Cryptocurrency basics – The network

This article is technical, if you haven’t read our New to Bitcoin article, failing that, if you don’t want to know the nitty gritty, it would be ill mannered to not warn you that you may be wasting your time here.

Otherwise, strap yourself in, cause we are going to dive deep(ish) into the terms that surround the block chain.

Ledgers

A distributed ledger is series of ledgers which share and agree upon information, in the case of cryptocurrencies it is spread across multiple networks and computers. A central ledger is basic, contained within one system, while possible to update and replicable it is controlled by a singular network or individual.

Node

A node is a computer connected to a coins network. A node helps support the network, by validating and relaying transactions. It also stores a copy of the full block chain, acting as an independent ledger of transactions.

51% attack

For such an ominous name, it’s traditionally been a grand thing. A 51% attack is a situation where more than half of the network is controlled by a singular individual or a group working in concert. This gives them control over the entirety of the network, allowing to let them do some pretty nefarious things; such as:

  • Use singular coins over and over, as they are generating the hash code
  • halting all mining;
  • Halting or manipulating all transactions.

The likelihood of this happening in the current climate is very low. For instance, in order to gain control of the Bitcoin network, you would have to buy at the current value of a little over 76 billion dollars worth of currency. This is assuming you can convince the entire marketplace to buy it off you at the current valuation.

Fork

A fork is a permanent change to the current version of a block chain. You can think of it a little bit like taking the jump from windows 8 to windows 10. (What ever happened to version 9.0 by the by?) A fork like this occurs when a 51% attack occurs. Though not always nefarious, this can be a globally democratic process, like the adoption of SegWit for Bitcoin. These ‘attacks’ are most commonly the way that the system is improved. These happen when a development team submits substantial changes to the network. In order to create a successful fork, you need to have the highest chain of blocks.

Block Height

Block height is the number of blocks preceding the mother block or genesis block (first block) on the chain. That first block will always have a height of zero. It’s a metric used to define time and its use in cryptography. It has a few other functions, but basically, it’s the big bang or zero hour for all information contained on the blockchain. A new Bitcoin block is made every 10 minutes, you can work out time-related information if you have the total length of the chain. This allows you to verify transactions using clients.

Hashrate

Hashrate is at its most basic level, the speed at which a block is discovered, and the rate that the block is solved. This is what miners do, essentially, they find and solve blocks in order to generate new coins. The speed at which they do this is the hash rate.

That’s the basics, but it gets more complicated as you go.

The educated worm kills the bird.

 

Mr M