Blockchain Explanation

to understand blockchain let's go back to 500 ad on the island of Yap located in what is now Micronesia yeah Pease people had stones like this everywhere this is a yappy point it was their money it's about 200 kilos suspending these like modern coins that posed a bit of a problem well the yappi solve this by not ever physically moving the coin the coins were placed in very visible locations on their tiny island every adult neppy knew who the owner of each coin was by memory when two people wanted to transact they would announce the change in ownership to the other yuppie who had all update their knowledge of whom the coin belong to voila the coin was exchanged the yuppies were using what we would call a distributed ledger it's a ledger in the ECAM piece had a mental record of the ownership of all coins and they would mentally update that ledger anytime there was a transaction it's distributed in that the ledger wasn't just known by one person it was known by all people now the a piece could have asked one person to keep track of the mental ledger point that person would have to be really trustworthy in terms of both honesty and administration skills the monopoly that person would have on transaction activity might lead them to charge a fee or make rules for who and when one can transact and problems would arise if that person fell ill decided to leave or if their integrity was compromised in some way that central person would be a bank distributed Ledger's perform many Bank light functions without requiring trust and a central entity in the Epis example a person can't tamper with the ledger and claim ownership of a stone that doesn't belong to him but lets all the yuppies come forward and contradict his claim based on their knowledge of the legend so fraudulent transactions aren't likely also if one particular member of the tribe isn't available or moves away thereby losing a copy of the transactions can still be validated by the other yeah peas so the system is fault resistant perhaps most interesting is what happens if a coin gets destroyed or lost in one instance a large stone fell overboard on the way back from the island where they quarry the stone no problem the other yeah peas decided we can imagine your coin sitting there in the ocean we'll give you credit for it and we will mentally use it for transactions like we do with the others so keeping it for all practical purposes and point doesn't even exist they could still use it to transact distributed Ledger's turn out to be one of two key concepts you need to understand blockchain but before I explain blockchain further let me first tell you way to summarize the book Warren piece in just 20 letters it turns out that every book has a unique untraceable fingerprint there are certain functions by which I just mean mathematical equations the computers used where if you put in a book or string of characters you get out the other end a unique 20 to 30 digit code this code will be unique to any given input so when you put in Warren piece you'd get a 20 digit reverse code if you put in the exact same copy of Warren piece but with one comma changed you get a totally different 20 digit code these codes would be so different you'd be unable to connect either code to one another or the original versions warranty functions that do this have some amazing uses you can use them to validate information let's say you were about to sign a lease and you wanted to make sure that you're signing the same copy as the landlord you could drop your version and the other into the funky and if there was even a comma difference they feel different 20 digit codes you can also use functions like this to obscure your identity you can combine your personal info your name date of birth hair color into a string of text and put that text into the function to generate a unique 20 digit code you can then use this code as your internet identity to conduct business online confident no one pre connected back to you but if later someone wanted to verify that it was you who owned the code you can show that you know the only combination of inputs that can regenerate that code functions that do this are called cryptographic hash functions and they are the second concept you need to understand blockchain first though let us go back to the idea of an additional point we know from the island example that a distributed ledger allows you to transact with coins even if the underlined point don't exist just like the coin at the bottom of the ocean we also saw how it is nearly impossible to steal coins this was because ETFE knows who owns a given point and whether any transactions have changed that ownership now imagine that these Ledger's instead of being stored in people's heads are stored in computers online around the world managed by incentivized volunteers it would still work just like with the island each computer would have a copy of the ledger showing coin ownership that's visible and known to everyone every time a person wanted to make a transaction she would just announce to the computer network her intention to send coins to someone else all those computers upon hearing that announcement would update their internal ledger by deduct end point from her and adding a point to the other person we would only be missing two things to make this workable in the real world first thing we're missing we need a way to disguise the identities of people on the public ledger most of us aren't going to put our name the transaction history in public view we can solve this with a hash function each person's identity details can be reduced to an Nyjah Belen T digit code or only the owner knows the inputs required to generate the code thus anonymizing participant the second thing we'd be missing to make this workable is a way to quickly compare Ledger's between computers to make sure they're starting from the same version of the transaction record we can also address this with a hash function each computer can turn its Ledger's which is just computer taxed into a 20 digit code and compare with codes for Ledger's on other computers if the codes all agree we know the Ledger's are the same if they're the same it's likely they represent an accurate view of coin ownership implicitly this makes it almost impossible to tamper with the ledger because to do so a person would have to tamper with a thousand other ledger copies stored independently in computers around the world we've just invented Bitcoin the digital currency we all heard so much about bitcoin is a shared distributed ledger to transfer invisible coins anyone can join this pleasure by creating a 20 digit coded identity and obtaining coins from some other users in a transaction those concepts the distributed ledger coupled with hash functions those together are often called block K or sometimes just a distributed ledger the first blockchain was built to enable Bitcoin the blockchain can be so much more to illustrate that we need to see how modern airplanes have become just like iPhones a year ago I was taking a flight that had to abort takeoff by coming to a screeching halt halfway down the runway the captain reassured us it was a minor problem with the wing you know the part that keeps the plane in the air not to worry he said the mechanics would get it sorted but a bit later he came back on to let us know it was not a mechanical issue with a software bug no big deal he said we're downloading a software patch it should be good to take off in 20 minutes so while my iphone is downloading a software update from Apple my airplane is downloading some do not die update from the airplane manufacturers this led me to a dark realization if there are bugs with wing software there could soon be wing software hackers and such worries actually intensify as we enter the world of autonomous cars robots to perform surgery and computers that give financial advice in fact professors at University of Michigan demonstrated it was possible to kill patients who have pacemakers by hacking their devices wirelessly a lot of smart people think blockchain can help give us some security in this automated world take the hack plane scenario picture 100 planes around the world each communicating to one another on a network before takeoff my plane could take its wing software and dump it into our friend the cryptographic hash function thus generating a unique 20 digit code you could then imagine the other 99 planes all have Ledger's for one another with records of the appropriate 20 digit code each plane could have for its wing software my plane could compare the code generated by each wing just before takeoff with the code stored on Ledger's in the other 99 plane if the codes match my plane can be sure that its software's not been tampered with why because a hacker would have to have changed to ledger on all 99 other plank for my code to agree with the code stores there if the plane was autonomous it could decide not to take off unless all 99 planes gave it the OK a world of safe smart devices is an and this contrast with how we solve this today the plane would have had to communicate it with a central server a single point of failure vulnerable to fault tampering that central server would also be in a closed system owned by one company making hard for other devices to interoperate blockchain could change all of this by removing the need for a trusted central intermediary blockchain could open up new ways of working that are hard to even predict today with the trend towards faster technology adoption blockchain is likely to make its impact known sooner rather than later we hope this video will help you get ready

