What is Blockchain?
Bo Bergstrom ??
Entrepreneur who loves 0 to 1, AI and Web3 | Writer?? | Veteran | Specialize in AI, Incubation, Prototyping, and New Venture Initiatives
In short, blockchain is a list of transactions that are both linked together and stored on a network of computers.
Breaking that down, there are three distinct parts:
1 - a list of transactions
2 - that are linked together and
3 - stored on a network of computers (i.e. decentralized)
What is a list of transactions and how can they be linked?
This one is easiest to explain in a picture of, you guessed it, a chain of blocks!
The key here is that each block has ALL three pieces of information.?The Hash is simply a long string of random characters for the block.?The presence of the previous hash links one block to the next (see how I put that as if it were connecting one link to the next??Yes, I know, design genius!).?
Lastly, the transaction list is what makes the blockchain open and transparent.?This is one of the three key characteristics that make blockchain so powerful:
1 - Decentralized (no one person has control)
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2 - Unchangeable / Immutable (it's a permanent record)
3 - Open / Transparent (anyone can inspect it for veracity)
How are transactions processed?
Via a mechanism known as "blockchain consensus" that essentially replaces the middlemen.?They do this by reaching a consensus amongst themselves as to whether a transaction is valid.?This is accomplished through one of two ways:
1 - Proof of Work.? Individual network notes called "miners" compete to solve a math problem.?The first miner to solve the problem gets to create the block.?Then other nodes check if the block is valid. If it is, the miner is rewarded with a small amount of cryptocurrency and the tranasaction is recorded on the blockchain in the transaction list.?If it's not valid, the miner wasted their time and energy.?Proof of work is becoming controversial because it solves the math problems using brute force, which uses a lot of energy.
2 - Proof of Stake.? Individual network nodes called "validators" put some of their own cryptocurrency at risk by "staking" it.?Staking is like saying, "I'll commit X amount of cryptocurrency to win the right to process this transaction."?Validators with more at stake are more likely to be selected to process the transaction and create the block.?Other validators check the block to see if it's valid.?If it is, then all participating validators earn a transaction fee and the transaction is entered in the permanent transaction list.?If it's not, then the validator might lose their stake.
It's still early for Proof of Stake, but it uses much less energy than proof of work.?Of the two leading cryptocurrencies, Bitcoin and Ethereum, both currently use proof of work but Ethereum is in the process of transitioning from proof of work to proof of stake.
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Next up we'll talk about what Bitcoin is.
The article before this was What is Web3
Trusted Advisor to Powerful Women Leaders | Helping Them Sustain Success, Influence, and Impact at the Highest Levels - While Staying Deeply Fulfilled | Executive Coach & High-Performance Strategist
3 å¹´Blockchain made simple for the layfolk
Entrepreneur who loves 0 to 1, AI and Web3 | Writer?? | Veteran | Specialize in AI, Incubation, Prototyping, and New Venture Initiatives
3 å¹´Michael Miebach, Tim Rohde, Kristin Smith, Greg Snow, Jared Tate, Peter Wilson, Peter Smith, Saba K.., Navroop K. Sahdev I thought you would appreciate this article (and the larger series).
Senior Director Operations at Smith+ Nephew
3 å¹´Bo, I like the series - thank you for sharing. To add a couple thoughts on consensus... many people focus intently on energy use for proof of work without expounding upon all aspects of the process. This allows for a good straw for proof of stake advocates. For proof of stake, favoring validators can be seen by some as a step away from decentralization, especially when founders or VCs get access to tokens prior to the general public. You touched a little on this in your first post. Looking forward to reading more in your series! Happy New Year!