The Bitcoin network is simply the term used to describe all the servers (nodes) which are mining (compiling) the various transactions undertaken with Bitcoin.
Whilst the network is classed as decentralized (thanks to the way it’s been built on top of the blockchain database technology), the question that a LOT of people have been asking is who really controls it?
In order to answer this, we need to look at the blockchain technology itself…
To Understand Bitcoin, One Must First Understand Blockchain…
Bitcoin is built on top of the blockchain technology set.
Blockchain is what’s known as a decentralized database, which basically means that it’s designed to store, manage and provide data across 100’s or even 1000’s of servers (nodes). This stands against traditional database architecture, which denotes that each client should connect to a central server to retrieve data.
Whilst much has been said about blockchain (mainly due to Bitcoin’s price rises), the reality is that it’s basically a combination of two existing technologies – Torrent files and the GIT source code management system.
To briefly explain, torrents are widely used to share illegally copied games and movies (also legal stuff, but it’s never used for that).
Based on the BitTorrent protocol, it works by having a file which is then shared across the torrent network so that if anybody else on that network wants the file, the system will automatically share it with them. Torrent nodes are two types of user — either seeders (downloaders) or leachers (uploaders).
Whenever you use the BitTorrent system, you will be able to both download and upload files across the network. What makes BitTorrent so similar to Blockchain is the way in which no central server/provider is required to transfer the files. Whilst there is a central network service (to track available seeds etc), the requirement for a central provider is obsolete. This is exactly how Blockchain works (more in a second).
On top of this, there is the GIT protocol.
GIT is used by software engineers to save updates to their code. It works by creating a repository (collection of files) within a folder. Each time the developer updates their files to save them and manages them… he is able to update the repository.
Each update (known as a commit) stores an itinerary of the latest files in the repository, as well as any historical data which may have also been saved previously to this. Not only does this give the developer the opportunity to traverse changes in the code, but it also allows teams of developers to share their code without conflict.
The importance of this is that both GIT and Torrent files have basically been combined to give Blockchain. Blockchain allows anybody to save data into a chain which is then automatically shared across the relative Blockchain network that happens to be powering it.
This type of setup is how Bitcoin works (members of the networks are called miners)…
How the Bitcoin Network Works…
Bitcoin is meant to be a public financial ledger, which means that its MAIN purpose is to store financial transactions in a giant itemized ledger.
Whilst lost on most people (yea, they think it’s all about creating a new currency that’s going to change the way the world buys stuff….. good luck with that one when the USD is your major competitor), the reality of all the cryptocurrencies is actually quite simple – they are encryption algorithms for particular blockchain databases.
Bitcoin is an encryption algorithm (it’s limited to 21 million coins or decryption tokens), Ethereum is an encryption algorithm and Litecoin is an algorithm.
They ALL store different types of data in decentralized blockchain networks, and issue coins (decryption tokens) as a way to compensate server owners who provide the computing power to keep the network running.
It’s this computing power which sits at the core of bitcoin.
You see, unlike the other cryptocurrencies, Bitcoin works by taking financial transactions and encoding them into a huge public ledger. This is half of what a bank would do (except a bank actually sends the funds as well).
Think of it as the equivalent of a 21st-century cheque or maybe even a credit card (where the money is provided by another financial institution). In either case, the underlying transaction is not handled by the card or cheque, but by a central system which manages the various currencies. Let me repeat… Bitcoin is NOT a currency and NEVER will be.
Irrespective of this, in order for Bitcoin to work, it needs to be able to record the various financial transactions that have been undertaken through its network/system. This is where the bitcoin network comes in – a group of 100’s or even 1000’s of servers designed to update the central Bitcoin database.
Who Controls It?
As one of the major benefits of Blockchain is its decentralized nature (much akin to BitTorrent), the reality is that no one controls it… but they CAN influence it.
The Bitcoin network works like ANY network – people behind the scenes have committed resources to ensuring that they are able to turn a profit. These resources are in the form of servers (in the case of Bitcoin) and the profit is in the form of Bitcoins.
The problem that the Bitcoin network faces is a two-pronged attack.
Firstly, the service depends ENTIRELY on external (third party) servers calculating the next blocks on the Bitcoin blockchain. The moment this is too difficult to do (IE too many resources are required to calculate the hash in time in return for the Bitcoin reward), the miners will move their computing power onto other opportunities. When this happens, transaction times will not only grow but the state of the network will diminish markedly.
Secondly, the predication of Bitcoin lies in its price traded on a secondary market. This price has absolutely NO bearing in the real world (it’s pretty much made up) because Bitcoin holds NO value of its own. Consequently, when considering whether people will continue to commit their servers to the network, it’s ALL determined by whether the price of a Bitcoin stays high. And I’m sorry to burst your bubble, but it won’t. It will burst just like all the bubbles before it. And people will lose $1,000’s.
So in terms of who controls the network, the answer is the same as who controls an economy. It’s not the government because people CHOOSE to spend their money in whichever they want (the government can only influence how they do it).
As such, the same is true with Bitcoin.
Since there is no central power to regulate the coin or its uses, the network has to do it manually. This means that in order to manage whether said network is able to manage the way the different coins are handled, ANY external influences have to be managed properly.
The only real way that someone could change the way in which Bitcoin (specifically) is handled is by creating what’s known as a HARD FORK. This is a term used to describe when the underlying structure of a chain’s block are handled (IE a different set of data is saved). This almost happened in November 2017 with the Segwit2 fork, which was eventually abandoned.
If one of these forks sticks, however, it would not only undermine the value of the core Bitcoin currency, but could cause all the other cryptocurrencies to topple as well.
Latest posts by QoinBook (see all)
- Leveraging Blockchain Technology to Fight Against Fake Vapes - October 1, 2019
- MinedBlock: A Novel Approach to Cryptocurrency Mining - May 18, 2019
- KABN Network: A Blockchain Integrated Financial Service Platform - May 1, 2019