CRYPTOS CAPTAIN x-@bitcoinizeme 3 Abstract: It is no longer possible to ignore the digital economy and its implications in the modern world. We live in a world where information technology (IT) is playing an increasingly significant role in our economic system. The volume and value of data exchanged daily are growing, as is the threat of data theft or corruption. The centralization of the internet and corporate networks is a major concern. In response to this problem, a new technology emerged in 2009: the BLOCKCHAIN. With the goal of securing the exchange of data through the decentralization of networks and the use of cryptography to protect it, blockchain technology can no longer be ignored and must be implemented in the industry to provide the security it requires. Keywords: -BLOCKCHAIN -DECENTRALIZATION -CRYPTOGRAPHY -NETWORK -DATA CRYPTOS CAPTAIN x-@bitcoinizeme 4 Summary: We can no longer ignore the digital economy and its implications in the modern world. We live in a world where information technology plays an increasingly important role in our economic system. The volume of DATA exchanged daily continues to grow, as do the threats of corruption or theft of that data. The centralization of the internet and corporate networks is a weakness. In response to this problem, a new technology emerged in 2006: BLOCKCHAIN. With the goal of securing and ensuring the reliability of DATA exchanges through the DECENTRALIZATION of NETWORKS and the use of CRYPTOGRAPHY to secure them, BLOCKCHAIN technology cannot be ignored and must be implemented by industries to provide the level of security they need. Keywords: -BLOCKCHAIN -DECENTRALIZATION -CRYPTOGRAPHY -GLOBAL NETWORK -DATA CRYPTOS CAPTAIN x-@bitcoinizeme 5 Overview: In the first part, we will first address the prerequisites for understanding blockchain technology. This involves fully understanding the challenges of CRYPTOGRAPHY in an organized society based on the exchange of information. Modern communication channels (NETWORKS), including the internet, are weak points in our system and must evolve. We will detail the various encryption methods and network systems, as well as methods for validating information. In the second part, we will explain blockchain technology in detail, clearly distinguishing between the two distinct types that exist. These are two different ways of operating a blockchain, and it is important to differentiate between them. To do this, we will explain the fundamental operations of the various blockchains that exist today by exploring the innovations that have emerged in chronological order: Bitcoin and Ethereum for so-called “Proof of Work” blockchains, and those resulting from the latest innovations in this technology, known as “Proof of Stake,” each using a different method to validate the entry of new data into the blockchain. One of the most notable innovations is the creation of SMART CONTRACTS, or autonomous “smart” contracts, which enable the integration of computer programs into the blockchain—a development with significant potential. Finally, in the last section, we will discuss the potential applications and challenges of such technology and the innovations it could bring to the world of maritime transport. CRYPTOS CAPTAIN x-@bitcoinizeme 6 CRYPTOS CAPTAIN x-@bitcoinizeme 7 Table of Contents INTRODUCTION ..................................................................................................................................8 PART 1 - BASIC CONCEPTS FOR UNDERSTANDING BLOCKCHAIN TECHNOLOGY . 10 1. Introduction to Cryptography.............................................................................................................. 10 2. Different Types of Encryption.............................................................................................................. 11 2.2 Symmetric Encryption.................................................................................................................. 11 2.3 Asymmetric encryption ................................................................................................................ 12 3. Digital Networks and Different Methods of Information Transmission .......................................... 14 3.1 The so-called conventional centralized network (Client-Server).............................................. 14 3.2 The decentralized network (P2P) ................................................................................................ 15 4 Validation and integrity checking of information in a decentralized network ................................ 16 4.1 The Byzantine Generals' Problem ..................................................................................................... 16 4.2 The hash function.......................................................................................................................... 17 PART 2 - DESCRIPTION OF BLOCKCHAINS............................................................................ 18 1. General explanation .............................................................................................................................. 18 2. Proof of Work (PoS) Blockchains ........................................................................................................ 19 2.1 General Functioning of the Bitcoin (PoW) Blockchain.................................................................... 19 2.2 The Ethereum blockchain (Proof of Work with smart contracts).................................................. 22 2.3 The Drawbacks of PoW Technology .............................................................................................. 