The Blockchain, Bitcoin and other Cryptocurrencies
- 1. The Blockchain and its Applications An Introduction By Apondi Kevin Omondi
- 2. The General Structure Decentralized Ledger Cryptocurrency Asset Management Smart Contracts Consensus Rules Cryptography The blockchain is applied in ensuring immutability of distributed ledgers.These distributed ledgers are stored in each full node in the bitcoin network communicating through the internet. Applications such as cryptocurrencies are built on top of the blockchain protocol and access to the ledgers is through cryptographic keys and addresses.
- 3. Breaking it Down: What do we mean by Decentralized Ledgers, Consensus rules, Cryptography and Cryptocurrencies
- 4. Decentralized/Distributed Ledger “It’s like a lot of people having a copy of the same spreadsheet, and anyone can add an entry. Every time an entry is made, everyone updates their copy of the spreadsheet. And all the copies are open for anyone to see.” - Rodney Johnson, Business Insider
- 6. The blockchain is a file storage system where groups of transactions are stored in blocks after passing through a proof of work algorithm called hashing. A block contains a number of transactions and is approximately 1MB in size. Each block is created after about 10 minutes and added to the main chain of blocks through a process called mining. What is Blockchain? Video Explanation
- 8. Blockchain Pros ● Efficiency ● Disintermediation - No central administrator. ● High security of records - this is due to the use of cryptography. ● Transparency of transactions ● High anonymity of transacting parties. ● Auditability ● Traceability Blockchain Cons ● Cannot be easily regulated without undermining its useful properties such as anonymity ● Complexity ● Volume – Blockchain is restricted to handling 7 transactions per second while VISA has the peak capacity to handle 56,000 transactions per second. ● Blockchain is more of a solution looking for a problem and hence does not fully satisfy the current user needs
- 10. ● These are protocols/rules governing how nodes in the blockchain network interact. ● They enable group decision- making hence enabling group members to develop and agree to support a decision in the best interest of the whole. Proposal Discussion Test for Consensus YesNo Modification to Proposal Stand Aside Consensus Achieved Consensus Raised Action PointsBlocked
- 11. Cryptography
- 12. A code is a system of symbols, letters, words, or signals that are used instead of ordinary words and numbers to send messages or store information. A code is used to keep the message short or to keep it secret. Codes and ciphers are forms of secret communication. A code replaces words, phrases, or sentences with groups of letters or numbers, while a cipher rearranges letters or uses substitutes to disguise the message. This process is called encryption or enciphering. The science that studies such secret communication is called cryptology. Source: Cryptology for kids Encrypt Hi Kevin Message: Hi Kevin Kevin’s Public Key 6FB9957008EO3CE4 Decrypt 6FB9957008E O3CE4 Kevin’s Private Key Untrusted Network e.g Internet Bitcoin uses Public Key Cryptography to manage keys and addresses
- 14. Cryptocurrency These are digital money/tokens that use cryptography and blockchain to facilitate secure anonymous transactions. Cryptocurrencies include: ● Bitcoin ● Ethereum ● Litecoin Smart Contract These are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. E.g ● Ethereum Smart Contract Asset Management This is the management of valuable assets including titles to land and property in the immutable blockchain. The application of blockchain in asset management ensures security and immutability of records hence promoting efficiency.
- 15. Example of a Bitcoin Transaction Mr. B sends some Bitcoins to Mr.A To use bitcoin, users install an application on their computer or mobile phone that creates an encrypted wallet with its own unique address. This address can be changed with each transaction and isn’t easily connected to a user’s identity. Examples of wallets include: ● Mycelium Wallet ● Bread Wallet
- 16. Blockchain Cycle Source: Gartner.com Like the cable TV, the internet, the telephone and many technologies, bitcoin follows an S- curve of growth. This graph illustrates the predicted trend of the growth of bitcoin and other cryptocurrencies
- 17. Blockchain Disruptions ● Financial services. Blockchain enables faster clearing of transactions at cheaper costs than banks and other financial institutions. ● Voting. In future elections, votes could be cast through a blockchain. Blockchain’s audit trail would authenticate voters’ identity and keep track of votes while allowing anyone to verify no votes were altered. ● Music Streaming. It’s estimated that artists lose up to 86% of the proceeds from their music because of illegal downloading. Blockchain is making it possible for artists to earn royalties on their music without going through a record label. For example MYCELIA ● Real Estate. Using blockchain, anyone can manage, track, and transfer land titles and property deeds—no need for intermediaries. A firm called Ubitquity is providing this service right now. ● Supply chain Management. Smart contracts function as a traceability system—recording, managing, and enforcing contracts in a secure and transparent manner.
- 18. About Me Apondi Kevin Omondi A young guy with a smart mind and an unstoppable motivation to change Africa through technology. Contact Me: aomondi15@alustudent.com