42 thoughts on “Blockchain Explanation”

  1. Cryptocurrency is a growing investment trend and many people are just barely getting aware of it, so it's time to double down and keep accumulating.

  2. Yeah but how much time it would take for all the other 99 planes validate the 20-key code? Hours? Mins? Secs?

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  4. i dont want to be that guy that says i wish i invested in block chain when it was still affordable at age 50 , best explanation of block chain ive found so far

  5. It is important to have a clear understanding. Enrich your understanding with the Cryptocurrency Community Data base that we have curated:

  6. Nice explanation as well as entertaining. I had a difficult time explaining blockchain to my brother last night. I will forward him this video. Thanks!

  7. I don't understand the part (approx. 2:30) explaining lost currency. The rationale is even if the coin isn't there, it can still be used to transact via the chain, but how? at what point do members of the chain allow/agree to record these values if it doesn't exist, even if it can be vouched that the coin was lost (implying it does exist) how do you account for possible fraudulent cases of other "lost currency"?

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  9. Please make one without the music, that kind of killed it in order to make the watchers able to pay attention efficienty.

  10. What a good explanation, suitable for those with and without programming background.
    Well done and thanks !

  11. the aeroplane wing explanation did it for me,,..time frame 07:25 in the video…but watch the full video.

  12. The computesr are run by "incentivized volunteers"? So where is the accountability when the money is lost? With a bank, if my money is lost, I at least have one, centralized entity that is held accountable.

  13. I really liked the airplane wing example. I've seen many videos explain adequately what happens when it comes to bitcoin, and why does it work, and also many videos saying how blockchain tech could be used for number of different things, but I just couldn't connect the two. Now this airplane wing example made it a lot clearer.

  14. If everyone adoptes this, wouldnt having a ledger of all people and their currency balance take up way to much space on most people's computer? Stats for 7.6 billion people is a lot for most computers

    The Bitcoin network is currently experiencing record usage, resulting in longer confirmation times and higher miner’s fees for transactions. Transactions are likely to be more expensive and/or take longer to complete and additional fees go directly to miners.

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