23 3. Proof of Stake (PoS) Blockchains ........................................................................................................ 24 4. Conclusion on the Different Types of Blockchains............................................................................. 25 PART 3 - THE CHALLENGES AND APPLICATIONS OF BLOCKCHAIN TECHNOLOGY .............................................................................................................................................................. 26 3.1 General Overview ................................................................................................................................ 26 3.2 Administrative Aspects ....................................................................................................................... 27 3.3 Operational aspects ............................................................................................................................. 27 3.4 Economic and environmental aspects................................................................................................ 28 CONCLUSION ....................................................................................................................................29 Bibliography .........................................................................................................................................30 LIST OF ILLUSTRATIONS................................................................................................................31 CRYPTOS CAPTAIN x-@bitcoinizeme 8 INTRODUCTION : All aspects of society are supported by digital technologies (economy, finance, media, industry, communications, etc.). These functions are therefore particularly vulnerable to malfunctions and malicious acts (hacking). Cybersecurity has thus become a critical issue for global stability. The collection, processing, and trading of personal data (Big Data) fall under this same issue. In 2009, the first digital currency (Bitcoin) emerged from the creation of blockchain technology, which uses cryptography and decentralized networks to secure and ensure the reliability of digital data exchanges through the principles of consensus and network decentralization. Digital networks and data are ubiquitous in our daily lives, both professionally and privately. This revolution began with the invention of the personal computer and gained momentum with the advent of the internet, connecting them worldwide. The acceleration of data exchange and the increasing volume of data generated by our activities continue to grow alongside the rise in computing power and the bandwidth of wired (fiber) and wireless networks (4G, Wi-Fi, etc.). We emphasize here that these technical advances are certainly welcome, as they enable the emergence of a new Information Economy, but They are not without their drawbacks. In the private sphere, our personal information is now traded like any other commodity, and we never benefit from the sale of our own data. In the professional sphere, these technologies enable the optimization of production, monitoring, and distribution through technical innovations specific to each field. We are able to produce more, faster, and with fewer human and material resources, and to adapt production flows to demand. Our society operates on a just-in-time basis, with minimal inventory. Distances are shrinking, and we’ve even reached a point where surgeons can perform operations remotely thanks to a global ultra-fast communication network and advances in robotics. We are thus entering an era where digital technology dominates every field: social media and online platforms are revolutionizing the way we think, act, and stay informed, significantly altering our habits. We are increasingly relying on technology for all our daily tasks as well as our professional activities, and every day we witness the shift toward digital interactions at the expense of physical ones. It is therefore necessary to examine the flaws and weaknesses of such technologies, as their impact on the physical, economic, and social worlds could be catastrophic. Indeed, we can easily CRYPTOS CAPTAIN x-@bitcoinizeme 9 envision the dangers that digital piracy—or “hacking”—can pose in a world entirely governed by digital technology. It is therefore legitimate and necessary to find adequate solutions to secure our digital communications and data systems. A few early examples serve as warnings about the dangers we face by placing blind trust in computer systems and communication networks. A No computer is ever immune to a "bug" (internal threat), and data exchange networks can easily be compromised unintentionally (network malfunctions, electromagnetic interference) or intentionally (malicious acts). Furthermore, these networks are a major concern in the event of conflict between nations due to their vulnerabilities. The current model of the internet and corporate networks is known as “centralized,” meaning that users do not communicate directly with one another but rather through a central server; which is also the model of the Cloud, highly popular in recent years. This model is particularly vulnerable to attacks because by attacking the central computer, one gains control of the entire network. We have witnessed a resurgence of large-scale, organized hacking operations (digital warfare), such as the hacking of the Pentagon and Sony, the “CryptoLocker” virus that affected many large companies, and the “Stuxnet” virus that targets the computer systems managing factories uranium enrichment, etc. We are also seeing an increase in the theft of personal data for financial gain, which clearly illustrates the emergence of “digital wealth.” In