The blockchain is a term that has come
to mean many things to many people
for developers it is a set of protocols
and encryption technologies for securely
storing data on a distributed network
for Business and Finance it is. A distributed ledger and the technology
underlying the explosion of new digital
currencies for technologists it is the
driving force behind the next generation
of the Internet for others it is a tool
for radically reshaping society and
economy taking us into a more
decentralized world.
Whichever way you look at it blockchain
has become a term that captures the
imagination and fascinates many as the
implications of such technology are
truly profound for the first time in
human history people anywhere can trust
each other and transact with in large
peer-to-peer networks without
centralized management trust is
established not by centralized
institutions but by protocols
cryptography and computer code this
greatly strengthens our capacity for
collaboration and cooperation between
organisations and individuals within
peer networks enabling us to potentially
form global networks of collaboration
without centralized formal institutions
unprecedented but hugely relevant in an
age of globalization and a new set of
21st century challenges that require
mass collaboration
Chane is a complex technological
economic and social phenomenon it calls
into question what might have seemed to
be established parameters of the modern
world like currency economics trust
value and exchange to make sense of this
one needs to understand it in a holistic
context all the way from its
technicalities to it's aspirational
potential this course is designed to do
exactly that by giving a 360-degree
overview to the different dimensions of
the technology its potential application
within various industries and its
far-reaching implications for society
and economy
in the first section of the course we
give an overview to the blockchain both
on a technical and non-technical level
we also discuss the importance of the
blockchain within the context of the
emerging next-generation Internet
in the second section we talk about the
blockchain as a so-called trust machine
and how it enables transparency and
collaboration we will look at
distributed ledger technology talking
about smart contracts etherium and
decentralized applications
in the third section we introduce you to
the workings of token economies
illustrating how the blockchain and
distributed Ledger's can work to build
vibrant ecosystems through the use of
tokens to incentivize behavior
section of the course we will be looking
at specific applications of the
blockchain to economy society technology
and environment looking at both existing
practical applications and potential
future applications
the blockchain is a so-called emerging
technology that is currently
experiencing very rapid evolution within
the space of just two or three years it
has already gone through changes in its
technical implementation and our
understanding of what it is and can be
as such our aim is to future-proof this
course by not dwelling excessively on
existing technical implementations but
presenting a more conceptual
understanding of the blockchain within
the broader process of change of the
emerging next-generation Internet
is much more than a technology it is
also a culture and community that is
passionate about creating a more
equitable world through decentralization
it is a movement to disrupt the
disruptors to redesign the Internet and
in so doing shake up existing
centralized incumbents throughout the
course we will introduce you to this
culture and its aspirations
this course is non technical in nature
it is an introductory course and thus
all terms will be explained it should be
accessible to anyone with a basic
understanding of web technologies and
economics.
the blockchain depends upon a
distributed consensus algorithm in order
to make an entry onto the blockchain
database all the computers have to agree
about his state so that no one computer
can make an alteration without the
consensus of others once completed a
block goes into the blockchain as a
permanent record each time a block gets
completed a new one is generated there
is a countless number of such blocks in
the blockchain all connected to each
other by links in a chain in proper
linear chronological order the
blockchain was designed so that
transactions are
mutable meaning they cannot be deleted
each block contains a hash value that is
dependent upon the hash of the previous
block so they're all linked together
meaning if one is changed then all the
other blocks linked to it going forwards
will be altered this works to make the
data entered tamper proof what we've
described here is the workings of the
first generation of block chains which
function largely simply as databases but
the technology is currently evolving to
become much more than this as the second
generation already provides the capacity
to execute any computer code on the
blockchain the system is evolving to
become a globally distributed tile
computing infrastructure and as we'll
discuss in a future video it remains
very much a work in progress when seen
from this perspective blockchain
technology works to create a permanent
and secure database this makes
blockchain suitable for the storage of a
record or transaction that involves
value or in some way it needs to be a
secure and trusted source of information
these secure distributed records are
called distributed Ledger's a
distributed ledger is a consensus of
replicated shared and synchronized
digital data geographically dispersed
across multiple sites countries or
institutions without centralized
administration or centralized data
storage being maintained instead by a
distributed network of computers such
Ledger's can be used for any form of
asset registry such as inventory or
monetary transactions this might include
the recording of hard assets such as
physical property cars homes etc.
