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Introduction to Sia and Siacoin Part 2

Multi-sig transactions on Sia. Importance of decentralization.

 

Introduction to single-signature and multiple-signature transactions

In terms of technology, the biggest different between the Sia blockchain network and the Bitcoin blockchain is that all transactions on the Sia network are multiple-signature transactions.

Satoshi Nakamoto introduced the Bitcoin network to the world in 2009, yet multi-signature transactions have only become available to users in 2013.

A regular transaction on the Bitcoin network requires only one signature. This signature comes for the owner of the private key for a wallet that is linked on the network to a Bitcoin address. This type of transaction is also known as a single-signature transaction. In practical terms, this means that one person controls a wallet on the Bitcoin network and can decide what happens to the funds even if this person is a part of an organization.

However, as the Bitcoin network has becoming more and more popular, it turned out that there was a need to something more complex.

For example, when it comes to large sums, a person may want to divert the money from on organization to his or her personal account, so having one person in charge of a wallet is not always a good idea. One person may also not have any bad intentions, yet may send the funds to a different wallet simply by mistake. Mistakes on blockchain networks, including Bitcoin and Sia, can be a big problem because one of the main properties of blockchain networks is decentralization.

 

Blockchains as ledgers

A blockchain is similar to a ledger with blocks of blockchain being “pages of the ledger.”

These pages are connected in a cryptographically secure way and the entire ledger or blockchain can be stored on multiple independent computers all around the world.

A computer on a blockchain network that has a full copy of blockchain is called a node and you can see a map and number of active nodes on the Bitcoin network as you are reading this article by going to https://bitnodes.earn.com/

 

Features of decentralization

In practical terms, decentralization means several things. First, it means a very high level of security because all an attacker has to do to cause harm to a usual tech company is gain access to its server. With blockchain network gaining access to just one node is useless because other nodes would still have copies of the blockchain. Even if just one copy remains untouched and undamaged, a blockchain network could fully restore itself by letting other nodes and users on the network copy the original version of the blockchain.

Second, decentralization means that there is no central authority in charge of a blockchain. This fact comes with its own advantages and disadvantages. The biggest advantage is that the only authority on blockchain networks is users who agree with each other. No single user, be it a government of a country, a bank or a corporation, can make decisions about what happens to a blockchain network.

 

Examples of decisions by centralized authorities

This decision making is what has been the problem both in business and government governance for a long time.

For instance, a business like Uber or Airbnb can make a decision to increase the fees it is taking from drivers/hosts and users of their services just because it decides it wants to and this is exactly what many of aggregator platforms have been doing in the past. Often, their business model is about building a user base by changing no fees at all or very low fees and giving huge referral bonuses to have a lot of service providers and users of service on the platform. Then, once they build a user base, they start raising the fees and the members of the ecosystem feel trapped because the system is so big that they feel like they don’t have anywhere to go. One of the variations of this approach is to raise the fees that users pay but not pay the providers more. This is exactly what happened in several states with Uber in the spring of 2018.