this study, we will therefore examine a technological innovation that could represent a revolution as significant as the advent of the internet to help us combat piracy and protect data, communications, and computer networks: BLOCKCHAIN technology, derived from cryptography and the use of a decentralized network. This technology, brought to light in 2009 by the arrival of Bitcoin—which could simply be summarized as a digital commodity. In this study, we are not focusing on Bitcoin itself but on the innovative underlying technology it utilizes. We will demonstrate that this technology can be an effective tool for addressing the issues outlined above, as well as the negative aspects that may result from it. To do so, it is necessary to explain its fundamental operating principles in order to highlight both its strengths and its weaknesses. We cannot ignore this technological innovation today, as it is still in its infancy. The fundamental problem solved by blockchain technology concerns the validation of new data entries in a decentralized network . In this study, we will focus on explaining the various validation methods and outlining their advantages and disadvantages. This technology is a combination of two pre-existing technologies: cryptography and decentralized networks. CRYPTOS CAPTAIN x-@bitcoinizeme 10 PART 1 - BASIC CONCEPTS FOR UNDERSTANDING BLOCKCHAIN TECHNOLOGY 1. Introduction to Cryptography The principle of cryptography—a word derived from the Greek kyptos (secret) and graphein (to write)—and cryptology, which additionally encompasses the study and decoding of encrypted messages, has been in use since ancient times, long before the advent of the computer age. The principle involves transforming a plaintext message into an encrypted message and then being able to perform the reverse operation so that only the intended recipient can receive the relevant information. We can therefore immediately see the value of this in military and commercial fields to ensure the authentication of the parties involved and the confidentiality of operations. Indeed, as far back as ancient times, there was the issue of the messenger who physically transported important documents between two parties—by land or sea—and who was not authorized to know the information but only to transmit it; the question of the physical and moral integrity of the person entrusted with such a mission was already being raised. Today, we can draw a parallel between the role of the messenger and that of the Internet. Cryptography ensures that only the recipient, who knows the decryption key, can view the document. The first question we might ask is this: if the encrypted message is transmitted by a messenger, the recipient must also have the information necessary to decrypt the message, which implies that they must also receive the encryption key and the process used—but through which medium? For if we use the same medium as If the communication for the encrypted message and the means to decrypt it are compromised, we are exposed to a major risk. It follows that this science is essential to the proper functioning of an organized and secure society, whether for military, financial, diplomatic, commercial, or private communications, as it enables us to counter potential disruptive elements and threats—both internal and external (such as a messenger who is corrupt or intercepted by the enemy). It has influenced the course of history for many civilizations: whoever possessed the highest level of confidentiality had the advantage. Each era saw different tricks for transmitting coded messages. Nebuchadnezzar would shave his soldiers’ heads, write a message on them, and wait for the hair to grow back before sending them to deliver the message. The oldest evidence of the use of an encryption system dates back to 2000 BC among the Egyptians; all major civilizations practiced the art of cryptography without considering it a science, yet its evolution and sophistication have been constant throughout the ages. The discovery of mathematics and its evolution have made it possible to develop increasingly complex and sophisticated encryption techniques. On the other hand, our analytical capabilities have CRYPTOS CAPTAIN x-@bitcoinizeme 11 also improved over time, rendering earlier encryption systems obsolete. This is therefore a veritable information war that has been ongoing throughout history. When a code is cracked, we must invent a new one—one that is increasingly complex as our analytical and mathematical capabilities and knowledge advance. It is therefore not a passive art but a true, living, and evolving science. In our modern world, and since the advent of computing, we have developed more sophisticated encryption systems, but the analytical capabilities of our ever-more-powerful computers also make them more vulnerable. It is therefore necessary to focus on more innovative techniques capable of withstanding the new analytical tools at our disposal. Claude Elwood SHANNON can be considered the father of modern cryptography. His remarkable work has enabled major advances in the fields of computer science and cryptanalysis during the 21st century. 