Cryptographic keys: Since time immemorial, the essence of encryption and cryptographic technology was to provide security. There has always been a need to ensure the fidelity of information when it is being transferred from one point to another.
The emergence of the internet and the associated massive advancements in information technology have made data encryption to be of paramount importance. With communication happening on a per-second basis between millions of nodes on the global information highway, there has arisen the need to ensure the fidelity of data streams.
Remember that advancements in a positive light often always encourage the development of not so savory technology designed to undermine it. In this case, reference is being made to hacking, identity thefts, and other forms of data manipulation.
The field of cryptography and data encryption has grown in leaps and bounds over the last few centuries with the development of advanced cryptographic methods.
The gold standard today in the world of cryptography and data encryption technology is the Cryptographic Key protocol. A cryptographic key is a data string that is used by a cryptographic algorithm to “decrypt” (unlock) a ciphertext and display it as plain text or to “encrypt” (lock) a plain text and display it as a ciphertext.
The function of the key depends on what end of the information transfer spectrum it is being used in, i.e. sender or receiver. The sender wishes for the information to remain encrypted and for only the receiver to be able to decrypt it.
Think of these keys like regular keys that work in pairs, the sender has one and the receiver has another one. Regular keys can lock or unlock a door, for example, and only the holders of these keys can carry out the locking and unlocking process.
Now that we have a basic understanding of cryptographic keys, let us examine how they work in a blockchain environment. Remember that in a blockchain, there is no central authenticating body, no central server, just a network of nodes with no hierarchy. This, therefore, creates a situation where each transacting node is responsible for securing their digital identities.
This is achieved by means of a digital signature. A digital signature is a combination of a public key and a private key. Think of this signature like a normal signature, unique to each individual, in this case, each computing node in the blockchain network.
When a transaction is to be carried out, these two keys are used to encrypt and decrypt the data file containing the transaction details. The combination of public key and private key cryptography creates a digital identity that makes control over proof of ownership easier to accomplish in a decentralized blockchain network.
However, control over proof of ownership isn’t enough to create a secure digital framework. Alone, cryptographic keys make it easy to secure and authenticate digital identities. It does not, however, offer up a framework for validating the transactions carried out by these authenticated digital identities.
The function of central servers in a centralized network is both authenticating identities and authorizing transactions. It, therefore, means that an additional network framework is required to make the blockchains run efficiently and this brings us to the second principal technology: P2P networks.
P2P networks: Blockchains utilize a decentralized computing network, unlike a centralized network that is in use in most of the mainstream internet.
This decentralized (or distributed network) is made of up of many computing nodes and there is no hierarchy in the system, i.e. all nodes are essentially equal. Each node is essentially a peer of another node, hence the name Peer-to-Peer (P2P) network.
All known blockchains, both public and private make use of P2P networks with the only difference being in the permission granted to the nodes in the network. This use of P2P networks enables blockchains, especially the public ones to grow exponentially, thus making it easy for new nodes to join the network.
It also enhances the anonymity of the participants in the network. In the early days in the development of the P2P network architecture, all nodes basically carried out the same functions.
This meant that a portion of the resources of each node was made available for other nodes to use without any central server in charge of coordinating the activities.
These days, P2P networks have evolved from this model to one in which the peers do not necessarily have to carry out the same functions. This has enabled the creation of versatile multifunctional P2P networks capable of finding applications in diverse areas of human interests.
This singular advancement in the P2P network has expanded the applicability of P2P networks from the basic home/corporate networks and file-sharing platforms of the past to more robust networks that can handle advanced functions like the ones carried out in a blockchain network.
The blockchain can be thought of as being a modification of the internet, or the internet as it was originally conceived. There are many computing nodes spread across the globe that make up the complete internet architecture and these nodes do not all carry out the same function.
Collaborative P2P networks that have nodes with diverse functions and capabilities make it possible to form blockchains where each node or group of nodes can bring in diverse unique capabilities and resources to improve the robust functionality of the blockchain network.
More advanced tasks such as the validation of transactions can, therefore, be carried out by these nodes in the blockchain network.
In a blockchain, there are different types of nodes that carry out various functions all of which contribute to the overall servicing and maintenance of the network without the need for a central server.
By being built on a P2P network, blockchains can achieve trustless validation of transactions by means of nodes dedicated to validating the transactions initiated by nodes within the network.
Network Servicing Protocol: The cryptographic keys and P2P networks provide the framework for nodes in the blockchain network to authenticate and validate transactions.
With cryptographic keys, users can exchange value on the blockchain, while the P2P network makes it easier to validate the ability of these users to exchange value and without the need for a central server. The next question is how do you create an incentive for the maintenance of the network?
It is all well and good to have people contributing computing power to form a network, but how do you introduce an economic value to this shared network. Remember that these computing nodes run on electricity which means that resources are being spent just by participating in the network.
Unless you are a computer hobbyist, you might not see the need in joining a blockchain and even if you did, you might not want to contribute to its functioning, especially in carrying out the validation of transactions if there is no reward for such activity.
The reason for this is simple, as these blockchains increase in size, the amount of computing power needed to validate transactions increases exponentially and this means more consumption of electricity.
Blockchains solve this problem by introducing a reward-based system for computing nodes that offer their computing power in servicing the network by acting as transaction validators. This is called mining on most blockchains and it is what creates transaction blocks which are added to the blockchain periodically.