Okay so today we're going to talk about blockchain technology
and give you a high-level overview of what it is and how it works
blockchain, it emerged in 2008 out of cryptocurrency
specifically Bitcoin that had a white paper published and
That's really where it all started
So we start, I guess, by defining what it is
Blockchain technology is a distributed, decentralized system in which all parties
have an entire record and can view the transactions that took place
It's a decentralized and distributed network and
I can draw that out to explain what a decentralized, distributed network actually is
so in a classic centralized network, you have a central node to which all other
nodes in the network connect to
In a distributed system
you might have
clusters of nodes with a few
links between them, something a bit like this
But if you know - this node - is knocked offline, you lose
the part of the data that was stored on that system
in a distributed system
like a peer-to-peer network
you have something a bit more like this
here you can think of talking a bit like in database terms
your database is sharded and
distributed in components, parts across your network
In this distributed, decentralized solution
all parties have a complete record of the database and system
combined together to add this one single database with each individual node having a complete
copy of all transactions, in the case of blockchain
So here you've got centralized,
here you've got a decentralized network
where you've got clusters with only a few nodes connecting the individual clusters
and here in this more lattice pattern you've got a
distributed and decentralized network
you can think of the blockchain system as a distributed ledger or like an old fashion
uh, database term, a transaction based database
That's what it fundamentally is, it stores a ledger of transactions
uh
and
it's also
immutable, which is to say..
it can be updated
new sets of transactions can be added to it
but, it can't, you know, once something's added, that block cannot and should not be changed or
mutated any further
the core technologies that underpin blockchain
is hash codes, hash puzzles
Merkel trees and public-private key cryptography
in the sort of common parlance of bitcoin you have what is known as a bitcoin wallet
that's actually your public key in [terms of your?] private-public key cryptography
[like an?] earlier Computerphile on public-private encryption
but essentially, in the case of blockchain, you have your your wallet (your public key) and
uh
your private key
and an interesting thing about at least the way bitcoin has implemented on the blockchain technology
it's all or nothing, so the total wealth of my current wallet has to be spent in a transaction, so if I've got five
bitcoins using the Bitcoin technology
and I only want to send one to you then I send one coin to you and four back to myself
but I had to do this sort of circular transaction
I basically say that that one bitcoin I've sent to you
is
I don't necessarily know you, I don't know who you are
There's no reason for us to have met or
me to even know your name what I'm really saying is the wallet that is labeled
by this public key, the person who owns the corresponding private key to that public key
I'm authorizing them to take ownership of
this one Bitcoin
and that's how public private key Encryption is used in, in means of
legitimizing and, or uh
authoring transaction said yes
I have said you can spend this amount
I wish transfer the amount to you, and you know that that turns got originated from me
and not somebody else on the network poking at me
The other thing is hash uh
Hash codes and merkel trees Basically I can, please throw this out,
another interesting thing about the way hashes work is for a given input
if I have I know
ABC make my input and I put that through hashing algorithms and
I get the output, I don't know, uh
Zero Five B C
Uh
I only have to change this marginally, say I add ABC
and I add D to it and it will completely change the corresponding hashed code
you only have to change the input in a small way to get a drastically different hashcode coming out
that will be of the same uniform length, a particular one despite the fact the input which of a different length
you can think of it is like labeling it with a uh
I'm going to use 'unique' carefully here 'cause there are
In occasions you do hash collisions where?
different input resolves to the same hash, but you're you're aiming toward uniqueness
and the idea is you can think of it as like a
fixed length signature for a given input
so how this feature further in in block Chains is
a blockchain technology
The transactions we talked about earlier
uh, are grouped to get, you know, you can think of transactions when they first
published the network it's existing out there in the ether
and then the job of you might have heard of sort of miners in blockchain technology
The job of a miner is to gather a bunch of these two transactions together
form them into a block and
the process of doing that is what involves hashing
and the process of checking that a block it remains immutable and hasn't been changed
It goes on to Merkle trees which are drawn in the next diagram, but essentially one key. I formed my block
My block has a corresponding hashcode
and how Merkle trees come into it. If we start with a
basic block of content that we want to represent in our tree structure in generating our
next node in our tree. I'm just going to use H to represent hash function
Of A and B, and the value of that comes to label this node in our tree
Likewise over here, take the Hash of B
and C and then here at our top level we take the hash of
the hash of A and B, and the hash of B and C
and that
represents our next level up in the tree and
the interesting thing about
This structure and about hash code is, we remember from this diagram
You only have to change your input a tiny bit to change the output so if I change this base content
I make it lower case rather than upper case for example
this will then change to this, the hashcode will become invalid
as wic and it will persuade and filter back up and
that is the core
of blockchain technology in terms of how blocks are stored and how it's, uh,
In a, in a sys-, in a distributed system when no one knows anybody else
how you know and can be certain that
the transaction cannot been tampered with because everyone can see this chain of blocks
Having talked about some the underlying data structures
give an example of how transaction get grouped into blocks and blocks get grouped into chains
so you can think of, uh
your, you know
your ledger of transactions, you can, when you transaction your first formed on the network
they could go out there in the ether; the sort of loose
transactions that need to be grouped together into blocks
in a network
Anyone who takes on the role of a miner their job is to grab some of these
transactions down from the ether put them into a block
If I draw a block here and a block has several things in it has
a set of transactions
A said something to B
B said something to C and so and so forth
it also has the hash value of any previous block
That were in the network
Going back to that Merkle tree structure
Additionally it has something known as a Nonce value
Which is just a randomly guessed value, uh
to impact the
signature hash of this block
so you hash the combination of the record of transactions, the hash value of the previous block and
this Nonce value to generate a
Hash Code that uniquely labels this block
now the reason behind the Nonce value is
to sort of hash puzzle this final hash code that labels this block
It will [? help out you know ?]
it had to start with four zeroes
So what a miner does, he groups his transactions together
And he puts in random guesses for that Nonce value until this hash value that labels this block
satisfies the Criteria of whatever the hash puzzle is
where does this hash puzzle come, your said..
