Blockchain Basics

Hey, everyone. Welcome to Fireblocks Academy. My name is Chris Jamieson. I’m the director of enterprise programs here at Fireblocks. And in this video, we wanna take you through at a very high level what is blockchain.

Now there are four basic concepts that I’d like for you to walk away with here. The first being is that blockchain is just a distributed ledger or database of transactions. The second is that blockchains are decentralized.

The third is that blockchains are typically resilient. And the fourth is that blockchains are typically immutable, which is another word for tamper proof.

So why don’t we start with very simply, what is blockchain? Blockchain, in its simplest form, is a decentralized ledger or database of transactions where each transaction or block of transactions is linked to the previous block of transactions through the transaction ID from that previous block. Let’s actually go through and figure out how that actually works.

So let’s start here with block one.

We can see that we have our transaction ID.

Let’s just call it a for simplicity, and we have our transaction information.

Now we have block two.

Again, we have our transaction ID. Let’s call it b for simplicity’s sake. We have our transaction information and then we have the transaction ID from the previous block.

And now we have block three.

We have the transaction ID. Let’s call it c. We have our transaction information, and then we have the transaction ID from the previous block.

Now what you can start to see here is that these blocks are essentially all linked together by the transaction ID of the previous block.

And what we start to see is that these blocks are essentially chained together, hence the term blockchain.

And what’s really cool about this feature is that you could take the latest block in a blockchain and actually trace it back all the way to the first block because of the way that this works.

Now we talked about some very simple features for blockchains that you wanna be aware of. Why don’t we go ahead and dive into those? Let’s start first with decentralized.

Now I think the easiest way to explain this is probably to do it with an example of taking a very simplified centralized database system and comparing it to a very simplified decentralized blockchain database system.

So let’s start with a centralized system, our database system.

So in a centralized database system, we have our central database, and then we have our access nodes or users that will essentially be taking information from or putting information into this database.

Now the key thing to keep in mind here is that there is only one copy of this database and that the users in the network are essentially pulling information from this central database.

Now in a decentralized blockchain example or blockchain database example, we have the same access nodes or users, except each one of these has its own copy of the database as well and access node five.

These are all connected in some way, shape, or form because they have to communicate with each other about new transactions, etcetera.

But, again, the key thing to notice here is that there is no central repository of information. Each node has its own copy of the actual database or ledger of transactions.

Now the second thing we wanted to talk about was resiliency or being resilient.

Now in a centralized database example, let’s just say that our database, our centralized database goes down for some reason. Perhaps it’s a connectivity issue, perhaps there’s a power outage, maybe there’s a server disruption, something along those lines. But what essentially happens is that the database goes down and then the users or access nodes can no longer push information into or take information out of the database and things grind to a halt.

In a decentralized environment or decent block decentralized blockchain, network, if let’s just say we have node five goes down and node four goes down for some reason. Nodes one, two, and three can pick up the network traffic. Things can continue to transact. New information can be added or pulled as necessary.

Things don’t just, grind to a standstill.

Now the last piece I wanted to talk about was immutability, which is, again, another word for being tamper proof. Now let’s just say that we have a malicious actor who is malicious actor LLC.

And what they essentially wanna do is go into the database and change the transaction information so that money or transaction or assets are being routed not from the appropriate parties, but to the malicious actor themself. So essentially, what they’ll do is they’ll go into the database, they’ll make those centralized database, they’ll go and make those changes, and then they’ll leave.

Now in a decentralized blockchain based database environment, you’ll have that same malicious actor.

But what what they’ll have to do is they will have to change each individual copy of that database for a majority of the nodes in the network. Now let me give you some context as to why that is extremely difficult to do in a truly decentralized type of network. The first is that most blockchain transactions, will add a new block every ten, twenty, thirty, sixty seconds, maybe two minutes, five minutes. Could be ten minutes. Could be up to an hour. It depends on the type of blockchain that you’re the blockchain protocol that you’re using, the assets that you’re transacting in, as well as, network connectivity, network traffic, things along those lines.

The second piece is that in a truly decentralized blockchain network, there are going to be hundreds, thousands, maybe tens of thousands of nodes in the network. These are all gonna likely be geographically dispersed. They’ll be running on different types of software or hardware, different security protocols, etcetera.

So not only is there a time element a time element, but there’s also a logistics element to this as well, which again makes actually changing transaction data or changing transaction histories extremely difficult, which is why they say blockchains are typically immutable or tamper proof.

So to summarize, blockchains are really just decentralized ledgers or databases of transactions.

They are typically resilient, and they are typically immutable, which is just another word for tamper proof. That’s it for now. For more educational resources, please visit us at Fireblocks Academy. Thanks for joining.