Likewise second-generation blockchains
offer the possibility to automate the
workings of these networks through what
we call smart contracts smart contracts
are computer code that is stored inside
a blockchain which encode contractual
agreements these smart contracts are
self executing contracts with the terms
of the agreement or operation directly
written into lines of code which are
stored and executed on the blockchain
like normal computer programs these
containers hold algorithms that take an
input of data and depending on the value
of the input trigger certain events for
example this might be a financial
contract that takes as the input the
amounts of money in a person's accounts
if it is above a certain level then it
increases the interest rate that they
earn on their deposits such smart
contracts can be used for automating and
many basic operations on the network
once again working to remove the need
for intermediary third party.
In such a way the system has dynamically
allocated resources and self-organized
via distributed token networks in short
blockchain is not just an information
technology but also an institutional
technology in that it enables us to
design incentive structures in the form
of token economies and in such a way
converts centralized organizations into
distributed markets via token economics
this is where things start to get quite
complex as you move into the realm of
designing economies and incentive
systems for coordinating human activity
in a decentralized fashion something
that could potentially enable the
coordination of human activity at a much
larger scale than has been possible
before the great design innovation of
the blockchain is really its capacity to
coordinate a network of autonomous nodes
towards maintaining a shared
infrastructure and this is done not just
through innovations in information
technology but also through the design
of incentive systems which has
traditionally been the domain of
economics through adding a layer of
trust and value exchange to the Internet
the blockchain merges our newly
developed information networks with the
institutional structures that sit on top
of them in so doing it greatly
strengthens the capacity of those
networks as a new mode for organizing
society and economy by merging economics
and technology it enables us to redesign
institutional structures and ultimately
reconceptualize how we organize
virtually every aspect of society
economy and even technology
infrastructure based on networks of
autonomous nodes that are incentivized
to collaborate of course it does not do
this alone such claims can only be
realized in combination with other
technologies and broader processes of
change as such the blockchain has to be
understood in the context of a broader
set of technological transformations
taking place with the current evolution
of the internet most notably much
what the blockchain promises will only
be possible given parallel developments
in the Internet of Things data fication
and advanced analytics all of which are
combining to form the next generation of
Internet of which the blockchain will be
a critical infrastructure.
Algorithm being run over the blocks data
to compress it into a code which is
called the hash which is unique to that
documents no matter how large the file
or what information is contained it is
compressed into a 64 character secure
hash this hash value can be recalculated
from the underlining file confirming
that the original contents have not
changed but the reverse is not possible
given just the hash value you cannot
recreate the blocks data contained
within it which is encrypted all blocks
of data which are formed after the first
block are securely chained to the
previous one this means that the hash
value of the next block in the chain is
dependent upon the previous one thus
once recorded the data in any given
block cannot be altered afterwards
without the alteration of all subsequent
blocks as well as this hash pointer
linking to the previous block each block
typically contains as well a timestamp
so that we know what happened and when
it happens this hashing and linking of
blocks makes them inherently resistant
to the modification of their data making
them immutable records you can only
write data to the database and once it's
there it's very hard to change almost
impossible thus data is stored on the
blockchain is generally considered
incorruptible blockchain security
methods include the use of what we call
public key cryptography a public key
which is a long random looking string of
numbers is an address on the blockchain
value tokens sent across the network are
recorded as belonging to that address
a private key is like a password that
gives its owner.