2. The Different Types of Encryption 2.2 Symmetric encryption Figure 1 Symmetric encryption, Munkhzaya Ganbold, Wikipedia This is the most basic and widely used encryption method. It consists of several distinct methods that can be combined: -Substitutions: characters are replaced one by one with others (a single character can be replaced by multiple characters; this is known as a polyalphabetic substitution) -Transpositions: Characters are swapped without changing them. CRYPTOS CAPTAIN x-@bitcoinizeme 12 These encryption methods can be applied character by character (or bit by bit) or in blocks of data. The encryption and decryption method is implemented by an algorithm that the sender and receiver must agree upon. It is then necessary to share the encryption/decryption key, which contains the information detailing how this algorithm is applied, specific to each encryption. Three pieces of information are therefore required to share an encrypted message: the encrypted message itself, the encryption algorithm, and the decryption key. However, if the same network is used to share them, there is a risk of corruption of the information, or even the complete interception of the message by an unauthorized third party, which renders this method ineffective. If, in addition to the encrypted message, one possesses the encryption algorithm used, it is sufficient try all possible key permutations one by one, which is now possible thanks to the vast computing power at our disposal. The flaws in this method stem from the fact that the same key is used to encrypt and decrypt the message, and that if one wishes to guard against any possibility of the message being hacked, it is preferable to use a key of a length equivalent to the message. This implies that both the encrypted message and its encryption/decryption key must be transmitted, which poses a technical problem: the key must be delivered in person or via another secure method; it would be impractical to use the same transmission network for both the message and its key. The second problem is the size of the key, which must increase with the size of the message: it therefore becomes difficult to encrypt long and complex messages. To address this problem, one can combine a symmetric cryptographic function with a hash function, which we will discuss later. 2.3 Asymmetric encryption Asymmetric encryption does not use the same key for encryption and decryption. To exchange encrypted messages or information back and forth between two people, four keys are required; they work in pairs, with each participant in the exchange possessing one. Each pair consists of two keys: a public key, which is shared with the recipient, and a private key, which must remain solely in the possession of its owner. The private key is paired with a public key. The public key is used to encrypt the message, which only the associated private key can decrypt. The public key can therefore be safely shared over the same network, while the private key must remain strictly isolated. CRYPTOS CAPTAIN x-@bitcoinizeme 13 Figure 2 Public key encryption, Davidgothberg, Wikipedia, Let’s take a simple example of an exchange between Bob and Alice. Bob must have: -Her own private key and Alice's public key. Alice must have, in turn: -Her private key and Bob’s public key Bob, who wants to send a message to Alice, will therefore use Alice’s public key to encrypt the message, which only Alice can decrypt using her private key. We can therefore conclude that the asymmetric encryption system is more secure because the private key of each person participating in the exchange is not shared over the network and remains strictly personal. Furthermore, even if the message is intercepted by a third party who knows the algorithm used, it is much more complex to decrypt the message by trying all possible keys, as the possibilities are infinite. This method is now the standard security protocol in use. An interesting feature is the ability to sign a message. The sender signs the message using their private key. The recipient, who holds the sender’s public key, can then verify the message’s authenticity. CRYPTOS CAPTAIN x-@bitcoinizeme 14 3. The digital digital and the various methods of information transmission 3.1 The so-called conventional centralized network (Client-Server) Figure 3 Network Central, And1mu, Wikipedia This is a network in which the user connects to a single central server via a device called a client or terminal. The server transmits information to the terminal (website, Minitel) via a communication channel (cable or wireless). The server may also function to connect one client with another (Internet, telephone, telegram). For this to work, there must be two-way communication between the server and the client. The client sends a request to the server, and the server responds by sending the requested information to the client. The server and client must speak the same language; this is referred to as a protocol. This is a so-called centralized system because there is a single server or database, and the multiple clients do not communicate directly with each other but only via the server. This is the classic structure of corporate intranets and the internet. This system is highly vulnerable to DDoS attacks, as all it takes is to overwhelm the single server with excessive requests by simulating a multitude of clients to take it offline; all clients find themselves isolated, unable to communicate with one another independently of the server. Centralized networks are also highly vulnerable to man-in-the-middle attacks; a hacker need only mimic a bank’s webpage and insert it between the client and the server—the victim then believes they are on the legitimate site and enters their password, by which point it is too late. It is easy to see that “cloud” technology, based on this principle and which was all the rage until recently, is already completely outdated due to the flaws in this system. CRYPTOS CAPTAIN x-@bitcoinizeme 15 3.2 The decentralized network (P2P) Figure 4 P2P network, Mauro Bieg, Wikipedia This is a network in which all machines are interconnected; it is referred to as a P2P (Peer-to- Peer) network. Information is no longer stored on a central server but on every machine in the network. Each machine is connected to N other machines. Thus, any new information entered on one of the network’s machines is transmitted to a considerable number of machines within a few microseconds. For example, if each machine is connected to 20 other machines, the information is distributed across 3,200,000 machines after 5 levels of propagation. A machine that is part of a P2P network is called a node and serves as both a client and a server. One of the first public P2P networks, Napster, was launched in 2001. It was used to illegally share music. Shortly thereafter, the University of Cambridge developed the TOR (The Onion Router) system, based on the P2P principle, which was notably used and funded by U.S. intelligence agencies to enable opponents of dictatorships to communicate with the free world. Today, TOR is the foundation of the Dark Web, used both for criminal activities and, as before, by opponents of totalitarian regimes or institutions to communicate with the free world. The information propagation tree is so complex that it is difficult to trace the source. CRYPTOS CAPTAIN x-@bitcoinizeme 16 4 Validation and verification of information integrity in a decentralized network The consensus principle refers to the way in which members of a network validate the entry of new data into a database shared by a decentralized network. We can imagine a democratic voting system in which at least 50% of the machines in the decentralized network must agree to integrate new data into all other machines in the network. Unlike a centralized network, where only the central server has the power to validate new data entries (which makes it highly vulnerable, since if a single server is hacked, thousands of connected “client” machines are infected simultaneously). The consensus problem is a hot topic in the blockchain world, and we distinguish between two major schools of thought defining two types of blockchain, each with a different way of reaching consensus. These are PoW (Proof of Work) and PoS (Proof of Stake) systems. The former relies on nodes with high computing power to achieve consensus, while the latter relies on so-called validator nodes. We will discuss these two types of processes in more detail below 4.1 The Byzantine Generals’ Problem There is a fundamental technical problem in achieving consensus in a decentralized network, where each node stores a shared ledger: how can we ensure that a node has not been compromised and is not holding or disseminating a corrupted or compromised ledger? In a centralized network, on the other hand, it is sufficient to monitor a single machine—the central server. This problem was expertly illustrated in a 1982 paper written by LESLIE LAMPORT, ROBERT SHOSTAK, and MARSHALL PEAS, and it is known as the “Byzantine Generals’ Problem,” which originally addressed the same issue but concerning the internal operation of a machine (communication between computer components), a concept that can be extended to an entire network. If generals, communicating solely via a network or messengers, wish to attack the same city, how can they ensure they receive and transmit to all their colleagues and that these orders are consistent and accurate? How can they be sure that one of them is not a traitor or that one of the messengers is corrupt and transmits false orders? CRYPTOS CAPTAIN x-@bitcoinizeme 17 4.2 The hash function A hash function is a function that takes a string of any length as an argument and returns a string of fixed length (the hash); the probability that two different strings will produce the same "hash" is infinitesimally small, but not zero; this is referred to as a collision. The goal here is to transform the raw data to be processed into a fixed-length sequence of alphanumeric characters. Thanks to hash functions, any message of variable length can be reduced to a sequence of alphanumeric characters whose length is determined by the hash algorithm used. The result obtained is called a HASH. Whether it is the message “hello world” or an entire book, the resulting HASH will be the same length. Thus, it is sufficient to verify the hash of received information to ensure that the text is exactly identical to the text sent (a single comma or space in a 1,000-page text will produce a completely different hash). The difference lies in the time required to compress a short piece of information compared to an entire book. Take, for example, the SHA256 algorithm used by Bitcoin: -The string "Hello world" is represented in hexadecimal as F0DA559EA59CED68B4D657496BEE9753C0447D70702AF1A351C7577226D97723 -The text of this entire thesis would be represented as 6c75d2c729776f53b846d021ef01f5ff195fbe970811a867bd395f3270b9fc19 It follows that using a hash algorithm also allows us to verify the integrity of the information contained in a transmission. For example, if we want to ensure the integrity of this thesis after receiving it via the internet, we simply need to convert the received file to SHA256 and compare the result with the expression given above. This principle replaces the CHECKSUM, which simply sums all the 0s and 1s comprising a digitized text but has a very high “collision rate”: two completely different texts can produce the same checksum. Using a hash provides considerable time savings and increased reliability in the process of verifying information integrity. There is no need to compare this document with an original word for word when it is sufficient to generate a hash; with the average computing power available to us—such as that of a smartphone—this is enough to arrive at the same