encryption Works

Public key encryption, sometimes called ",public key cryptography",, is a method of encrypting your gegevens so that only the people to whom you provide a key may access it. Aside from being a way to keep your gegevens generally secure, it is also foundational to other technologies such spil blockchains and digital certificates so seizing the fundamentals of public key encryption can help you better understand those technologies spil well.

Let’s ease into the concept of public key encryption with an example. Suppose for a uur that almost everyday you receive package deliveries from amazon.com. Each day, the delivery person leaves thesis packages on your doorstep while you are away at work. Recently, some of your packages have gone missing. You check ter with both Amazon and the delivery service and they confirm that the packages were delivered which means that there is a thief intercepting your deliveries before you can get to them. S o you build a little opbergruimte with a padlock that is left unlocked each morning when you leave for work. You leave instructions for the delivery driver asking him to please place your items te the opbergruimte and squeeze the padlock shut to secure them–no key required.

For a while, this goes well: each day when you terugwedstrijd from work and find your packages are securely locked te the opbergruimte. Then one day you receive a pair of boots your ordered only to detect that Amazon mistakenly sent you the wrong size. Now you need to make a come back. Amazon is blessed to oblige and instructs you to leave the package on your porch for the delivery driver to pick up the next day. They also let you know that your exchange or refund will only be processed after the returning pair of footwear is securely back te their warehouse. You have a problem here: if you place the opbergruimte on your porch unsecured, the thief may be back to steal the package before the delivery driver picks it up which would mean that not only do your footwear not getraind correctly–you now have no footwear at all even tho’ you paid for them! You can’t leave the boots ter the parcel opbergruimte and lock it because the delivery driver does not have a way to unlock the padlock–only you have the key that can do that.

The solution is ordinary enough: you make an precies copy of your key to the padlock and leave it under your doormat for the delivery driver and then you send the driver a text message informing him that you have locked a come back parcel ter the opbergruimte and that the key is under the doormat. That works. Your footwear are returned to Amazon, you get your refund, and things are going fine until a few days zometeen you arrive huis from work to detect that your parcel opbergruimte is unlocked and your deliveries for the day have bot stolen again! The only way this could have happened is if the thief somehow got a copy of your key.

OK, let’s hop out of the example for a ogenblik. By creating a copy of your key and handing it off to the delivery driver, you created an example of symmetrical encryption: you can lock the opbergruimte, but anyone else having a duplicate of the key has the same access to the opbergruimte spil you (the level of access is symmetrical ). If you have everzwijn password protected a Microsoft Excel spreadsheet, and then collective the spreadsheet along with the password to unlock it with your colleagues, then you have used symmetrical cryptography and, spil you may have had the misfortune of experiencing firsthand, the passwords for thesis spreadsheets tend to be greasy and ultimately find their way into the arms of the very people to whom you meant to block access.

Back to the example. Once you get overheen your indignation that the thief had the audacity to slip up to your porch, find the key, and make a copy of it while you were away at work, you realize that what you indeed need is a way for the delivery driver to lock your opbergruimte with his key and for the opbergruimte to stay locked until you unlock it with your own different key–a key that only you wield. So you alter your lock opbergruimte and give a fresh key to the delivery driver. When the driver places your packages te the opbergruimte the next day he turns his key to the right–the only direction he can now turn it) and the opbergruimte is locked. When you comeback from work each evening, you insert your different key and turn it to the left–the only way you can now turn the key–and the opbergruimte is unlocked.

Things are going superb for a while and the thief is stymied, he even attempted making a copy of the fresh key you left under the vloermat for the delivery driver but quickly discovered that it wasgoed only good for locking the opbergruimte and wasgoed downright futile for unlocking it.

After several days you run into one last problem (suspend te there–the example is almost finish): you ordered a T-shirt from Amazon and they sent you the juist size but the wrong color. You need to leave the package for the delivery driver once again, but you don’t have a way to lock it into your opbergruimte and he would not be able to unlock it even if you could because your key only locks and his key only unlocks. Te cryptographic terms, your keys symmetrically cancel each other.

What you need is a way to lock the opbergruimte so that the driver’s key may unlock it if, and only if, you were the last person to lock it spil would be the case if you were placing a comeback package ter the opbergruimte. Outside of that, everything still works the same: if the delivery driver places packages ter the opbergruimte and then locks it, his key–or any copies of it–will not be able to unlock it. Only your key can do that.

Te our lock opbergruimte example, your key is analogous to a private key and the delivery driver’s key is a public key. You can mitt out spil many copies of the public key spil you like. You might choose to give them to not only your delivery driver, but also to friends who may also need to leave items ter the opbergruimte for you or for whom you need to leave an voorwerp that they will pick up zometeen.

Your opbergruimte is now a pretty good example of asymmetric cryptography, the technology behind public key encryption. Granted, the example broke down a little te the end because it would permit for the thief to use his copy of the delivery driver’s key to unlock the opbergruimte whenever you placed a come back te it but te the digital world you wouldn’t place anything te the opbergruimte that you weren’t okay making accessible to anyone with a copy of the delivery driver’s key anyway, regardless of how they got it.

Ter the digital world you are protecting gegevens, not lock boxes, so let’s get into that setting. Suppose I want to send an significant email about our planned product releases from headquarters to co workers all around the world. Corporate espionage has bot a problem lately so it is significant that I encrypt the message and that only the intended recipients can decrypt it. On the other arm, it is also significant for the recipients to have confidence that the email indeed came from mij te the very first place. So I am going to encrypt the message using my private key that only I wield and the recipients will decrypt it using the public key I issued them. All of their copies are identical. Reflect on the lockbox wij built. The delivery driver can unlock the opbergruimte if and only if you locked it te the very first place. It’s the same te public key encryption. The public keys you have issued can decrypt a message of yours if and only if it wasgoed encrypted using your private key te the very first place. So, the act of successfully decrypting the email from you using the public key you issued is ter itself proof that it wasgoed encrypted using the private key that only you wield thereby proving that the email did indeed come from you.

Waterput te other terms, my private key is run through a mathematical process against the email I am sending that scrambles the email such that only the public key can be used to mathematically descramble it. And that te essence is the magic behind public key cryptography. Want to attempt it for yourself?

That’s all there is to understanding public key encryption! Wij hope that this article has given you a better understanding of how PKE works spil it is a very significant building block to other technologies wij will discuss te future articles. Wij also hope that this article has sparked ideas about areas within your enterprise that could benefit from the implementation of PKE. If you do have ideas to discuss, wij’d like to discuss them with you! Please call us at 833-POLYRIFIC or send us a message to learn more!

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