Blockchain

So what is a Blockchain?

1. transactions

2. immutable ledgers

3. decentralized peers

4. consensus mechanisms

It is a distributed ledger represented by a sequential chain of data blocks that records transactions, establishes identity of the users, and establishes contracts

Decentralized Peers

rather than then centralized “hub and spoke” type of network—> blockchain is a decentralized peer to peer network

• each NODE has a copy of the ledger

Consensus

• ensures that the next block in a blockchain is the ONE and ONLY version of the TRUTH

• keeps powerful adversaries from derailing the system and successfully forking the chain

• pros and cons

Consensus

1. Proof of Work (POW)

• wasteful

Consensus

2. Proof of Stake (POS)

more efficient

Hash

• takes the block’s data and nonce as input and produces a fixed length—> unique “fingerprint” of the block

• each blocks hash depends on its own data and the hash of the previous block—> which links blocks together and makes the chains history immutable

• IF any part of a block’s data is CHANGED—> its hash changes COMPLETELY

• The HASH—> result of applying the algorithm to the block number, nonce, transaction/data

Nonce:

• to provide a variable that miners can CHANGE to find a valid hash for a block 

  • number only used once

  • miners can change freely

  • miners change the nonce in each attempt to generate a different hash for the block

  • manipulate the nonce to achieve the satisfaction of the hash

Transactions:

• as with enterprise transactions today—> blockchain is a historical archive of decisions and actions taken

• proof of history, provides provenance

NFTs

• NON FUNGIBLE TOKENS

  • each NFT is unique and cannot be replaced by another identical item—> unlike money, which is fungible

Smart Contract: convey stuff on the blockchain

• computer code

• provides business logic layer prior to block submission

• can be as simple as “if-then” requirements, or as complicated as multi-participant processes that run on automated agents