Blockchain as a decentralized system

[fog37]

TL;DR Summary

better understanding what blockchain is about

Hello,

I am learning about blockchain this summer. I sort of get the big idea (skipping the middle man, encryption based decentralized system where everyone that is on the database can see everybody else transactions). Isn't the fact that everyone can see any transaction unsafe and against the privacy? What am I missing?

Also, before a new block (which is essentially an approved transaction with all its associated details) gets added to the public ledger and chain, it must be approved by "everyone" on the system. How is that possible? Does that mean that EVERY user in the world who is on blockchain must approve that single transaction? That is hard to imagine and also hard to imagine...

Thanks!

 

[jedishrfu]

I think its that multiple computing entities create a new block from the latest recorded transactions + hashcode of the previous block. The new blocks that are generated are compared and validated across entities with the first entity getting the associated bitcoin.

A simple example would be listening to a radio show and writing down everything that was said on a piece of paper. A few other folks around the world are doing the same thing and sharing their pages online. You check your page against the others listed and when your page agrees with their you give them an upvote. The number of votes of accuracy a page gets and it being the earliest generated page means it gets added to the notebook of pages aka the blockchain and its author gets paid something for his/her efforts.

https://en.wikipedia.org/wiki/Blockchain

Blocks
Blocks hold batches of valid transactions that are hashed and encoded into a Merkle tree.[1] Each block includes the cryptographic hash of the prior block in the blockchain, linking the two. The linked blocks form a chain.[1] This iterative process confirms the integrity of the previous block, all the way back to the original genesis block.[21]

Sometimes separate blocks can be produced concurrently, creating a temporary fork. In addition to a secure hash-based history, any blockchain has a specified algorithm for scoring different versions of the history so that one with a higher score can be selected over others. Blocks not selected for inclusion in the chain are called orphan blocks.[21] Peers supporting the database have different versions of the history from time to time. They keep only the highest-scoring version of the database known to them. Whenever a peer receives a higher-scoring version (usually the old version with a single new block added) they extend or overwrite their own database and retransmit the improvement to their peers. There is never an absolute guarantee that any particular entry will remain in the best version of history forever. Blockchains are typically built to add the score of new blocks onto old blocks and are given incentives to extend with new blocks rather than overwrite old blocks. Therefore, the probability of an entry becoming superseded decreases exponentially[22] as more blocks are built on top of it, eventually becoming very low.[1][23]:ch. 08[24] For example, bitcoin uses a proof-of-work system, where the chain with the most cumulative proof-of-work is considered the valid one by the network. There are a number of methods that can be used to demonstrate a sufficient level of computation. Within a blockchain the computation is carried out redundantly rather than in the traditional segregated and parallel manner.[25]

 

[fog37]

I see. So regular individuals that have some spare time and also want to get some monetary reward, will somehow vet and validate the transaction which then gets "posted" on the blockchain. Cool.

 

[jedishrfu]

Its the bitcoin mining process that collects the transactions and does some of this vetting automatically.

Here's a video on the process:



and this one from 3Blue1Brown on Bitcoin: