01_Basics Flashcards
Metcalfe’s Law
in context of Blockchain
- valua of a network is proportional to the sqaure of the number of connected users of the system (n2)
Token Economy
- shift from people-based to a people- and device-based market potential
- token economy offers new revenue models, smaller niches with very low prices and yet a large # of transactions
Traditional
Price x People = market potential
Token Economy
Price x (People + connected devices) = Market Potential
What is a blockchain?
- distributed
- immutable ledger
- that faciliates the process of recording transactions and tracking assets in a network
Distributed Ledger Technology (DLT)
- generic name for family of technologies underpinned by a distributed ledger
- Bitcoin and blockchain are possible applications
Specific distributed ledger solutions that facilitate functionality
- blockchain
- other DLTs (e.g. hashgraph)
3 Attributes of a blockchain
- Decentralization
- Immutability
- Transparency
Hashing
SHA256
- developed by NSA
- 64 characters long
- hexadecimal string [0 through 9, a, b, c, d, e, f]
- 2 to the power of 256 possible outcomes
Requirements of Hash Algorithms
4 items
1. One Way: cannot reverse engineer data from hash; only verify that data from hash is identical to orginial data
2. Deteterministic: different data renders different hash
3. Avalanche Effect: small change has big impact to has
4. Collusion Resistance: no other document can be found with same hash
Methods to secure Immutabilty of a blockhain
- through hashing and
- distribution & transparency
Concensus Options
3
- Proof of Work (PoW)
- Proof of Stake (PoS)
- Others: DPos, Proof of Authority (PoA), Proof of Elapsed Time (PoET), Proof of Burn (PoB), Practical Byzantine Faul Tolerance (PBFTI), Proof of Identity (PoI)
How do network participants reach consensus in PoW
- miner perform hash function calculations using trial and error (“Mining”)
- trial and error approach is time-consuming and requires a lot com computer memory
- miners are rewarded for their work with tokens of the blockchain
e.g. Bitcoin
How do network participants reach concensus in PoS
- network (pseudo) randomly selects an individual (validator) to approve new transactions
- selection is based on proportional share of token owernship (the more you have staked the higher likelihood to be selected)
- reward vs. penalty: deposited amount of money gets transferred if invalid block is detected
e.g. Ethereum, Nxt, Bitshares
Mining (PoW)
- miners are trying to generated a hash below target hash
- generating Nonce (Number only used once) that will yield a certain hash that meets the has requirements
- trial and error method trying to find hash with the minimum number of 0s
Public + Permissionless
Architecture Options
e.g. cryptocurrency, video games
Public
- anonymity
- anyone can write
Permissionless
- anyone can become a node
- anyone can read
Public and Permissioned
Architecture Options
e.g. voting, land titles, university degrees
Public
- anonymity
- anyone can write
Permissioned
- permissioned users can validate
- an owners decides who can read
