The Blockchain Technology Overview, December 2017
Bitcoin is how the Blockchain started in 2008
The essence of the Bitcoin is the 3 major global technologies:
1) peer-to-peer networks (distributed peer-to-peer networks, they are equal and equitable exchange of information)
2) consensus algorithm (in case of the Bitcoin this is the proof of work; most of the cryptocurrencies today operate on the basis of this type of algorithm)
3) Shabal-256 cryptographic hash algorithm (SHA-256).
Three above mentioned technologies were applied as a single in the Bitcoin; till now, these all evolved separately.
Fig. 1: Centralized and Decentralized Systems

news How do peer-to-peer distributed networks operate: P2P networks exchange information among themselves, with the nearest PIR by the three handshakes theory.
The networks can be of 3 types: centralized, decentralized and distributed. In its pure form, there are only the distributed ones.
The essence of the Blockchain is that it represents the conventional database, which contains facts from the first unit of its existence until today; data is structured, the facts are combined into blocks and each block is associated with the previous block, i.e. each block carries a hash of the previous block.
Hash function is the feature that ensures the specified exit size from any input. Changing one character completely changes the hash. An example is given on the page 2. Cryptographic hash function (see Fig. 3) has 3 basic properties: 1. it is conflict free (i.e., there is no other input, which will give the same hash as somebody already has; if there is such mathematical possibility in existence, it means that the function is compromised), 2. it is not recoverable (if we know the hash, then under no circumstances we will get the input data), 3. it is puzzle-friendly (if we serve the key and encrypt our message using the hash function, then afterwards knowing the outgoing data the message that we need can be retrieved).
Security algorithms:
SHA-1: developed in 1995, theoretically, was hacked in 2005 (it was justified by mathematicians, i.e. conflicts were found), the conflicts were published only in 2017.
Fig. 2: Hashing
news Fig. 3: Hash Function
news SHA-256: used in the Bitcoin, belongs to the family of SHA-2 algorithms, developed in 2002, competition for the design of algorithm conducted by the NSA of the United States; in 2008, conflicts were found for 22-d and 31-d algorithm iterations in 2012, a decision was made that the SHA-3 will be based on the fundamentally different protection algorithms (see Fig. 4).
In fact, SHA-256 was discontinued in 2012.
However, it is still used in the Bitcoin. It is believed that the current computer facilities cannot hack the algorithm today, of which there are doubts.
Fig. 4: SHA-256
news The proof-of-work technology was developed in 1993 in theory and was implemented in practice in 1997.
Fig. 5: Proof-of-Work
news On average, one and the same block of the Bitcoin performs 3000-5000 transactions, block volume is 1 MB. The Bitcoin uses the Merkle Tree, that gives it the possibility of existence of the lightweight network nodes, i.e., the client does not need to have a local host it the Blockchain of 150 GB in size, whereas it is sufficient to have a blockchain only for the header blocks (being 40 MB in size in the Bitcoin, that may be run by any phone). Verification is done by specifying a path for multiple hashes.
In the air, for example, there are 3 trees already.
Fig. 6: Merkel Tree
news Fig. 7: Merkel Tree In The Air
news In 2011, the Scrypt algorithm was coined (in fact it is a key derivation function, being that RAM conditionally and accidentally adds pseudo-random values when calculating the algorithm used) and the Litecoin cryptocurrency.
In 2012, the proof-of-stake algorithm was coined (money makes money). Diagram of the algorithm operation is presented in the Figure 8.
In 2014, a new algorithm was developed including 6 previously known algorithms of cryptoprotection, which were packed in each other as in a nesting doll. This is how the Dash was invented (Fig. 9). The main value of the Dash is the possibility of money-laundering and their further legalization because all transactions in the system are fragmented and mixed.
Fig. 8: POS
news Fig. 9: Dash
news In 2014, the proof-of-space consensus emerged (mining on the HDDs). This technology meets the cloud technologies and virtual reality. It gives people the opportunity to work in distributed decentralized networks in the cloud, and in the future in the virtual reality. The main advantage of the technology against such giants as the Google or the Apple is its confidentiality. In 2015, a completely new and cool algorithm of a kind was invented – the Ethash.
Fig. 10: Ethash & Ethereum
news Later on, the Equihash algorithm and the Zcash cryptocurrency came to be. This technology allows to mathematically substantiate the anonymity of your transactions. I.e. you can get confirmation of a transaction, without disclosing the sender, recipient, and the amount. In fact, Zcash is the best there is of the anonymous currencies today.
Figure. 11 Equihash & Zcash
news Recently, the Lightning Network technology was invented (Fig. 12). The most interesting thing that the Lightning allows one to make, is transactions between the Blockchains. This technology supports almost all features of the clearing, i.e. even an exchange can be completely decentralized.
Fig. 12: The Lightning Network
news It is very interesting how the Bitcoin mining pools are distributed in the world. More than 80% of the Bitcoin miners are located in China.
Figure. 13: The Bitcoin Mining Pools
news There is a huge problem with the growth of the current complexity of the network (Fig. 14). As you can see from the Figure, the complexity of the network over the past 10 days grew by 50% (this is the number of ASICs that are connected to the power outlet). Therefore, if the Bitcoin does not change its technology and the SHA-256 algorithm for some more updated ones, it can begin to technologically lose to the other cryptocurrencies, that will affect its capitalization.
Fig. 14: The Bitcoin Network´s Complexity Growth
news Fig. 15: Challenges the Bitcoin System Faces
news An important point: On October 11, 2017, Intel presented its 17-Qubit Superconducting Chip. As far as it is known, presently the Chip is being introduced in the Intel offices. This is an implication for the future hacking probability of the Bitcoin.
Fig. 16: Comparative Table of the Bitcoins
news As of today, only the Bitcoin Gold uses the modern technologies, it is more secure and convenient, while its stock price is lower than of the others.
This overview of the situation around the Blockchain technology and its usage possibilities summarizes the knowledge about this technology and the current situation, as well as it can serve as some sort of a prompt helping to understand the development prospects of the technology and its application in the coming future.
This overview was prepared by the Barbarossa team.
Blockchain Technology Overview, December 2017