So its part of the mathematics of the the Block chain Network and it's a way of, uh,
certifying that
a grou-, a block is legitimate
uh
and that it's agreed upon key, and it's a way of
managing the distributed nature of the network because anyone can
take any collection of transactions very light that are sort of out in the open that not yet formed into a block and
Try and create a block and there's this sort of mathematical race of a sort of compute power
To solve this puzzle and the first person who solves it or the first group of people that solve it
They're the ones that generate a block that goes on to the chain
so it's a way of managing the fact that everybody is free to try and create blocks to add to the chain
so what happens then when
say two people
Both happen to solve a block at the same moment at precisely the same moment now
it is rare, but they happen and in those instances
You can get forks in block chains. The people in the network, they see one block added
go off and try and build
Blocks on top of that block whereas the people that see a different block being added go off and try and continue the chain in another direction
How's that yelled across the network? How is it that everyone has this single agreed upon ledger? What happens is
That the longer essentially a sort of a democracy throughout the network, [but] the longest chain is the one that everyone agrees
that they should take and the mathematics are such but you're unlikely to sustain
Forks for a long period of time
as
You know people are looking all the time to update their current ledger to the longest chain
you know suppose, to keep it simple, we have five people in our network and we have a forked chain. We have two
imagine we [have] two competing chains it only takes
three of those out of five to have seen
the you know the longer of the two chains
for the vets bit contention submissively
Bishop by Majority vote yet
were
We're going to reject any chain that shorter than the longest chain the majority [of] the people on the network I've seen what happens to
Any transactions that happens with the shortage only man. You know in the shorter chains. That's where you're kind of your transactions
You're in that group. You're out of luck they go [into] the extent that they go back into the ether. They're not yet
codified allure
Incorporated into the blockchain and so not process not not legitimate all of this
Means is actually a slow assistance on
at the moment
Not as well this will it take it happening very quickly at the moment blocks are
in
Again, I use bitcoin cuz you tweak the first system
And you know one of the most widely adopted in the bitcoin system lock your created that [the] mathematical complexity of that hash puzzle
Is on a sliding scale to reflect the compute power of the network at any given point?
That blot will be created on average every 10 minutes the further back
In the chain a particular blockage the less likely it is for that came to be
to the plan to be a a shorter fork and
Decided so that the current
Waiting period is kailia
before counting that the money in your wallet
Let's [fix] plot to be created at a moment. That is back an hour
So it's not
Instantaneous, but it's not too long to wait and a
bad point makes a very slim chance that your
transactions going to go back into the ether and then you know to be incorporated in a block later on if you are in the
Unfortunate circumstance where you were past that shorter fork of the blockchain and your transaction hadn't been accepted
And it's been turned back into the ether yeah
You're just wasting for another minor to come along grab that series of transactions you and try and build another block
you must leave this all these insults and filming about the fact that
[there] [is] [going] [to] be a pointer which lonely bitcoin. Go maybe
That's correct. Yes, if some it's like me that this mining will stop at uplands
No, but how you will be?
Complicated with more change so at the moment
Bitcoins are sort of being introduced to show you through the mining process in that you're being financially rewarded in
Bitcoin, I think at this point in time
the creation of a block it merits its
coins
in the wallet of the Minor or
as is commonly the case now with people grouping computer out together the group of people that are made after sort of
mining pool
and
At the point where all of all bitcoins have been introduced
You'll no longer gain financially from mining in that regard how you will then
Gain be through transaction fees
and he's where
people can
Give up certain amount of their trank action, okay?
I want to send you
He will get a bitcoin I've got five in my county ahead for rather than camping for back to me
Maybe I can three and a half back to me, and I k give the other half
to the
Minor and
during that way you'll be financially complicated for
The work of of mining so it's a bit like a currency exchange or PayPal little taste their feet dirty nose
Is this dislike this distribution if these miners are effectively actually like the ages?
affiliation well it
to the extent where
you know that there will be the
transaction page which of them at the Moment
You know should have
not
Taking a big part of the network because people are still getting money just from doing the computation work of curing the hash by George
But as a system evolved and relies more upon
Transaction fees then yes. They will book that have more of a role to play within the network
But they're still likely to be
Far below your standards
Transaction fees for exchanging Dalek pounds from its original conception they'll only ever intended and designed to be
21 million bitcoins in existence, and you can clearly like to radioactive half-life
controlling the release of those we're going and how that's reflected is the
level of rewards for mining so every and [kitty] every
21,000
bitcoins
In the bin the book collection area that have produced
The rewards for mining and creating a block it's aft
and show you're introducing half the amount of
[ecological] in network if you were previously in Chianti, so forth
until eventually
All 21 million bitcoins have been introduced to the network
same process in reverse
Using the same key and then they get hello back out the other end, and that's nice and simple it works, and it was once
Sort of the only way that people did [sing], but it has a problem. Which [is] you both need to know