Qtum as a combination of Bitcoin and Ethereum. Advantages of Bitcoin.
Qtum is a project in the blockchain space that is best described as a combination of Bitcoin and Ethereum. The team that is developing Qtum is located in Singapore.
This series of articles will first look at advantages and disadvantages of Bitcoin. Then, it will do the same with the Ethereum Network. Finally, it will explain how Qtum is combining the advantages of Bitcoin with the advantages of Ethereum, at the same time solving the issues that both cryptocurrencies have.
Irreversible transactions on the Bitcoin Network
Satoshi Nakamoto has launched the Bitcoin network in 2009 as a way of solving the problems with existing payment systems. The main problems with existing currencies are reversibility of transactions and centralization.
Most financial institutions in the world today operate in strict regulatory environments and have to mediate disputes between users of the financial system. The costs of such mediations drive the costs of the transactions up and it is the customers who are paying for that, even though most of the customers on the daily basis participate in small transactions as a way for payment for irreversible services. Bitcoin has solved this issue my making transactions irreversible and by introducing proof-of-work as a way to seal the blocks of the blockchain, which is a revolutionary technology that the Bitcoin network uses to keep a track of all the transactions that have ever occurred on the network.
Bitcoin blockchain is fully transparent and accessible to the public distributed ledger that contains records about all the transaction on the Bitcoin network since its inception in 2009.
The technology is called blockchain because it literally represents a chain of blocks of data. Each block of the Bitcoin blockchain is up to one megabyte in size and the Bitcoin network aims to create a block of the blockchain every ten minutes. A block of the blockchain is similar to a page in a financial ledger.
The blocks of the bitcoin blockchain are connected via hashes. A hash is a string of data that a cryptography algorithm creates for a larger set of data. A set of data under a cryptography algorithm can only have one hash and the hash is going to be unique. Bitcoin uses cryptography algorithm SHA-256, created by the United States National Security Agency. Here’s how hashes work. Suppose you have a set of data (1, 1, 34, 45, 67). You run the data though a cryptography algorithm and you get a value that is shorter than the data, say zx32q. Because of the way hashes work, you know that no other set of data can have the same hash under the same cryptography algorithm. This allows the check the validity of data very quickly. Suppose you send the data to someone else and you want to know whether they have received it undamaged. You could simply ask them to run the data through the same cryptography algorithm (because hashes for different cryptography algorithms will be different) and share the hash with you. If they send you zx32q, you know that they have the right data.
In the example above, the data set is very small and if you wanted to check on the data, you could use the data itself. On the Bitcoin network, the Bitcoin software creates hashes for the blocks of the Bitcoin blockchain that may contain information about thousands of transactions. For example, block #516149 of the Bitcoin blockchain contains information about 2443 transactions, block #516147 has information about 1005 transactions, yet the principle stays the same: the network runs the information through the cryptography algorithm SHA-256 and receives a unique hash for the set of data. Because SHA-256 is a very sophisticated algorithm and the sets of data are large, hashes for them are also much longer than in the example above. For example, for block #516149 the hash is 0000000000000000001dbe358db2af7379dd162731b1c176a0165f057f543242 and for block #516147 the hash is 00000000000000000000fd2f528bdbc4a9201dcf60736ec28584cbee411a96c2. The principle, however, stays the same: a large set of data has a much shorter hash.
Transparency of the Bitcoin network and tamper-proof nature of the blockchain technology
You can see this and other information about blocks of the Bitcoin blockchain by visiting the official Bitcoin blockchain explorer that is open to anyone and contains all the information about Bitcoin blockchain blocks, transactions, and complete history of all the transactions that have ever happened on the Bitcoin network. The address for the website is https://blockchain.info .
Each block of the Bitcoin blockchain has its own page and you can see all the information about transactions for the block on the page of the block. For example, the page for block #516147 is https://blockchain.info/block/00000000000000000000fd2f528bdbc4a9201dcf60736ec28584cbee411a96c2 and the page for block #516149 is https://blockchain.info/block/0000000000000000001dbe358db2af7379dd162731b1c176a0165f057f543242.
All the blocks of the Bitcoin blockchain are linked via hashes. Each block of the blockchain, except for the block #1, contains the hash for the previous block. Because a set of data can only have one hash, changing even just one digit in just one of the transactions that have occurred on the Bitcoin network is not possible because the block with the changed digit would have a new hash. Such a block would not fit into the blockchain because the next block has the hash for the original previous block. This tamper-proof nature of the blockchain technology is what makes is so secure and attractive for a number of uses and industries, where having a tamper-proof history is critically important such as cargo transportation, medical history and so on.