What is Blockchain

good morning today we're going to talk about blockchain the reason we are going to talk about that is that we need to create common language across Business and Technology about this issue Albert Einstein once said that if you cannot explain it simply you do not understand it well enough the goal today is to explain it simply so everyone understand it well enough okay so the first thing that we need to understand are two basic terms Bitcoin and blockchain Bitcoin is a digital coin it's money which is digital we are not going to talk about this

Bitcoin at this talk we are going to talk about blockchain blockchain is technology that Ena is moving digital coins or assets from one individual to another individual it's very important to understand that Bitcoin is not blockchain it is important to understand in our common language because I heard that compliance people are saying oh we cannot talk about Bitcoin maybe because it has bad reputation but about blockchain we should and can talk okay so after we understood the basic terms of of Bitcoin and blockchain it times to go into the problem that blockchain attempts to solve

and the problem is money transfer I'm going to explain it at the conceptual level and the same for Bitcoin I'm going only to focus on the concept I'm not going into the implementation details of how it is done in practice the important thing is to keep in mind is as a concept only so today if a person a wants to move money or transfer money to a person B let's say from Israel to Japan this is typically done using a third trusted party and it is typically works as follows first of all a say I

want to move transfer to B and orders a third uh party to transfer money to B The Trusted party because it is trusted identify B in your fund identify that uh the person and the bank account and then move the money after taking some fee to the right account in Japan this typically takes about 3 days or more but it takes some time what blockchain is attempting to solve is first to do the transfer money without the trusted entity at the middle so people can actually talk with each other second to do it faster than

3 Day actually immediately and third to do it cheaper than the fee that the third party collects so let's dive in into how blockchain addresses this money transfer problem the first principle that we are going to talk the first concept is a concept of the open Ledger and I'm going to illustrate this concept using an example let's say that we have a network of four people that actually wants to move money from one another and let's assume that at Genesis at the moment of the Inception of this network a has $10 from the beginning now

let's see the concept of the open Ledger and how it is being implemented in blockchain let's say that a wants to move to B $5 what is going to happen is that we are going to add a transaction A mve to B $5 and we are going to link it into the already existing exting transactions then let's assume that b wants to move to D $3 so we are going to do the same we are going to link another transaction Into The Ledger into the chain that says b moves to D $3 finally if you

want to move $1 from D to C again we will do the same process D move to see $1 and we link it to The Ledger to the open Ledger okay so this is the concept of open Ledger it is essentially a chain of transaction and this is one of the reasons that this is called blockchain I'm not going to talk about the blocks these are implementation details which we leave aside for a moment but this is a chain of transactions that is open and public to everyone what it gives us is that everyone on

the network can see where the money is how much money each one has in its pocket first and second everyone can decide whether a transaction is valid or not valid for example if a now attempts to move $15 to um to C everyone on the network can immediately see that this is not not a valid transaction because a started with 10 move out to be another five a does not have $15 and this transaction will not be added to the open ledgend uh this transaction will not be part of the chain now we can move

to the second principle of blockchain look that we have a centralized place now that managing The Ledger but remember that blockchain goal is to get rid of the centralized PL so the second principle is a [Music] distributed Ledger which means blockchain is going to tr the centralized one and to distribute it across the nod in the network which means D for example can have a copy of The Ledger and can hold it in his node a can do the same and have a copy of The Ledger and anyone else that participate in this network can

hold The Ledger can hold the chain of events that happens now what we got is that The Ledger is distributed and essentially we don't need anymore the centralized place that holds The Ledger we achieved the goal we got rid of the centralized trusted party however we created another problem or a new problem now when the uh various copies of The Ledger uh in the network we need to make sure that all these copies are synchronized and all the participants in the network see the same copy of The Ledger the same version of The Ledger and

this leads to the third principle of blockchain which is probably the most interesting one we understood already that The Ledger is open everyone can see it The Ledger is distributed across various nodes uh and now what we need to understand is how uh in this kind of distributed Ledger nodes understand and synchronize a ledger across himself we're going to do that using an example um let's say that b wants to move to C $5 what B is going to do B is going to publish and broadcast this intended transaction to the network everyone in the

network will see immediately that b wants to move $5 to C this is an unvalidated transaction it is not getting yet Into The Ledger in order to get into The Ledger we need to understand the concept of miners in Bitcoins miners are special nodes which can hold The Ledger in this case let's say that d and a are miners miners are going to do the following thing miners are going to compete among themselves who will be the first to take this transaction unvalidated one and be able to validate and put it into the Ledger the

first minor that will do that will get a financial reward in this case Bitcoin let's try to understand what it means to win the competition in order to be the first that is able to take the transaction and add it to The Ledger a minor needs to do two things first thing need to validate the new transaction this is easy The Ledger is open and you can immediately calculate whether B is does have the funds in order to make the transfer this is easy the thing the second thing that a minor needs to do is

to find a special key that will enable this minor to take the previous transaction and to this previous transaction lock the new transaction in order to find this key this minor needs to invest computational power and time because this search for the key is random the minor is repeatedly guessing new keys until it find find the first key that match this kind of a random puzzle the first one that will do that we get a financial reward let's see how ledgers are synchronized across the network the a minor was able to solve the puzzle and

be able to take this transaction and add it to the its own Ledger what the is going to do now is going to publish the solution to the entire network to broadcast it to the entire network which means he will say here is in validated transaction and here is the lock here is a key that enables everyone on The Ledger on the network sorry to uh take it and add it to their own Legends what all miners are going to do a for example see that this transaction is already validated and can be added to

the Ledger which means there is no point in trying to resolve this transaction and get a reward a will immediately take this transaction add it to its own Ledger and we look for another transaction to work on and hopefully to get the reward next time let's try to summarize what we do or what we did or what we learned we try to explain how blockchain works we learned that blockchain is not Bitcoin these are two different things we learned that blockchain is based on basic principles of the fact that the Ledger is open and public

such that everyone can see and validate transactions the fact that the Ledger is distributed and essentially exists in many nodes on the network remove the dependency on third party we learned about the concept of miners who are special nodes in the network that the RO go is to validate transactions and add them to The Ledger we touched on the fact that the economic incentive of miners essentially ensures that collectively they agree what is the official ledgers that should be used by everyone we need to remember and I really ask you to remember that this explanation

is very simplistic it only about the concepts and ideas behind blockchain the implementation itself uh is much more detailed and complex and uh answers probably a lot of questions that you already have thank you very much