result. Note that the HASH function is a cryptographic function; it is impossible to reverse the operation and go from an SHA256 hash to the original message. The ability of a processor CRYPTOS CAPTAIN x-@bitcoinizeme 18 to perform multiple iterations of a hash function is called the hashrate and is measured in hashes per second. Figure 5 Hash function diagram, Wikipedia, helix84 PART 2 - DESCRIPTION OF BLOCKCHAINS 1. General Explanation Consensus is a fundamental issue in a decentralized computer system that can be likened to an autonomous ecosystem. How can we ensure that all nodes in a network accept and integrate data in a coordinated and symmetrical manner? The system, in its entirety, must be capable of detecting a malicious attempt to introduce corrupted or altered data into the network (and thus hijack the system). Unlike a centralized database, where a single central server simply verifies new information to be integrated, in a blockchain, consensus must be reached autonomously: the decentralized network must be capable of governing itself and determining on its own whether any new data to be integrated is correct and valid before propagating it to all nodes. To achieve this, the technology known as BLOCKCHAIN was developed: The data shared by the network’s nodes is divided over time into BLOCKS. The BLOCKCHAIN can be likened to a living database that is built BLOCK by BLOCK. Starting from an initial BLOCK called the “GENESIS BLOCK,” which must be shared between at least two machines (otherwise, there would be no point in calling it a network), a blockchain is built through a succession of blocks assembled one after another as the database assimilates new information. A blockchain is chronological, and past blocks are immutable. It is impossible to modify a block once it has been validated and integrated into a blockchain. CRYPTOS CAPTAIN x-@bitcoinizeme 19 Blockchain is the fusion of two technologies: cryptography (which enables consensus) and a decentralized network (which serves as a platform for exchanging information). A blockchain is an interactive and scalable database defined by initial, immutable parameters contained within its genesis block. A blockchain can therefore be used for numerous applications where data integrity and preservation are paramount. For example, a global and independent monetary system (BITCOIN), but it is also highly relevant for managing any global computing system involving a large number of machines, such as the IoT (Internet of Things), the management of complex industrial systems forming a network, or a fleet of drones or robots that must cooperate with one another. We understand that the security of such systems is paramount. There are two main families of blockchain, each with a different method of reaching consensus: -Proof-of-Work blockchains, which use mining as their consensus mechanism. The more computing power dedicated to mining, the more secure the network. -Proof of Stake blockchains: there is no mining; consensus relies on master nodes that the network trusts. In the case of a cryptocurrency, these are nodes holding a large amount of the currency, making an attack very costly. 2. Proof of Stake (PoS) Blockchains 2.1 General operation of the Bitcoin (PoW) blockchain Why a decentralized blockchain instead of a centralized local database? Let’s take a closer look at Bitcoin and the motivations of its mysterious inventor, setting aside its financial and economic aspects for the moment. Although its inventor, Satoshi Nakamoto, has never come forward, there are traces of the thinking that led to the creation of the first blockchain and the rationale behind the technical solutions implemented to meet the specifications for creating an international, autonomous virtual currency without a regulatory body. This consists of an exchange of 15 emails between the inventor and a group of cryptography enthusiasts in response to an initial document called a whitepaper (a term now commonly used to define the basic principles of a blockchain). CRYPTOS CAPTAIN x-@bitcoinizeme 20 The principle was to create a decentralized network enabling transactions to be carried out in an irreversible, reliable, and secure manner. This decentralized network consists of nodes sharing a common transaction ledger , a copy of which is stored in the memory of each node. The principles outlined are simple: double- spending must be impossible; usage must be anonymous; no central authority or third party controls the circulating supply or the issuance of new BITCOINS; but there are defined basic rules that cannot be changed (total number of bitcoins, number of bitcoins generated per block, etc.). Satoshi Nakamoto addresses this problem with an innovation: blockchain technology. A blockchain is a combination of two existing technologies: cryptography and peer-to-peer networks. Cryptography allows both for verifying transactions and authenticating each node (member) of the network, which has its own public key (address or account number) and a private key (password) that grants permission to send data over the network from that address—or, in the case of Bitcoin, to make a transaction. The Bitcoin blockchain is simply a ledger of verified and validated transactions between one or more addresses, recorded in blocks linked together chronologically to form a chain of blocks. Each node therefore knows the state of the ledger at any given moment ‘T’ and knows the credit balance of each address. In the Bitcoin system, debt does not exist. The blockchain is the result of two distinct mechanisms characterized by two types of nodes that it is important to differentiate: Each node can be: -As a simple "Peer" whose sole role is to relay data within the information chain and store the block history, it uses only its network resources—namely, its internet bandwidth and memory. A simple Peer receives any compensation for its contribution. A Peer-type node participates solely in the decentralized network aspect of the blockchain. -Alternatively, it can also contribute its computing power to participate in the validation process of new transactions by solving a (SHA256); such a node is called a ‘miner’ and is rewarded “reward” in the form of transaction fees and also newly generated bitcoins for making its computing power available. These nodes are called MINERS. It is the miners who perform the cryptographic and hashing functions of blockchain technology. CRYPTOS CAPTAIN x-@bitcoinizeme 21 This is known as mining: high-performance processors are dedicated to this task and apply a specific encryption algorithm (SHA256), and the “winning” computing unit—the first to verify and validate the correct block—is awarded the new Bitcoins generated as a reward for participating in the transaction validation process. The new, validated, and verified block is then integrated by all network members through exponential propagation. The use of a hash algorithm during this process also allows for data compression, so the blocks are lighter compared to a raw database. We refer to it as a blockchain because it is, in fact, a chain of several blocks linked together. Two major advantages of this technology emerge from this explanation: -The first is that the database, the blockchain, is DECENTRALIZED, because each node in the network has a copy of it in its memory, which implies that there are as many up-to-date backups as there are nodes in the network, and that 100% of the nodes would have to be destroyed to alter the transaction history. This is in contrast to a database at a bank or a company, which has only a few backups on centralized servers and is therefore vulnerable. -The second reason is that, thanks to mining, it is difficult to interact with the blockchain in a malicious way, as the computational power used to run the encryption and verification algorithms acts as a guarantor of the network’s and information’s integrity. To insert a fraudulent transaction into the next block, a hacker must therefore control more than 50% of the mining power. Since this power is itself decentralized, it is highly unlikely that a hacker could mobilize thousands of computing units distributed globally and simultaneously. This is what we call a 51% attack. In a PoW-type blockchain, miners are responsible for validating and confirming the entry of new data into the network. To do this, they use a specific cryptographic algorithm applied by high- performance computing processors. Miners therefore apply a cascading hash function. A data packet is first first hashed, and the resulting hash is then hashed again. This operation is repeated as many times as necessary until the desired result (target) is obtained. That is, until a hash is reached that meets the required specifications (target). Since a hash has a fixed length, the more characters defined in the sequence, the more difficult it will be to find a hash that matches the target data block. This is the concept of mining difficulty: a certain number of zeros is required at the beginning of a block’s hash, so miners compete to transform the data packet of the future block—which includes transactions—into a hash whose beginning contains a certain number of zeros. The more zeros required at the beginning of the hash, the fewer solutions corresponding to the same message there are, and the more miners must CRYPTOS CAPTAIN x-@bitcoinizeme 22 increase the number of iterations of the hash function to “win” and find the block that will be selected as valid. The higher a miner’s hashrate (hashes per second), the greater their chance of obtaining the correct result within the allotted time. This defines the concept of “mining difficulty.” Difficulty is a key parameter in the operation of a PoW blockchain. It is adaptive and varies over time. The shorter the interval between two blocks, the more power (hashrate) is required to win the block. On the other hand, the more miners there are, the higher the difficulty becomes. We can draw an analogy with mining for minerals: Since the amount of ore in a mine is fixed, the more excavators in operation and the faster they are, the less ore each individual machine extracts. 2.2 The Ethereum blockchain (proof-of-work with smart contracts) ETHEREUM represents the second major evolution of PoW blockchain technology. Developed in 2015 by Vitalik Buterin, then 21 years old, through a new type of crowdfunding called an ICO (Initial Coin Offering). The principle is simple: a portion of the currency is created in advance and distributed to investors in exchange for their financial contribution. The currency in question has no value until a market is established and a price is set based on the principle of supply and demand. The subsequent issuance of the currency is created through mining, and there is no limit on the maximum number of Ethereum that can be created. It should be noted that this blockchain is the one undergoing the most intensive ongoing development, and long-term plans include phasing out mining and transitioning to a hybrid PoS system. Like Bitcoin, whose potential future developments are restricted by the initial rules, which are difficult to modify, and the absence of a central authority to oversee changes. The two main innovations revealed by Vitalik Buterin are: -The ability to create so-called "smart contracts ." This means that computer cod