What is a blockchain?
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The document presents an overview of blockchain technology, highlighting its origins with Bitcoin and its role as a distributed ledger verified through consensus mechanisms. It discusses the implications of the financial system's trust crisis that led to the demand for an alternative like Bitcoin, as well as the technical aspects of how transactions are processed and secured on a blockchain. Additionally, it explores various applications of blockchain technology beyond cryptocurrencies, such as in supply chain management and health record ownership.
What is a blockchain?
- 1. What is a blockchain? ● Presented by Kevin Koo on 8 Sept 2018 ● Venue: Pusat Bandar Puchong, Selangor ● Source: cover of Fortune magazine, 1 Sept 2017 edition
- 2. About me ● From Kuala Lumpur ● Lawyer, blockchain enthusiast ● Co-founder, Lex Futurus LLC ● Partner, Koo Chin Nam & Co.
- 3. In case you get lost A Blockchain is: ● Distributed ledger (record of transactions) ● Simultaneously recorded by all network nodes using P2P technology ● Records are timestamped and add-only (no deletion) ● Transactions are verified using a consensus mechanism such as Proof Of Work ● Records are secured against tampering using hash
- 4. Note This presentation includes graphics found on the Internet. The copyright for the images belong to their respective creators. The images were used solely for purpose of providing education content to the attendees of a talk. This presentation was made on 8 September 2018.
- 5. A short history lesson Because blockchain started with Bitcoin!
- 6. It began with a crisis... ● Financial meltdown in the USA due to subprime crisis
- 9. Breakdown of trust ● People did not trust the banking system. ● People demanded an alternative system. ● People were disappointed that the banks betrayed their trust. ● There was a backlash against the centralization of the banking system. ● There was anger against the bank’s power to create money out of thin air.
- 10. Money from thin air? ● Banks maintain only a small percentage of their clients’ deposits made in their accounts. ● The rest of their clients’ deposits can be loaned out according to the capital adequacy ratio (CAR), for the banks to earn interest from loans ● If everybody went to the bank to withdraw their money simultaneously, the bank could not pay all of its clients. ●
- 11. The Bitcoin white paper ● Written by anonymous researcher, Satoshi Nakamoto
- 12. Bitcoin proposal by Satoshi ● Digital currency, as a way to make payments over the Internet anonymously. ● Was not subject to any financial institution, banks, intermediaries, governments, etc ● Anti-inflationary: Fixed number of bitcoins ● Based on a network of independent computers, thus not requiring trust. ● Consensus: Based on a peer-to-peer network, where transactions must be verified on multiple computers before being approved.
- 13. Blockchain started with Bitcoin ● Bitcoin’s underlying technology is blockchain, and the means of keeping Bitcoin transactions and records secure. ● Bitcoin and other cryptocurrencies have no central authority to regulate how much is being minted. The only failproof mechanism is the code (which regulates the maximum number of Bitcoin) and the Blockchain (which stores records of the transactions) ● Blockchain has many potential applications. Bitcoin and cryptocurrencies is just one of many!
- 14. Blockchain basics ● The underlying technology that makes Bitcoin and other cryptocurrencies possible
- 16. Explaining a block ● Transactions are verified by the nodes, and then grouped together into blocks. ● Blocks are then “chained” together.
- 19. Understanding the whitepaper ● You can read it at https://www.bitcoin.com/bitcoin.pdf
- 20. ● An understanding of Bitcoin’s technology must begin with the rationale for a P2P network solution.
- 22. A P2P solution is about keeping actors honest ● Everybody knows what everybody else knows ● Nobody can “game the system” by using information asymmetry ● It becomes expensive to attack the network due to the large number of nodes in the network (true in the case of Bitcoin), therefore ensuring the integrity of the system. (In other words, it avoids a 51% attack)
- 23. ● Hashes are used to verify previous transactions, while adding new transactions.
- 24. ● Proof of Work is a protocol that uses an arbitrary number known as a “nonce” to fix the hashing rate of the network. Higher rate = more difficulty.
- 25. Double spending ● Double spending is an attack, which involves spending the same amount twice before the transaction is confirmed on the blockchain.
- 26. ● Someone will not be receiving their bitcoin. ● The blockchain can only confirm one of the two transactions!
- 28. Timestamping transactions ● The time and date of each transaction is recorded into the blockchain!
- 30. PoW prevents manipulation ● ASIC computers “mining” and consuming electricity ● Proof of Work makes it expensive for an attacker to attack the network.
- 34. Smart contracts, basically ● Smart contracts were first made popular in the Ethereum blockchain, not the Bitcoin blockchain. ● Think of all the nodes on the network, and their computing power. Surely, rather than doing purely Proof of Work, some of that computing power can be used to run little programs! ● On the Ethereum network, there are two types of accounts: Personal accounts, and smart contract accounts. ● Smart contracts are little programs on the blockchain.
- 35. Examples of use cases ● Blockchain can be used not only in cryptocurrencies and payments. Here are some examples how companies are using blockchain to solve our everyday problems.
- 37. ● Everledger is tracking diamonds and providing supply chain / proof of ownership
- 39. ● WePower energy trading platform
- 40. ● Allowing patients to take control of their health records using the blockchain
- 41. ● Steemit is a blogging / social media / social networking site built on the blockchain
- 42. ● Neil Strauss is an author on the Steemit platform. He has been earning good money from his articles!
- 43. Which cat is better?
- 44. Get in touch. ● http://www.kevinkoo.com ● E-mail: kevinkoosk@gmail.com / kevin@lexfuturus.io ● Telegram / Skype / Twitter: @kevinkoosk