An Introduction to Blockchains

What problem does a blockchain solve?

What problem does a blockchain solve

  • Joe asks me to pay him back after dinner
  • I call my bank and ask them to transfer $10 from my account to his
  • The bank opens up a spreadsheet to check if my account has enough to send him $10
  • The bank writes the transaction history into that spreadsheet and updates it accordingly
  • I tell Joe that he should have the money now

Why is that a problem?

What is actually happening?

Can we manage that list of transactions between ourselves?

How does it work?

So let’s say I have 10 people here and they agree: They have the details of each other’s accounts all the time without knowing each other’s identity.

Everyone is going to have an empty folder that they will fill with pages that make up this list of transactions

#2 shouts that she wants to give $10 to #9

So now that the page is full, we have to stamp it with a unique key that everyone in our group agrees on. Putting this stamp means no one can make changes to this page once it’s put away, ever, never ever. And since everyone trusts the stamp, they can trust the page. This sealing thing is what bitcoin calls ‘mining’

How do we seal the page?

4

dcbea

26

94c8e

Can you tell me what input makes the machine spit out something that starts with 3 zeros?

Think about that for a moment? How would you solve this problem?

Hard to solve but easy to check

But how does this seal pages?

Hard to solve but easy to check

Hard to solve but easy to check

Hard to solve but easy to check

Hard to solve but easy to check

But what if someone says the wrong number?

Why would they say the wrong number?

  • Misheard transactions that were announced earlier
  • Miswritten those transactions
  • Trying to cheat or be dishonest to favor himself

Majority Rules

Majority Rules

  • If the majority votes that the sealing number is correct, the page is sealed and put in the folder
  • If the majority votes the sealing number is not correct, that person’s page is thrown out and they have to copy off a buddy

Why do people spend resources doing the calculation when someone else will do it for them and tell them the answer?

It’s a race

The first to get the sealing number gets free money that comes out of thin air

How does sealing a page actually protect it?

Hard to solve but easy to check

Every page relies on the previous page

Longest chain is the honest chain

An Introduction to Blockchains.pptx - Google Slides