TeaThe world of blockchain is full of esoteric, endless acronyms and specialist terminology that almost seem designed to puzzle outsiders. In a way, the lingua franca acts as a lantern or roadmap, facilitating progress in various areas of industry. Once you’ve got a handle on the confusing terms — not to mention the memes pervading crypto Twitter — you’re free to explore.
Although gamified and decentralized finance (GamFi and DeFi, respectively) protocols have gotten much of the headlines from blockchain, distributed ledgers are the technology that is ticking up the entire industry. No blockchain, no NFT. Not even a DeFi protocol. No bitcoin, ethereum or stablecoins while we’re at it. Blockchain is to “crypto” what combustion engines are to cars.
Few are as well-versed in blockchain as Lior Yaffe, co-founder and director of the software firm jelurida, is the company behind the Nxt and Ardor blockchains. Founded in 2016 to help organizations and companies implement distributed ledger technology, Jelurida – and Yaffe – have been through many bull and bear markets. The focus is on building robust blockchain architectures to meet the needs of the world.
As a blockchain OG himself, Yaffe shares his thoughts on this fascinating technology, discussing tradeoffs, testnets, and the differences between the different platform categories (private, public, etc.).
Let’s start with the basic concepts of blockchain technology in very accessible terminology. In this context, why do we have so many blockchains instead of just one?
Lior: In short, a blockchain is a software product that manages tokens of value on the Internet without relying on a central entity to do the bookkeeping. Anyone who wants to join the network, validate transactions, and generate blocks is free to do so, and the underlying software is open-source, allowing developers to review the code and ensure it works. Can verify that there is no backdoor.
A typical blockchain solution depends on the following entities:
- token Is a digital currency managed by the blockchain.
- Exchange Occurs when tokens are transferred between addresses. A transaction can also represent a message, vote, or smart contract submitted to the blockchain.
- node Is a workstation, usually cloud-based and running software used to process transactions and generate and validate blocks.
- block Transaction store. Blocks serve as a synchronization point for the blockchain, all nodes connected to the blockchain must eventually agree about the order of blocks and the order of transactions in each block. They are built on top of each other and linked together using digital signatures to form a chain of blocks, that is, a blockchain.
- Address There is a pair of private/public keys used to control access to the token. You can think of it like a self-owned bank account: anyone holding the private key for an address can spend tokens at the address by depositing transactions, while anyone holding the public key can transact- Can validate the validity of the loan and assure that no double spending has occurred.
- purse Holds all tokens owned by one entity in multiple addresses. A wallet can be a software application, a hardware device, or a combination of both.
- consensus algorithm The mechanism is for nodes to reach agreement about the order of blocks and transactions to prevent double-spending of tokens without central management.
- smart contract There is a special type of transaction that registers a code on the blockchain.
- fees Related to blockchain transactions: Since such transactions are expensive to process, each one requires a fee to be paid to the network. These are used as a spam prevention mechanism to compensate block generators for their processing costs and to make it costly to spam the network with junk transactions.
There are many different design goals and tradeoffs in implementing the building blocks described above, with some solutions focusing on decentralization and privacy, others on scalability and smart contracts. Some solutions don’t even use blocks, but rely on other data structures, while still others focus on decentralized storage of data.
Existing solutions offer tradeoffs between three different, and sometimes conflicting, design goals:
- Security – security of funds, user privacy.
- Scalability – The capacity and speed of the network.
- Decentralization – Don’t trust, verify; distribution of decision making; Censorship Resistance.
To deal with these tradeoffs, developers are constantly experimenting with different designs.
Why are there so many different layers of blockchain? Please explain the different layers and whether each serves a specific purpose. Can they work together, or are they all made to do different things?
Lior: The concept of blockchain layers is somewhat confusing, sometimes the term is used to describe a blockchain architecture, which is made up of five layers (hardware, data, network, consensus, layer). Due to the wide variety of architectures, I think this model is confusing.
Instead, I prefer to define only two layers:
L1 – The blockchain itself as mentioned above.
L2 – An optimization layer built on top of L1 that compromises on decentralization and sometimes security in order to achieve greater scalability.
L2 chains exist mostly because the cost of submitting transactions to L1 can reach dozens of dollars per transaction on some networks during peak times. L2 solutions use advanced cryptographic techniques to package multiple transactions into a single proof registered on the L1 network, and which offloads much of the processing from the main network.
A testnet, meanwhile, is a blockchain with the same functionality as the main chain but uses a worthless token. The testnet is used to test their enhancements and smart contracts without risking user funds before deploying them to the mainnet.
Blockchain can be classified into four categories: private, public, consortium, and hybrid. Can you help us understand what these ranges represent?
Lior: Blockchains that deploy tokens of value are always public and are more or less permissionless by definition. In the past, various attempts were made to use the blockchain architecture as a private “write only” database, or a hybrid between private and public solutions. However, in my view these solutions are less interesting and can usually be replaced with a central database which is much more efficient. From my point of view, the only promising blockchain is the public, open-source and permissionless kind, using tokens of value that can be freely exchanged between entities that work together. But don’t trust each other.
Your company, Jelurida, created the Ardor blockchain in 2018. How do you ‘build’ a blockchain? How is it different from writing software code? More importantly, how and where do the aspects of “decentralization” come into the picture?
Lior: Blockchain is almost always an open-source software product; The source code is freely available to allow third parties to review it for backdoors, bugs, and security issues. Our solutions are developed in Java, making them easy to integrate with enterprise software and application servers at the API or code level.
Ardor’s “decentralization” stems from the fact that the software is freely available and that anyone can install it, automatically download the blockchain, and begin seamlessly generating blocks and validating transactions. Is.
Of course, blockchain developers need to pay great attention to security issues, because launching a new version is somewhat like deploying a drone into space, in the sense that if you have a serious bug, hackers will mercilessly attack you. Users will exploit this to steal and destroy funds. Your reputation
Jelurida’s NXT blockchain is said to be the first open-source blockchain to rely entirely on a proof-of-stake consensus protocol. What is Proof-of-Stake and how is it different from Proof-of-Work?
Lior: As discussed above, each blockchain uses a consensus algorithm to decide on the correct transaction history. The first consensus algorithm introduced by bitcoin in 2009, and many others, rely on “mining” or using vast computing power to solve difficult computations artificially. The purpose of this technique, known as proof-of-work, is to make block generation difficult enough to guarantee the scarcity of new blocks and thus the new tokens that are typically distributed with each block.
Our product is using a different technology known as Proof-of-Stake, which treats each token as a virtual miner: the more tokens you have, the more time you have to generate the next block. The better your chances of doing so. The advantage of this algorithm is that it does not require a lot of computing power to be wasted like proof-of-work. Today, most modern blockchain products, except bitcoin, rely on some variation of proof-of-stake as their main consensus algorithm.
Jelurida’s Ardor, Ignis, and NXT blockchains – do they each serve different purposes, or do they work together to support uses that other blockchains don’t?
Lior: Nxt is a mature and stable public chain that has already been running for nine years without any hiccups, which is an amazing feat in itself.
Ardor/Ignis represents Jelurida’s next generation blockchain architecture built on Nxt technology. It includes an innovative, multi-chain architecture, smart contracts, integrated wallet, and many other features and gadgets that aim to make blockchain development simple and secure.
The advantage of the multi-chain architecture we provide is that the consensus layer, also known as the parent chain (Ardor), is relatively lightweight, while applications can be deployed on child chains such as our own Ignis chain. Can be done which is cheaper to use and more scalable.
The views and opinions expressed here are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.