Lesson No. 1: Blockchain Technology

To understand the world of cryptocurrencies, you need to understand the core technology driving it: Blockchain technology is revolutionizing how we interact with data.

Blockchain 101 is the product of our team’s desire to reduce what has typically been a significant educational barrier of entry into the crypto space. Our goal is to create a digestible and understandable curriculum accessible to anyone - while simultaneously helping our own nascent members to expand their understanding of the fundamentals of Web3.

Regardless of your interests or the industry you work in, this segment is designed to facilitate base level understandings of the rapidly evolving digital space. If you’re interested in becoming “crypto-literate,” you’re in the right place. 

Written by: Tamara Szulc, Surya Dawar, and Janet Yihm

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Lesson No. 1: Blockchain Technology

To understand the world of cryptocurrencies, you need to understand the core technology driving it: Blockchain technology is revolutionizing how we interact with data. 

PART 1: DEFINITIONS 

A blockchain is a Digital Ledger Technology (DLT) that is made up of an expanding list of data, known as blocks, that are safely connected to one another using cryptographically secured encryption. Each block includes transactional information details, a timestamp, and a cryptographic hash of the preceding block (generally represented as a Merkle tree, where data nodes are represented by leafs). The timestamp demonstrates that the transaction data was there at the moment the block was produced. Each block links to the ones before it, forming an effective chain (compare the linked list data structure). This is because each block includes information about the one preceding it. Thus, once a transaction has been recorded, it cannot be undone without also undoing all subsequent blocks, making blockchain transactions irreversible.

That’s the technical definition, but if you’re new to crypto that probably sounds like a foreign language. Let’s break it down: 

• A Blockchain is a Distributed Ledger found on a network of nodes (computers) around the world;

• A ledger is a place where we record transactions, similar to a database; 

• A distributed ledger is a database that exists independently on nodes within a network. In other words, each node holds its own individual copy of this database;

• No single node can alter the database without all the other nodes agreeing to the alteration. Therefore, no single entity has the power to control the blockchain network. 

The lack of a centralized authority controlling the network is what allows blockchain technology to achieve “decentralization,” another buzzword common in the space. If you’re wondering how the network stays true and honest without a central authority ensuring that it does, you’re thinking in the right direction. In simple terms, blockchain technology utilizes cryptography and a “consensus mechanism”. Cryptography is a method of ensuring secure communication through the use of keys and hash configurations. A consensus mechanism is what allows nodes within a network to verify and agree that a transaction being entered is true. We’ll dive deeper into these concepts in future editions!

Blockchain technology, when done right, possesses a few key features that allow it to serve its purpose: 

1) Most blockchains are public and transparent in nature; they’re open and accessible for everyone to see. 

2) They’re immutable and append-only i.e. the only way to update the blockchain is to add new data/transactions; one cannot go back and edit past transactions (If you think about why, it makes complete sense!). The purpose of the blockchain is to maintain a transparent record of data. Someone trying to alter the blockchain in bad faith will not only need to undo all the subsequent blocks post the block they want to change (think back to how all blocks are linked to one another), but they will also need to do so on all the existing nodes at the same time, a virtually impossible task in a large network.

Now you have an above-the-standard understanding of what is blockchain. Then, this question may come to your mind: Does this fancy thing have anything to do with me? Well, actually, it does. Maybe beyond your imagination, there are many current and potential applications, which may completely affect your life. 

PART 2: WHY IS IT IMPORTANT?

Blockchain has the potential to disrupt business models because of its unique technology that changes the way data is stored and distributed. It’s revolutionary because it allows trustless and permissionless transactions. Its encryption technology allows for advanced security and transaction transparency which enables companies to quickly trace and view transactions. Current issues of centralized networks include data breach, single point of failure, censorship, and more. Blockchain technology solves many of the problems Web2 faces. Decentralization allows networks to function without authorities manipulating or bending the rules. It allows data to be held and spread among several network nodes which creates redundancy, maintains fidelity of the data stored, and improves security.

PART 3: REAL WORLD APPLICATIONS

Blockchain has the potential to transform the way business is conducted. Its unique technology provides benefits and solutions to businesses from all sectors, most notably supply chain management and health care. 

SUPPLY CHAIN MANAGEMENT 

Walmart, a multinational retail corporation, uses blockchain to trace the origin of products, manage inventory, product recall and much more. Walmart’s use of blockchain technology allows them to trace food from store shelves to the farm within 2.2 seconds, instead of seven days. Considering the solutions that blockchain provides, there’s no doubt that it will continue to disrupt and improve many industry sectors.

If you have any  experience shopping online, you may be aware of how  difficult it is to ensure your products are in good condition during shipment. . Blockchain can help address that concern. Alibaba, a  tech giant, has adopted blockchain technology to support its cross-border supply chain, partnering with the logistics company Cainiao. Blockchain allows  customers and other stakeholders to  track the condition of their goodsfrom its departure portal to its destination. Just imagine, with one click from anywhere in the world, you can monitor the safety of your products throughout its delivery period.  

HEALTH CARE

Good health care is essential for any society to thrive. Blockchain has given the industry a boost by providing various solutions already being applied, with much more to come!. For instance, MedRec is a blockchain-based health data management toolthat allows users to store patients medical data more efficiently and securely. No one wants their physical or psychological information being tampered with.. MedRec uses smart contracts, which  IBM defines as “programs stored on a blockchain used to automate the execution of an agreement without any intermediary’s involvement or time loss,” to conduct all its recording and tracking of  data, relieving the fear of misappropriation. Furthermore, research on possible blockchain applications in the medical industry is burgeoning, including but not limited to  analysis of the effects of specific procedures, maintaining  patients’ health record, and increasing trust in clinical trials.

Finance, energy, real estate, agriculture…All sorts of  industries are taking  a stab at incorporating blockchain technology. While things may be in their nascent stages for now, there is no doubt that blockchain technology will play a decisive role in changing how we communicate and transact as a society. The revolution has already begun. 

CONCLUSION

We hope you enjoyed the first edition of Blockchain 101. Next week, we will be using the Ethereum merge, which you may have heard of, as a backdrop to our deep dive into consensus mechanisms. We are also creating a Glossary of important terms and concepts we write about so you always have an option to refresh your memory!

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ADDITIONAL RESOURCES: 

The Blockchain: A Guide for Lawyers

Vinay Gupta at Michel Bauwens & the Promise of the Blockchain on Vimeo

Blockchain Expert Explains One Concept in 5 Levels of Difficulty