in this video we're going to talk about
the basics of the blockchain as the
technology on its most basic level the
blockchain can be understood as a new
kind of database at least this was its
original design what's different about
this database is that it's distributed
digital databases have been around for a
while now but until recently they've
been designed to centralize information
on one computer or within one
organization the blockchain though uses
a distributed network of computers to
maintain a shared database the
blockchain is then a set of protocols
and encryption methods than enable a
network of computers to work together in
securely recording data within a shared
open database this database consists of
a series of encrypted blocks that
contain the data the blockchain is a
continuously growing list of these
blocks of data which are linked and
secured using cryptography this makes it
a trusted database with this trust being
maintained by open secure computer code
an encryption instead of any single
institution the database stores
information in blocks that are linked
together through hash values with
entries to this database being made by
computers that all have a copy of the
database and all must come to consensus
about its state before they can update
it so these are three central concepts
to understanding the system's workings
that of blocks and hashing mining and
proof of work and distributed consensus
we'll go over each of these separately
in terms of its structure a block chain
may be considered as a series of blocks
of data that are securely chained
together new blocks are formed as
participants create new data or wish to
update existing data these blocks are
encrypted and given a hash value that
represents a unique identifier of the
data within that block
this hashing works by a standard
algorithm being run over the blocks data
to compress it into a code which is
called the hash which is unique to that
documents no matter how large the file
or what information is contained it is
compressed into a 64 character secure
hash this hash value can be recalculated
from the underlining file confirming
that the original contents have not
changed but the reverse is not possible
given just the hash value you cannot
recreate the blocks data contained
within it which is encrypted all blocks
of data which are formed after the first
block are securely chained to the
previous one this means that the hash
value of the next block in the chain is
dependent upon the previous one thus
once recorded the data in any given
block cannot be altered afterwards
without the alteration of all subsequent
blocks as well as this hash pointer
linking to the previous block each block
typically contains as well a timestamp
so that we know what happened and when
it happens this hashing and linking of
box makes them inherently resistant to
the modification of their data making
them immutable records you can only
write data to the database and once it's
there it's very hard to change almost
impossible thus data is stored on the
blockchain is generally considered
incorruptible blockchain security
methods include the use of what we call
public key cryptography a public key
which is a long random looking string of
numbers is an address on the blockchain
value tokens sent across the network are
recorded as belonging to that address a
private key is like a password but gives
its owner access to their digital assets
or the means to otherwise interact with
the corresponding data
a public key is associated with the
private key so that anyone can make an
encrypted transaction to the public key
address but that encrypted message can
only be deciphered with the private key
that corresponds to that public key in
such a way effective security only
requires keeping the private key
privates the public key can be openly
distributed without compromising
security for example on the Bitcoin
blockchain to receive funds from another
person you use a piece of software
called the wallets which creates a
public key that you give to someone else
for them to send bitcoins to that
address with your corresponding private
key you can then access that address
with those bitcoins on it the blockchain
is a distributed system this means there
is no centralized organization to
maintain and verify the entries on the
database this database is instead
maintained by a large number of
computers that are incentivized to
provide computing resources by earning
some form of tokens in exchange
but these computer nodes in the network
themselves cannot be trusted
individually
thus it is required that the system
provide a mechanism for creating
consensus between scattered or
distributed parties that do not need to
trust each other but just need to trust
the mechanism by which their consensus
has been arrived down any computer that
is connected to the blockchain network
and using a client can perform the task
of validating and relaying transactions
each of these so-called minor computers
gets a copy of the blockchain which gets
downloaded automatically upon joining
the network when new entries into the
database are made these changes are
automatically broadcast across the
network mining nodes validate
transactions add them to the block
they're building and then broadcast the
state of the complete block to other
nodes on the network in order to
randomize the processing of blocks
across the nodes and to avoid certain
service abuses block chains use various
time stamping schemas such as proof of
work proof of work describes a system
that requires a certain amount of
resources or effort to complete an
activity typically this resource is
computing time as in the case of the
Bitcoin blockchain this is realized on
some form of challenge such that no one
actor on the network is able to solve
this challenge consistently more than
everyone else on the network miners
compete to add the next block in the
chain by racing to solve a very
difficult cryptographic puzzle the first
to solve the puzzle wins the lottery as
a reward for his or her efforts the
miner receives the small amounts of
newly minted bitcoins and a small
transaction fee a consensus algorithm
like bitcoins proof-of-work functions to
ensure that the next block in the
blockchain is the one and only version
of the truth and it keeps powerful
adversaries from derating the system
block chains are trying to create a
secure trusted shared database and
do this through encryption and hashing
proof of work and network consensus the
hashing and linking of blocks makes it
difficult to go back and change a
previous block once it's entered but
this alone would not be suffice to
ensure that the data is truly tamper
proof so then the proof of work system
intentionally makes it computationally
more difficult to alter the database
thus making it extremely difficult to
alter all the blocks on top of this it
places that distributed consensus
mechanism so that even if someone did
manage to do this their record would not
match that of others and thus would not
be accepted as a valid record so to
successfully tamper with the block chain
you would need to alter all the blocks
on the chain redo the proof of work for
each block and take control of more than
50% of the peer-to-peer network only
then would your altar block become
accepted by everyone else on a block
chain of almost any size this would be
almost impossible to do indeed the
Bitcoin blockchain is very good proof of
this given that it now secures hundreds
of billions of dollars using this method
without the network having yet been
compromised at the end of the day what
this technology enables is a database
that is secured with automatic trusts
that is enabled by open source code and
encryption the data is tamper proof once
information is put into the database it
cannot be altered afterwards it is a
shared database as many people across a
network have a copy which is
continuously being updated so that all
have a single source of truth likewise
it is transparent meaning that everyone
can see all of the transactions and
alterations made to the database if
needed data quality and the resilience
of the network is maintained by massive
database replication across many
different nodes on the network no
centralized official copy exists and no
user is trusted more than any other
having started out life is simply a
mechanism to enable Bitcoin it has
become increasingly recognized that this
system is secure enough to work as a
ledger for the recording and exchange of
any value what we now call a
distribution there germ