The Blockchain

Remarkable technology:

• openness (anyone can see the chain)
• distributed and decentral
• permissionless (no access control)
• resistant to modification of the data
• redundant
• secure

blockchain = open, distributed, database

• in case of cryptocurrencies the data are monetary transactions
• a private blockchain is just a (overly sophisticated) database

The first blockchain was conceptualized by Satoshi Nakamoto in 2008.

Ledger:

+-----------------+       +-----------------+       +-----------------+
| Genesis Block   |       | Block 1         |       | Block 2         |
| - 000000000000  | ----> | - previous hash | ----> | - previous hash |
| - timestamp     |       | - timestamp     |       | - timestamp     |
| - proof of work |       | - proof of work |       | - proof of work |
| - Merkle hash   |       | - Merkle hash   |       | - Merkle hash   |
+-----------------+       +-----------------+       +-----------------+
        ^                         ^                         ^
        |                         |                         |
+-----------------+       +-----------------+       +-----------------+
| Transactions:   |       | Transactions:   |       | Transactions:   |
| - A -> B $73.87 |       | - B -> C $12.55 |       | - A -> D  $3.00 |
| - A -> C  $3.56 |       +-----------------+       | - C -> C  $2.50 |
+-----------------+                                 | - B -> C $17.24 |
                                                    +-----------------+

Each node has a copy of the ledger:

Timeline of a transaction:

• a transaction is agreed upon
• transaction is broadcasted
• nodes verify transaction
• some node will "mine" a block (which links to outstanding transactions)
• block is now part of the chain

Consensus (longest chain wins):