Blockchain

A brief but concise explanation....

* https://www.sciencealert.com/the-original-bitcoin-still-exists-as-giant-stone-money-on-a-tiny-pacific-island

http://www.bbc.com/travel/story/20180502-the-tiny-island-with-human-sized-money

Content

What is a Blockchain?

How a Blockchain works?

Blockchain generations

What is an smart contract?

Blockchain applications

https://www.youtube.com/embed/XVZxjVJz4ds?enablejsapi=1

What is a Blockchain?

“To understand the power of blockchain systems, and the things they can do, it is important to distinguish between three things that are commonly muddled up, namely the bitcoin currency, the specific blockchain that underpins it and the idea of blockchains in general.” The Trust Machine, THE ECONOMIST, Oct. 31, 2015

“BLOCKCHAIN” HAS MANY MEANINGS

Is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way

What is Blockchain?

A distributed ledger which is:
• Decentralized
• Peer-to-peer
• Tamper-evident/resistant
• Synchronized through consensus

How a Blockchain works?

Bob

Alice

Traditional scheme to send money

Bob

Alice

Transaction is send to the network in order to be validated and added to the blockchain.

Alice and Bob playing Chess by Mail
– Alice sends Bob “1 e4”
– Bob sends back “1 ... e5”
– Alice sends Bob “2 Nf3”

If they don’t agree on the state of the board, they can’t play a game!

1. Both know the starting positions of the board.
2. Both know the sequence of messages so far (i.e., the moves)
3. Thus, they can reconstruct the state of the board.

If we agree on history, we agree with the present state of the world!

Distributed ledger

Transaction003

Previous block Hash

Direction sender

Direction receiver

Amount

0x89437

0x324DE

0x3432CCD4343

0xFDFAB332FDE4

0x90CDE

0x89437

0x2332CCDFECD

0xF333B3324AA4

0x89437

0x90CDE

0x4532DDE3343

0xADDBB332F845

Miners have to validate the transaction

Proof of work

Solve a difficult mathematical problem

Proves that a miner did spend time and resources to solve the problem.

When a block is 'solved', the transactions contained are considered confirmed.

There exist another mechanisms to validate transactions. Like Proof of stake

Where cryptography is used...

- Initiation and Broadcasting of Transaction

Digital Signatures
Private/Public Keys

-Validation of Transaction

Proof of Work and certain alternatives

-Chaining Blocks

Hash Function

Blockchain generations

1 generation

Digital Currencies

Bitcoin is an example of this generation

The blockchain transfers ownership and records the transaction. This type of money is called cryptocurrency.

2 generation

Smart Contracts

Ethereum is an example of this generation

Smart contracts are those that are self-managing on a blockchain. They are triggered by an event like the passing of an expiration date or the achievement of a particular price goal.

3 generation

The Future

Cardano is an example of this generation

Will be able to do is let different blockchains ‘talk’ to each other like a computer network essentially.

Third generation blockchains can also work in layers. So you could have one layer handling contracts, one layer handling transactions and another layer for passing secure data between blockchains.

What is an smart contract?

Autonomous computer systems, written in code, that manage executions between individuals on the Blockchain.

Seller

Buyer

Broker

ABC

120.32

Transaction include private key of both participants

All of this trigger the execution of the smart contract.

Example buying an stock

It verifies the availability of the stock and the payment, and then makes the transfer between the seller and buyer.

Blockchain applications

Trusted concert tickets

It's hard to tell real tickets from counterfeits, especially if you bought them from a third-party website or a private individual.

The event venue registers the event, date and serial number of each ticket to a blockchain, which is accessible online.

When the ticket is first sold, it's assigned an address—a string of data which is publicly viewable on the blockchain.

When the ticket is first sold, it's assigned an address—a string of data which is publicly viewable on the blockchain. The owner is given a private key, which is a hash of the address data.

More efficient markets

In the financial markets, trades happen in a fraction of a second. But actually exchanging the assets and payments can take days, involving multiple banks and clearinghouses. That can lead to errors, delays, added costs and unnecessary risks.

Removes bottlenecks