Lecture on Blockchain

Introduction

• Purpose: Establish a common language between Business and Technology regarding blockchain
• Goal: Explain blockchain simply so everyone understands it

Basic Terms

• Bitcoin: A digital coin (money which is digital)
  • Not the focus of this talk
• Blockchain: Technology for moving digital coins or assets
  • Important distinction: Bitcoin is not blockchain
  • Blockchain should and can be discussed openly

Problem Blockchain Solves

• Problem: Money Transfer
  • Traditional transfer uses a third trusted party (e.g., banks)
  • Issues with traditional transfer:
    • Time-consuming (takes ~3 days or more)
    • Costly due to fees

Blockchain's Solution

• Aim: Transfer without a trusted intermediary
  • Faster: Immediate transfers
  • Cheaper: Lower fees

Key Concepts

Open Ledger

• A public chain of transactions open to everyone
• Example:
  • Four people in a network
  • Initial state: A has $10
  • Transactions:
    • A moves $5 to B
    • B moves $3 to D
    • D moves $1 to C
• Purpose:
  • Transparency: Everyone can see all transactions and balances
  • Validation: Network members can validate transactions

Distributed Ledger

• Distributed Ledger: Copy of the ledger is distributed across multiple nodes
  • Eliminates the need for a centralized trusted party
• Challenge: Synchronizing all copies of the ledger across the network

Validation by Miners

• Miners: Special nodes responsible for validating and adding transactions to the ledger
• Process:
  • A transaction is broadcasted to the network
  • Miners compete to validate the transaction

Steps for Miners

1. Validate the transaction (ensure the sender has enough funds)
2. Find the key to lock the transaction into the ledger

• Involves computational effort and time
• The first miner to solve this gets a financial reward (e.g., Bitcoin)

Synchronization After Validation

• The winning miner broadcasts the validated transaction and key to the network
• Other miners update their copies of the ledger with the validated transaction
• All miners then move on to the next transaction

Summary

• Blockchain vs. Bitcoin: Different entities
• Core Principles:
  • Open and public ledger for transparency
  • Distributed ledger to eliminate centralized dependency
  • Miners validate transactions and add them to the ledger
  • Economic incentives ensure consensus on the official ledger
• Note: This explanation is a simplification; implementations are more complex and detailed.

Thank you!