What is Blockchain? Blockchain Technology Explained Simply

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Start trading Bitcoin and cryptocurrency here: http://bit.ly/3uk1YyL Blockchain technology is a way of managing a ledger of records in a decentralized manner. It means that everyone participates in maintaining and updating the ledger, which makes it practically impossible to falsify. While Blockchain technology is a good solution to the issue of centralization, it’s also very inefficient and slow, therefore it should only be used if the problem at hand is indeed centralization. That’s Blockchain technology in a nutshell. If you want a more detailed explanation about the Blockchain and how Blockchain technology watch the complete video , here’s what I’ll cover: 0:54 - What blockchain aims to solve 2:48 - Bitcoin: the decentralization of money 3:10 - Decentralization opportunities 4:04 - Blockchain explained in a nutshell 5:16 - How does blockchain technology work 10:05 - Ethereum in a nutshell 10:26 - Private blockchains 11:40 - Public blockchains 11:58 - Is blockchain the next big thing? 13:12 - Conclusion For the complete text guide visit: https://99bitcoins.com/what-is-blockchain/ Join our 7-day Bitcoin crash course absolutely free: http://bit.ly/2pB4X5B Learn ANYTHING about Bitcoin and cryptocurrencies on our YouTube channel: http://bit.ly/2BVbxeF Get the latest news and prices on your phone: iOS - https://apple.co/2yf02LJ Android - http://bit.ly/2NrMVw2 Still have questions? Leave us a comment in the comment section below

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Video Transcript:

What is blockchain technology is it the next big thing are you missing out on a once-in-a-lifetime opportunity when some startup wants you to invest in their blockchain based adventure well stick around in this episode of crypto whiteboard Tuesday will answer these questions and more hi I'm Nate Martin from 99 bitcoins calm and welcome to crypto whiteboard Tuesday where we take complex cryptocurrency topics break them Down and translate them into plain English before we begin don't forget to subscribe to the channel and click the bell so you'll immediately get notified when a new video comes out today's topic is the blockchain and the exciting world of blockchain technology hopefully by the end of this video you'll understand exactly what blockchain technology is and why it's really hard to separate it from Bitcoin Before we understand how blockchain technology works we need to understand what problems it was designed to solve so let's take a step back and let me ask you a question how do we tell us something is fake or real in today's world for example a dollar bill the driver's license or a vote in the election how do we determine whether it's valid or not the answer we keep a record of it for example each dollar bill has a serial number that is Recorded by the bank your driver's license number is recorded by the DMV and voting records are used to track who voted and who didn't so the same person won't be able to vote twice whenever you want to verify that a document is legit you just look it up with the relevant authority we even have notaries people who are licensed by the government to act as witnesses to attest and record the validity of pieces of information or identities you'll notice there's one Thing that all of these mechanisms have in common they're all centralized which means there's a central authority whether it's a bank state office or person that has the power to issue and validate information these central authorities have a lot of power and as you know power may sometimes corrupt so what happens if one of these authorities wants to change the facts more even maybe change history a little bit well this may sound far-fetched but even our World history is just a record kept by historians in a centralized manner the phrase history is written by the victors tells us that facts can sometimes be distorted by those in power if you don't think that that's possible here's a real-life example today most money is just a record of who owes what to whom due to the subprime crisis in 2008 almost a thousand companies in the u.s. received over 630 billion dollars that never existed before other companies had Debts completely removed well some would argue this bailout was justified but you can't deny that someone decided to change the records of how much money was owned and owed well this is why bitcoin was born it was the first form of money that removes them for a central authority its records are kept by everyone not just by central banks and when everyone is keeping track and verifying the facts well that means that you can no longer change the ledger Of transactions whenever something doesn't add up or because it's more convenient you actually have to start being accountable but money isn't the only place where decentralization can play a role do you remember those big encyclopedia books we used to rely on when it came to research Encyclopedia Britannica employed a hundred full-time editors and over 4000 contributors to publish what we consider to be the authority on knowledge just imagine the Power the editors of these books had in deciding what was worth mentioning condemning condoning or ignoring well the last volume of encyclopedia britannica was published in 2010 today information is much more decentralized with over a hundred and thirty thousand active editors that maintain different wikipedia pages the risk of any of them going rogue unnoticed is much smaller since each edit is public and can be verified by anyone decentralization Reduces the risk for corruption fraud and manipulation blockchain