what is a blockchain?

Why should you care about it?

Unlike traditional methods, blockchain enables
peer to peer transfer of digital assets without any intermediaries.
It was a technology originally created to support the famous cryptocurrency,
BitCoin.
The blockchain by itself has taken a life of its own and
permeated a broad range of applications across many industries,
including finance, healthcare, government, manufacturing, and distribution.
The blockchain is poised to innovate and transform a wide range of applications,
including goods transfer, for example, supply chain.
Digital media transfer, for example, sale of art.
Remote services delivery, example, travel and tourism.
Platform for decentralized business logic, for example,
moving computing to data sources.
And distributed intelligence, example, education credentialing.
Additional applications of blockchain include distributed resources, for
example, power generation and distribution.
Crowd funding for example, startup fund raising.
Crowd operations, for example, electronic voting.
Identity management, for example, one ID for all your life's functions.
And government public records and open governing.
Moreover, blockchain can enable an inclusive economy.
It can enable a person in a remote corner of the world
to partake in a democratic process.
Opportunities for innovative applications are endless.
There is a dire need for critical thinkers, designers and developers who can
envision and create newer application models on blockchain to benefit the world.
This course is a first step in addressing this need.
At the end of this course, you will be able to explain the three fundamental
characteristic that define the blockchain using Bitcoin blockchain.

Bitcoin is not the only player in town.

By the end of the first module, we move beyond Bitcoin into introducing the next
generation blockchains with Ethereum.
You will also be able to discuss the important features of Ethereum blockchain
that is used as a reference implementation in many newer blockchains.
And explain the algorithms and techniques that enable the blockchain,
including a public gate cryptography and hashing.
Finally, you will be able to outline methods for
realizing trust in a blockchain.

Let's begin with an introduction of Bitcoin.

Two major contributions of cryptocurrency Bitcoin are a continuously
working digital currency system, and a model for
autonomous decentralized application technology called the blockchain.
Play video starting at :3:4 and follow transcript3:04
Though our focus is on a general blockchain,
we've to understand the working of the technology behind Bitcoin to fully
appreciate the innovation of blockchain.
We can all agree that the advent of the internet in the world wide web
has transformed every aspect of our lives,
from stock markets to street corner food trucks.
It has enabled a technology explosion with Web 2.0 and
the world of e-commerce applications.
Around 2008, 2009, when the institutions and markets we trusted
went crumbling down, and everybody was running away from the Wall Street,
a mysterious person, or persons, called Satoshi Nakamoto,
introduced a new digital currency, a cryptocurrency called Bitcoin.

Bitcoin enabled an innovative platform for

With no central authority, how did Bitcoin realize trust and security?
By implementing software programs for validation, verification,
consensus in a novel infrastructure called the blockchain.
Later on in about 2012, 2013,
computation elements were added to the blockchain infrastructure that has
opened up a whole world of possibilities beyond simple currency transfer.
These innovations are significantly shaping
the direction of Web 3.0 as you will learn in the next four courses.
What is a blockchain?
Blockchain is about enabling peer to peer transaction in a decentralized network.

Establishing trust among unknown peers.

Recording the transaction in an immutable distributed ledger.

Let's understand centralized versus decentralized network

using a common scenario.
Consider a scenario where customer wants to buy an item using her credit card.

Let's enumerate the intermediaries involved in accomplishing this task.

We have a credit card agency, we have a customer bank,
we have a credit cards bank, we have an exchange,
we have the merchant's bank, and finally, the merchant.
This is an example of a centralized system that we are so used to.
Now compare this with a system where peers can transact
directly with each other irrespective of where they are located.
Functions of the intermediaries are shifted to the periphery
to the peer participant in the blockchain infrastructure.
Peers are not necessarily known to each other.
This is a decentralized system.
How do we establish trust among the peers in such a decentralized system?
By having a process in place to validate, verify, and confirm transactions.
Record the transaction in a distributed ledger of blocks, create a tamper-proof
record of blocks, chain of blocks, and implement
a consensus protocol for agreement on the block to be added to the chain.
So, validation, verification, consensus, and
immutable recording lead to the trust and security of the blockchain.

Now I'll explain these concepts using another scenario.

I'm lending Amy $10,000.

This is one single peer to peer transaction.
We both make a note of it on a ledger.

What if I change my entry from 10,000 to 11,000?

Alternatively, Amy changes hers from 10,000 to 1,000.
To prevent this trust violation,
we need to seek the help of people around us, Lisa, Allison, and Francis.
Provide all of them a valid copy of this ledger.

This is the basic concept of an immutable distributed ledger

defined in a blockchain process.

In this scenario, we were all physically present in one location, Amherst.

Now imagine this to be an online transaction to an unknown peer.
Also, scale up the one transaction to 10,000 transactions,
how about a million transactions.

I should be able to transact with equal ease to any unknown peer in Amherst,
Albany, or Albania, maybe to send some flowers to a friend in Albania.
This is the tenet of a decentralized system supported by blockchain.

In the case just described, how do we trust our unknown peers?

Through verification and validation.
In our example, Amy requests Kevin to verify the amount I transacted with her.

Kevin checks it, oops, Kevin finds the amount of the transaction is not 10,000,
but 300, not valid.
Kevin rejects and nullifies the transaction.
Similar to these,
validation, then verification methods devised by the blockchain and implemented
by the peers provide the collector trust needed in a decentralized system.
Summarizing, blockchain technology supports methods for
a decentralized peer-to-peer system, a collective trust model, and
a distributed immutable ledger of records of transactions.