The blockchain is a distributed system
this means there is no centralized
organization to maintain and verify the
entries on the database this database is
instead maintained by a large number of
computers that are incentivized to
provide computing resources by earning
some form of tokens in exchange
but these computer nodes in the network
themselves cannot be trusted
individually.
We're going to trace the past present
and future of blockchain technology the
first blockchain was conceptualized in
2008 by an anonymous person or group
known as Stoshi Nakamoto the concepts and
technicalities are described in an
accessible white paper termed Bitcoin a
peer-to-peer electronic cash system
these ideas were then first implemented
in 2009 as a core component supporting
Bitcoin where it served as the public.
Bitcoin network currently consumes more
energy than many small nations being
equal to that of Denmark and costing
over 1.5 billion dollars a year in the
lectures deem a lot of this is being
fueled by cheap but dirty coal energy in
China where almost 60% of the mining is
currently being done this high energy
consumption is simply not scalable to
mass adoption etherium and Bitcoin use a
combination of technical tricks and
incentives to ensure that they
accurately record who owns what without
a centralized Authority the problem is
it's difficult to preserve this balance
was also growing the number of users
currently blockchain requires global
consensus on the order an outcome of all
transfers in aetherium all smart
contracts are stored publicly on every
node of the blockchain which has its
trade-offs the downside is that
performance issues arise in that every
node is calculating all the smart
contracts in real time which results in
those speeds this is clearly a
cumbersome task especially since the
total number of transactions is
increasing approximately every 10 to 12
seconds with each new block added the
volume of transactions is likewise an
existing constraint with cryptocurrency
speed is measured by TPS transaction per
second the Bitcoin network theoretical
maximum capacity is up to seven
transactions per second.
Blockchain this both reduces the
workload on the main blockchain and
makes it possible to run a very many
very small transactions within the sub
network as of the start of 2018 there is
a proof-of-concept running live on the
Bitcoin test net but the system will not
be fully operational until later in the
year as is the case with most of these
projects IATA is another example where
as existing block chains are sequential
chains where blocks are added in a
regular linear chronological order the
data structure of the iota system is
able to achieve high transactional
throughput by having parallel operations
the data structure is more like a
network rather than a linear chain
wherein processing and validation can
take place alongside each other the
other big difference is that there are
no specialized minors in this network
every node that uses the network
functions as a minor in the i/o to
network every node making a transaction
also actively participates in forming
the consensus that is to say everyone
does the mining this means that there is
no centralization of mining within the
network which is what creates
bottlenecks and demands lots of energy
likewise with this network there are no
transaction fees for validation and with
iota because it is more user generated
the more people that use the network the
faster becomes which is the opposite of
existing systems and obviously makes it
very scaleable there are lots of other
possible approaches to overcoming
existing constraints but suffice to say
the blockchain should be understood as
an emerging technology whose existing
implementation is like a large-scale
proof-of-concept running on a very
inefficient system but through lots of
experimentation and iteration well
hopefully in the coming years evolved
into this global distributed computer as
nan Lee Swan writes in her book first
there was the mainframe PC personal
computer paradigms and then the internet
revolutionized everything mobile and
social networking were the most recent
paradigm the current emerging paradigm
for this decade could be the connected
worlds of computing relying on
blockchain cryptography.