technology is a new and innovative way to implement decentralization in a nutshell blockchain technology is a solution for the problem of centralization it's a system for keeping records by everybody without any need for a central authority a decentralized way of maintaining a ledger that is practically impossible to falsify I mean when so many eyes are watching and verifying everything that's Being done it's really hard to break the rules unnoticed you might be wondering why is it called blockchain well imagine we're maintaining a shared ledger with many pages of records each page begins with a sort of summary of the page before it if you change part of the previous page you'll also have to change the summary on the current page so the pages are actually linked or chained together in technological terms pages are called blocks and since each block Is linked to the data of the previous block we have a chain of blocks or a blockchain many people think that Satoshi Nakamoto the mysterious inventor of Bitcoin created blockchain technology technically he only created the first real-life implementation of it Bitcoin FAT that word blockchain is never even mentioned in Satoshi's original white paper the closest he comes to saying blockchain is chain of blocks now that you know what blockchain technology is We still have two major questions to answer how does it actually work and is blockchain going to change our future let's start with the first question another way to ask this question would be how do I create a system that allows the creation verification and updating of records by everybody well there are four elements of blockchain needs to actually have a life of its own the first thing required to support a blockchain is a peer-to-peer network a Network of computers also known as nodes that are equally privileged it's open to anyone and everyone this is basically what we already have today with the internet we need this network so that we'll be able to communicate and share with each other remotely the second ingredient is cryptography cryptography is the art of secure communication in a hostile environment it allows me to verify messages and prove the authenticity of my own messages even When malicious players are around we need cryptography because of the first element remember I said anyone can participate in this network including bad actors it's great that I can communicate but I also need to make sure my communication comes through on altered the third element is a consensus algorithm now you can switch the technical word algorithm with the word rule this means we need to agree about the rules on how we add a new page also Known as a block to our records there are many types of consensus rules in bitcoins case we use a consensus algorithm known as proof of work this algorithm states that in order for someone to earn the right to add a new page to our ledger they need to find a solution to a math problem which requires computational power to solve computers around the network run calculations to solve the math problem and in doing so consume a lot of energy In other words they do a lot of work well that's why when one of them finds the number that solves the problem and displays it to the network they're basically displaying a proof of work well think of it as the nodes way of saying hey I spent quite a bit of energy here in solving this problem first so I am entitled to write the next page is mentioned before there are other consensus algorithms that don't require So much energy this is just the algorithm type that the Bitcoin blockchain employs there are pros and cons to different algorithms but in order to run a decentralized ledger you'll need to choose one otherwise it will be really hard to reach a consensus with so many people in the network finally our last element is punishment and reward this element is actually derived from game theory and it makes sure that it will be in people's best Interest to always follow the rules so far we've set up a network that has a way to communicate securely and follows a set of rules for reaching consensus now we'll glue these elements together by giving a reward to people that help us maintain our records and add new pages this reward is a token or coin that is awarded each time a consensus has been reached and a new block is added to our chain on the other hand bad actors who try to trick or manipulate The system will end up losing the money they spent on computational power or their coins can be taken away from them in the end the important thing to remember is that the punishment and reward system works on psychological behavior it turns the rules of the system from something you need to follow into something you'll want to follow since it will be in your best interest to do so well this was just a very high-level explanation of what a Blockchain consists of if you want to dig a little deeper into this process check out our video on Bitcoin mining part of our seven-day crash course on Bitcoin so there you have it the four elements for creating blockchain technology a peer-to-peer network cryptography a consensus algorithm and punishment and reward however there is a fifth element that can't really be synthesized market adoption I mean we can have a group of five people sharing A ledger with the consensus algorithm but it doesn't really make it decentralized since not enough people are part of the system moreover if there's no adoption there's not really any value to our coin and the fourth element of punishment and reward isn't very effective only once you achieve critical mass in the number of users as a blockchain become truly decentralized and therefore