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Module 1 Blockchain Foundations

In this module we will cover the following topics:

  1. Why are People Excited About Blockchain?
  2. The Brief, Brief History of Blockchain
  3. The Move to Decentralization
  4. Ledgers, Distributed Ledgers, and Consensus
  5. What is Blockchain?

Learning Objectives

  • Recall some major dates in the foundation of blockchain
  • State some advantages of decentralization
  • Describe ledgers and distributed ledgers
  • Explain the basic concept of a blockchain
  • Describe the reasons why people are excited about blockchain.
  • Define ConsenSys's role in the blockchain ecosystem.

Lesson 1 Introduction

1.1 Introduction

digitization gambit:

  • Benefits
    • Preserve values
    • Establish trust, maintain truth and stay secure
    • Users of technology can be empowered without being beholden to third-party power brokers
  • Drawbacks and risks

1.2 Consensys (the company)

Foucs on Ethereum

Lesson 2 The Brief, Brief History of Blockchain

  • 1990s Stuart Haber and W Scott Stornetta

    • how to keep the past secure, and keep digital information safe and resistant to tampering?
      • Chain of cryptographically secured blocks
      • paper “How to Time-Stamp a Digital Document”, published in the Journal of Cryptology. 1991

  • 1993 solve spam: proof of work

  • 2008 bitcoin Satoshi Nakamoto "Bitcoin: A Peer-to-Peer Electronic Cash System"

  • 2014 Ethereum

    • Ethereum's key innovation is that it is much more than just a currency or a record of transactions.
    • It's specification can actually run computation. Called the Ethereum Virtual Machine, or the world computer, the EVM allows for what are called smart contracts, or programs that can be deployed onto the blockchain, letting developers create decentralized applications that are housed, distributed on the chain itself.

Lesson 3: What is Decentralization?

Decentralization

  • no central authority
  • community members self-sovereign
  • power is shared

Example - BitTorrent

  • a peer-to-peer file sharing protocol that doesn't rely on any one server, company, or entity to work.

Decentralization benefits

  • systems are less likely to fail when rely on separated redundant components
  • harder to attack, users won't all be gathered in one place
  • nodes can come and go, but the system remains strong

Three main forms of decentralization, or how authority is transferred

  • Architectural (de)centralization  — how many physical computers is a system made up of? How many of those computers can it tolerate breaking down at any single time?

  • Political (de)centralization  — how many individuals or organizations ultimately control the computers that the system is made up of?

  • Logical (de)centralization — do the interface and data structures that the system presents and maintains look more like a single monolithic object, or an amorphous swarm? One simple heuristic is: if you cut the system in half, including both providers and users, will both halves continue to fully operate as independent units?

Lesson 4: Ledgers, Distributed Ledgers, and Consensus

double entry ledger accounting

  • every business has their own ledger, their own book of transactions. If you want to confirm that a transaction took place, you'd have to look at the books of two businesses, a credit to one and a debit to the other.
  • paper ledger, or spreadsheet/digital ledger

Distributed Ledgers

  • how make those ledgers work together?
  • how to keep them keep their information and alignment?

consensus

  • In order to keep the distributed ledgers in alignment, protocols must be established for the network to reach consensus on what exactly gets written to those ledgers and if one such ledger it gets changed, these networks should be able to notice the discrepancy and self-correct.
  • how to do?
    • modern networks do this with a combination of consensus formation via things like
      • proof of work as well as
      • peer to peer protocols and
      • cryptography
    • This can make the process of auditing complicated transactions much much easier, as it doesn't require coordinating the separate books from many different business entities. I

distributed ledgers don't have to be blockchains and that blockchains don't have to be distributed. It's just that the true power of blockchain technology comes when these two things are combined.

Lesson 5: The Paper Blockchain

block chain

  • is actually an extremely simple concept.
  • It's just a set of linearly connected information containing blocks secured with cryptography.

Why Blockchain?

two major distinguishing pieces of technology upgrade that we're dealing with

  • One is the ability to digitize assets.
  • ability to have Smart Contracts