What is Blockchain

good morning today we are going to talk about blockchain the reason we are going to talk about that is that we need to create common language across Business and Technology about this issue unbuilt Einstein once said that if you cannot explain it simply you do not understand it what enough the goal today is to explain it simply so everyone understand it well enough ok so the first thing that we need to understand are two basic terms Bitcoin and blockchain Bitcoin is a digital coin it's money which is digital we are not going to talk about this Bitcoin at this talk we are going to talk about blockchain blockchain is technology that enables moving digital coins or assets from one individual to another individual it's very important to understand that bitcoin is not blockchain it is important to understand in our common language because I heard that compliance people are saying oh we cannot talk about Bitcoin maybe because it has bad reputation but about blockchain we should and can talk ok so after we understood the basic terms of Bitcoin and blockchain it times to go into the problems a blockchain attempts to solve and the problem is money transfer I'm going to explain it at the conceptual level at the same for Bitcoin I'm going only to focus on the concept I'm not going into the implementation details of how it is done in practice the important thing is to keep in mind is asset concept only so today if a person a wants to move money or transfer money to a person B let's say from Israel to Japan this is typically done using a third trusted party and it is typically works as follows first of all they say I want to move transfer to be and all there is a third party to transfer money to be the trusted party because it is trusted identify be in Japan identifies that as a person and the bank account and then move the money after taking some faith to say write account in Japan this typically takes about three days or more but it takes some time what blockchain is attempting to solve is first to do the transfer money without the trusted entity at the minim so people can actually talk with each other second to do it faster than three they actually immediately and third to do it cheaper than the fee that the third party collects so let's dive in into how blockchain addresses this money transfer problem the first principle that we are going to talk the first concept is a concept of the open ledger and I'm going to illustrate this concept using an example let's say that we have a network of four people that actually wants to move money from one another and let's assume that at Genesis at the moment of the inception of this network a has $10 from the beginning now let's see the concept of the open ledger and how it is being implemented in block let's say that a wants to move to be five donors what is going to happen is that we are going to add a transaction a move to be $5 and we are going to link it into the already existing transactions then let's assume that B wants to move to D $3 so we are going to do the same we are going to link another transaction into the ledger into the chain that says B moves to D $3 finally if you want to move one donor from D to C again we will do the same process the move to c1 donar and we link it to select to say open ledger okay so this is the concept of open ledger it is essentially a chain of transaction and this is one of the reasons that this is called blockchain I'm not going to talk about the blocks these are implementation details which you will leave aside for a moment but this is a chain of transactions that is open and public to everyone what it gives us is that everyone owns the network can see where the money is how much money each one has in its pocket first and second everyone can decide whether a transaction is valid or not fine for example if a now attempts to move $15 to to see everyone owns the network can immediately see that this is not a valid transaction because they started with them move out to be another five and he does not have $15 and this transaction will not be added to the open legend this transaction will not be part of the chain now we can move to the second principle of look that we have a centralized place now that managing the ledger but remember that blockchain goal is to get rid of the centralized place so the second principle is a distributed ledger which means blockchain is going to change the centralized one and to distribute it across the nodes in the network which means D for example can have a copy of the legend and can hold it in his note a can do the same and have a copy of the ledger and anyone else participate in this network and Holland's allege can horns a chain of events that happens now what we got is that the ledger is distributed and essentially we don't need anymore the centralized place that holds the ledger we achieve the goal we got rid of the centralized trusted party however we created another problem or a new problem now when there are various copies of the ledger in the network we need to make sure that all these copies are synchronized and all the participants in the network see the same copy of the ledger the same version of the ledger and this leads to the third principle of blockchain which is probably the most interesting one we are understood already that the legend is open anyone can see it the ledger is distributed across various nodes and now what we need to understand is how in this kind of distributed ledger nodes understand and synchronize the better across and stuff we are going to do that using an example let's say that B wants to move to C five dollars what B is going to do B is going to publish and broadcast this intended transaction to the network everyone in the network will see immediately that B wants to move $5 to see this is an unvalidated transaction it is not getting yet into the letter in order to get into the letter we need to understand the concept of miners in Bitcoin miners are special nodes which can hold the ledger in this case let's say that D and a are miners miners are going to do the following thing miners are going to compete among themselves who will be the first to take this transaction and validate that one and be able to validate and put it into the ledger the first miner that will do that will get a financial reward in this case Bitcoin let's try to understand what it means to win the competition in order to be the first that is able to take the transaction and add it to the ledger a miner needs to do two things first thing needs to validate the new transaction this is is it the ledger is open and you can immediately calculate whether B is does have their funds in order to make the transfer this is easy the same the second thing that a miner needs to do is to find a special key that will enable this miner to take the previous transaction and to this previous transaction lock the new transaction in order to find this scheme this miner needs to invest computational power and time because this search of the key is random the miner is repeatedly guessing new keys until it finds interest that match this kind of a random puzzle the first one that will do that will get the financially let's see how Ledger's are synchronized across the network the a minor was able to solve the puzzle and be able to take this transaction and edit to say its own ledger what he is going to do now is going to publish the solution to save time network to broadcast it to the entire network which means he would say here is a validated transaction and here is the lock here is a key that enables everyone on the ledger on the network sorry to take it and edit to serve on ledges what all miners are going to do a for example see that this transaction is already validated and can be added to the ledger which means there is no point in trying to resolve this transaction and get a reward a will immediately take this transaction add it to its own ledger and we look for another transaction to work on and hopefully to get the reward next time let's try to summarize what we did or what we did or what we learned we try to explain how blockchain works we learned that blockchain is not Bitcoin there are two different things we learned that blockchain is based on basic principles of the fact that the ledger is open and public such that everyone can see and vide eight transactions the fact that the ledger is distributed and essentially exists in many nodes on the network removes the dependency on third party we learned about the concept of miners who are special nodes in the network that their role is to validate transactions and adds into the ledger we touched only the fact that the economic incentive of miners essentially ensures that collectively they agree what is the official Ledger's that should be used by everyone we need to remember and I really ask you to remember that this explanation is very simplistic it only about the concepts and ideas behind blockchain the implementation itself is much more detailed and complex and answers probably a lot of questions that you already have thank you very much

Channel: zlotolow

Views: 2,793,862

Rating: 4.8633442 out of 5

Keywords: blockchain, bitcoin

Id: 93E_GzvpMA0

Length: 13min 58sec (838 seconds)

Published: Wed Jun 08 2016