Part 1a: Blockchain
Blockchain Basics Course details
The video series is planned to help participants understand Blockchain and Machine Learning. The course first starts with basics of Blockchain.
So now the question is what is blockchain and how is this related to cryptocurrency. Blockchain is a distributed ledger maintaining records. Compare this with a traditional mechanism. These records can be financial transactions or medical record related or even some logistic related usage. In financial use case you can think of existing bank transfer. So if A wants to transfer money to B then we need a trusted party and this case the trusted party is bank. So A uses Bank as an intermediatary to transfer the money. However if a Bank becomes untrustworthy then it becomes difficult for A and B to transact. This is where blockchain can help. The blockchain is a distributed record. Multiple Nodes in the blockchain maintain this ledger in a chronological order. If you look at the below figure then you will see that the record of A transferring to B is maintained in all the nodes of the blockchain and once it has been verified in the blockchain it remains there permanently. This cannot be altered later.
So blockchain mainly has multiple nodes connected to each other. These nodes are computer systems that can process the transactions and they need to be connected by a network like Internet.
This is a classic case of distributed systems in computer science field. We will look at this in detail later.
Lets first answer the second question on what is cryptocurrency? In the above example if the distributed ledger holds a digital asset and can guarantee ownership of the asset using cryptography then this underlying digital asset is cryptocurrency. It holds value based on its usage and is not decided by any centralized authority. Blockchain wallets are needed to own and transfer these crypto and main point to for users to interact with blockchain. We will look at wallets later chapter.
Blockchain Generations and Levels:
The blockchains are categorized into generations. However there are multiple levels of blockchain. The generations mainly apply to the Level1 generation of blockchain.
Level1 blockchains are slower because of rigorous ledger maintenance rules. Level2 are mainly meant for scalability of the blockchain. Sidechains help in getting another blockchain working with main blockchain. For example Milkomeda side chain supporting the Ethereum Solidity Smart contracts is under development to work with Cardano as main chain. The digital asset is still Ada. Lets look at generations of blockchain. The first generation blockchain helped in transfer of digital asset viz. cryptocurrency. Now this is very rudimentary like A transfers to B. However we cannot associate any conditions with this transfer. For example the crypto should be transferred only if B has completed some job. This cannot be encoded in the first generation blockchain. So the second generation blockchain provides these mechanisms which can be triggered based on some events. These second generation blockchains are plagued with slowness. They just cannot scale as the usage increases. Hence came the third generation blockchains that tackled the transaction speed issue and also interoperability with other sidechain. Sidechain is also a blockchain that works in conjunction with the main blockchain. We will again look at this in detail later. The focus of third generation blockchain is to solve the trilema of Level1 blockchains which is decentralization,scalability and security.
So Bitcoin is the first generation blockchain, Ethereum is second generation blockchain and Cardano is an example of third generation blockchain. Before we get into the details about the various blockchains we will look into the basics of these blockchains and why these pose as challenges.
Following points are very critical while choosing blockchain
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