immutable and at that point the coin of that blockchain Usually begins to appreciate in value it's hard to say what triggers mass-scale market adoption in bitcoins case things actually started through use on the dark web where people used Bitcoin to pay for drugs and other illegal stuff but since then more people have begun to research Bitcoin and blockchain and have seen the benefits they offer either in practice or as an investment so there you have it the five elements of a truly open public Decentralized blockchain up until today there are only a handful of block chains that have over a thousand truly independent participants and as such can be considered as decentralized bitcoin is theorem and Manero to name a few if you're thinking that it sounds like a lot of hard work to put a blockchain in motion you're absolutely right but this is where if theorem comes in if theorem is a do-it-yourself blockchain where all of these five elements are already in Motion all you need to do is build the right solution on top of it but that's a whole different whiteboard episode you can check out later on now let's move on to another term you may have heard a private or closed watching this term refers to companies that screen and limit the players who can participate in their blockchain it's a bit like how the internet which is open to everybody and anybody is different from an intranet an internal network of company computers Well I assume some companies will find value in running private blockchains to improve their internal processes it's far from anything exciting in as much as it has nothing to do with decentralization to emphasize this a bit more let's compare open public block chains to closed private ones a public blockchain is open to everybody its transnational and borderless its censorship resistant and it doesn't require any third party it's also Neutral there's no such thing as a good bad illegal or legal transaction there's only a valid or invalid one a private blockchain on the other hand is limited to authorized participants only and is governed by a handful of entities in the words of Andreas Antonopoulos in most cases of private blockchains you really don't need a blockchain you can just to share a spreadsheet between participants the whole idea of blockchain was to decentralize a process through the General public and that's exactly the opposite of what a private blockchain does the features of a public blockchain on the other hand create enormous benefits there's no single point of failure the records are immutable also known as tamper-proof and finally it's censorship resistant so you can't really remove a record or stop it from getting published as long as it follows the consensus rules before we end today's lesson we still have one major Question to answer is blockchain technology the next big thing I assume you may have heard of different startups that are using black chain technology to solve some sort of a problem in most cases when I hear of such a company I asked two questions first are they using a public or private blockchain since if they're not using a public blockchain there's not really anything very disruptive there second do they even need a blockchain if you Remember in the beginning of this lesson we talked about the dangers of centralization but these dangers are only meaningful if there's a lot at stake for example the queue to the pharmacy is managed in a centralized manner but I don't really care since there's not a lot at stake and it's actually more efficient that way blockchain technology is very good at D centralizing but it's also very inefficient slow and energy consuming For example bitcoins Network takes ten minutes on average to confirm a transaction not the ideal waiting time for buying a cup of coffee at the 7-eleven the only reason to choose blockchain technology as your solution is if your problem is actually centralization if you don't need to decentralize something you probably don't need to use blockchain technology and are better off with some centralized solution in fact it'll probably work Better to sum it up blockchain technology is truly disruptive but at the moment only a handful of use cases really require it so the real question is this at the current moment is our world ready for more complex blockchain implementation than what Bitcoin already offers in the early 2000s there were a lot of Amazon's googles and Facebooks that never caught on for the changes they presented and today many of these blockchain startups face the same fate That's it for today's episode of crypto whiteboard Tuesday hopefully by now you understand what blockchain technology is an open censorship resistant method for managing records by everybody hence making them practically impossible to falsify it's a solution to the problems that centralization presents I also hope that whenever you hear the term blockchain technology in the future you'll know to take it with a grain of salt and ask the right questions You may still have some questions if so just leave them in the comment section below and if you're watching this video on YouTube and enjoy what you've seen don't forget to hit the like button then make sure to subscribe to the channel and click that bell so you'll be notified as soon as we post new episodes thanks for joining me here at the whiteboard 499 bitcoins calm I'm Nate Martin and I'll see you in a bit transnational and borderless its Censorship censorship censorship there's no such thing as a good bad huh the created blockchain technology technically boy try that one more time each page begins with assortment [Music]

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