The capacity to differentiate between
different forms of value is made
possible by the programmability of token
units because tokens are digital
they are also programmable which enables
one to specify certain rules for that
token and have those rules executed when
it is exchanged thus enabling certain
constraints or possibilities in its
usage one can specify that a certain
token is only spendable under certain
terms or specify how it can be converted
for example one could program the token
so that it cannot be exchanged for
diamonds that are mined in a particular
location of the world known for its use
of slave labor in this way the token is
not just a unit of utility but also
expresses social values
likewise one could create a health care
allowance in dollars or Euros that could
be programmed on the blockchain so that
it can only be used to pay for health
care at certified parties automating
these measures leads to a considerable
decrease in bureaucracy this
programmable token system works to shift
our economies from a single value model
to a multi value model they create many
different types of value and economies
but still retain the possibility for
exchange between them
the distributed web is the convergence
of the economic market system with
information technology that enables us
to convert traditional organizations
into distributed markets based on tokens
tokens define whatever is a value within
that organization and the market system
is used as a distributed coordination
mechanism for managing and growing that
resource
by creating an expanded definition of
value and converting closed
organizations into open markets this
means that we can vastly expand the
scope and capacities of the economy the
provisioning of services within the
economy no longer becomes dependent upon
a limited number of centralized
organizations acting for profit but
instead anyone can now provide the
service via these open protocols this
means we can harness the resources of
the many in a distributed fashion
instead of being dependent upon a few
likewise the token economy can harness
the motives of individuals not just for
financial rewards but for a multiplicity
of values
to illustrate how this works let's think
about the service of cloud data storage
currently this is provided by a limited
number of enterprises like Amazon and
Microsoft these centralized
organizations have huge data centers but
still those data centers are only a very
small fraction of the storage capacity
in the world most of the storage is in.
the personal computing devices of
end-users and most of that is not being
used a file coin is one organization
that works to create a distributed token
economy for this storage file coin is a
decentralized storage network that turns
cloud storage into an algorithmic market
the market runs on a blockchain with a
native protocol token also called file
coin which miners earned by providing
storage to clients.
conversely clients spend file coins
hiring miners to store or distribute
data the sum of all these computers that
are coordinated through an automatic
market system on the blockchain can
provide a much larger more resilient
system than the centralized model while
reducing redundancy and inefficiencies
in the overall system it also pushes the
provision of the service out to the
location where it is demanded as people
are connecting peer-to-peer locally
instead of going to the centralized
server that may be on the other side of
the planet
tokens such as file coins can be
exchanged for other currencies or
members can hold on to their tokens
whose value may appreciate as the
networks grow over time
this illustrates a very interesting
aspect to tokens anyone who uses the
system is also an investor in the system
thus tokens merge investment capital and
liquid exchange capital in new ways in
the traditional capitalist model we have
a divide between owners of capital and
workers a divide between a more fixed
investment capital and liquid exchange
currencies the shares in a company are
not the same thing as what people get
paid with for working in that enterprise
and use for everyday exchanges in the
market this creates the notorious divide
within the industrial economy described
by Karl Marx between the capitalists
that make money off their investments in
the workers that have to stay selling
their labor for money without ownership
tokens represent both the inherent value
of the community which is its capital
investment and they are also units of
exchange within that ecosystem the
founders of the project issue a number
of tokens at inception and sell those
for someone to use the system they have
to buy the tokens in so doing they
become part investors in the project but
they also use those same tokens to make
exchanges within the market thus the
people creating the value in the
ecosystem are also getting paid in
tokens meaning the workers that are
creating the value through their work
also have ownership within the
organization
in the traditional utility-based
exchange of cash people have no
ownership in the organization they just
try to make money and this can create
divides between the owners and the users
the token system works to better align
the incentives of the individuals with
the overall system because the value of
the tokens they earn is also dependent
upon the value of the whole when you are
working for a token network you are both
working for yourself and for the whole
organization as the to become more
aligned unlike the traditional divide
between capitalist and worker
the token system enables networks to
overcome the chicken-and-egg problem if
you are the first user of a network like
eBay then the value would be very low
thus it is difficult to get the network
started because it has to reach a
critical mass before it will be of value
to the users this means that it may
require a large investment to create a
network the Silicon Valley model worked
by having large initial venture capital
backing that enables them to overcome
this but it means that most networks
don't get off the ground and that once a
network reaches scale and has value it
becomes dominant and very difficult to
compete with resulting in a lock-in
effect and making it easy for large
incumbent organizations to become
extractive over time it also means that
those who founded the organization win
big time if the network takes off it
creates a winner-takes-all dynamic with
most people losing because of the
threshold.

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