Blockchain Primer

What is Blockchain?

The technology behind Bitcoin

Blockchain is a shared, trusted, public ledger of transactions. 


It is a distributed database that maintains a growing list of transaction data records, cryptographically secured from tampering and revision.

It provides an architecture for so-called trustless trust. It allows us to trust the outputs of the system without trusting any actor within it.
 

chain-03.png

OPEN AND ANONYMOUS

Open sourced and is designed to transfer transaction records without revealing the identity of either party

CONSENSUS

Decentralization implies the verification and integrity of transaction records are maintained by the community of users in the network

DECENTRALIZED

System is self scaling; no central party facilitating any transaction flow

IMMUTABLE

Blockchain utilizes cryptography to secure the data, verified and recorded in a sequential “chained-up” manner, makes one nearly impossible to alter once recorded

chain-02.png

What are Smart Contracts?

Beyond simple transfer of records

website_What are smart contracts.png

Blockchain protocols such as Ethereum introduced the idea of adding programmable instructions on top of the fundamental blockchain communications protocol. These so called “smart contracts” trigger transactions automatically when certain predefined conditions are met. 

The smart contract code facilitates, verifies, and enforces the negotiation or performance of an agreement or transaction. It is the simplest form of decentralized automation. 

Application Layer

SMART CONTRACTS

Define behavioral rulesets for all participants of the smart contract

Blockchain Layer

RECORD OF TRANSACTIONS

File containing all information since the genesis block - tracking all asset movements

CONSENSUS RULES

Defining game theoretical behavioural rulesets of all actors in the network

P2P NETWORK OF COMPUTERS

A network of all devices running the blockchain protocol, and keeping records of transactions

Internet Layer

TCP/ IP INFRASTRUCTURE

The Dilemma

website_the dilemma.png

How to maximize it all?

The theoretical concept of blockchain sounds very promising, however in practicality many blockchain protocols encounter a bottleneck in at least one of the three important functions of a blockchain. Many protocols decides choose to be strong in one (or two) at the cost of the third feature, due to the fact that it is very difficult to satisfy decentralization, security and scalability simultaneously.

 

Ultimately, the use case should determine which type of blockchain is best suited for the job.    

DECENTRALIZATION

website_the dilemma.png

More decentralized, slower the transaction speed

The degree of control in consensus mechanism - the more the better?

SECURITY

SCALABILITY

Faster transactions comes at the expenses of less layers of verification