Blockchain 101 - A Visual Demo

[00:00] This is a blockchain demo. We're going to do this in a very visual way though. We're going to make it very easy to understand by stepping through the key pieces of what a blockchain is in a visual way.

[00:15] But before we get started, we need to take a look at this thing that we call a SHA-256 hash. Okay, and a hash, this is one of them right here. A hash looks like a bunch of random numbers.

[00:29] And essentially what it is, it's a fingerprint of some digital data. And it just so happens, it's a fingerprint of whatever I type in this box. So if I type my name Anders into this box, you see that the hash has changed.

[00:45] As a matter of fact, it changed every time I type a letter, right? So I'm going to go back to this. So it says Anders. Okay, so this is the hash of the name Anders, all lowercase. It starts with 19EA, right?

[00:59] Okay, so if I delete that and I go again, type Anders again, You can see it starts with 19EA, the same exact hash. In that sense, it's a digital fingerprint of this data.

[01:11] Whatever data is here, every time you type exactly the same data, you get exactly the same hash. And I can type anything I want. So you can have nothing, like this E3B0, that's the hash of nothing.

[01:25] Or you could type tons and tons of stuff. As a matter of fact, you could put the Library of Congress in here, and you would get a hash. And the interesting thing about it is regardless of if there's a tiny amount of information,

[01:39] no information, or the entire Library of Congress, you're always going to get a hash that is this long, this many characters. And you're not going to be able to pre-guess what this is. You kind of have to put the Library of Congress in here to figure out what the hash is.

[01:54] but you always get exactly the same hash regardless of how many times you put exactly the same information in. So what I'm going to do is extend this idea of a hash into something that we're going to call a block.

[02:15] All right, so let's take a look at a block. So this is a block, and it's exactly like the hash. It's just that data section I've broken out now into three sections.

[02:27] One called block. This is just some kind of a number. This is block number one. Anomph, which is just yet another number. We'll go into what that is in a second. And then just some more data, just very similarly to the way that we had it before.

[02:41] However, the hash of this, which includes all of this information up here, is down here, and it begins with four zeros. You see that? It's a relatively unusual hash.

[02:54] You know, most of them are not really going to start with four zeros like that, but this one happens to. And because it does, totally arbitrarily, I'm going to say that this block is signed. Okay?

[03:06] So what would happen if I were to change any one piece of this information? Let's say if I were to type something here. Right? The hash is going to change. And what's the chance of, if I type letters,

[03:19] this hash is going to start with four zeros. Pretty low, it's probably not. All right, so let's see what happens when I do that. I'm just going to say, Hi. Oh, look at that. All right, this hash does not start with four zeros,

[03:33] and so the big background here has turned red. So now you know that this this block with this information in it is not a valid or assigned block.

[03:45] Okay? And that's where this mounts comes in. This mounts is just a number that you can set to try to find a number that fits so that this hash starts with four zeros again.

[03:57] All right, so how do we do that? Well, let's start with one. Does that start with now? It's three, two, seven, that's not one. So let's try two, s, f now, three, four, five, six. You get the idea, like I could sit here, there's one that starts with a zero. I could sit here all day typing these

[04:13] numbers and trying to figure out one that actually is going to hash out to something that starts with four zeros. Going to take a long time So here I have my little mine button I sure you been wondering what happens if I press that So what going to happen when I press this mine button is it going to run through all the numbers from 1 all the way up

[04:35] to try to find 1 where the hash starts with four zeros. And this process is called mining. Let's do it right now. Now it's checking all of the numbers from 1 all the way up.

[04:48] Now it's stopped at 59,396. and that one just happens to hash out to something that starts with four zeros, and it satisfies my little definition of what a signed block is.

[05:03] Okay, so that's a block. Now, can you tell me what a block chain is? It's probably just a chain of these blocks. Well, how do you put them together?

[05:15] Let's do that. All right, so here's my block chain. I have block number one. It has some kind of amounts, just like before. There's some data area to it. But then it has this previous. Here's a bunch of zeros.

[05:28] Let's roll forward. So this is block two and block three and four. This blockchain has five blocks on it, right? The previous here starts with zero, zero, AE8, all right, is this number, AE8.

[05:43] And then this previous, you know, B90, is this one over here. B9 0. So you can see that each block points backwards to the one before it.

[05:56] You remember that that first block over here, there actually is no previous, it's just a bunch of zeros. It's actually just a fake number. Okay, so just like we did before, what happens if I change some information here?

[06:12] Right, it's going to change the hash of this block and it's gonna invalidate it, right? Well, let's try that. that. So I'm going to type high again. Sure enough, that block is invalid. All right, just as we

[06:24] assume. But what would happen, I'm going to fix that now. We'll go back to something that worked. What would happen if I change something in this block? All right, it's going to change this hash,

[06:37] but this hash gets copied up to this previous. So it's going to change this one too, right? So it break both blocks. So let me try typing hi in there, sure enough, right? So we can go back as

[06:52] far as we want, you know, to some point in the past and break that block, and it'll break all the blocks since then. Everything before is still green, but this one is red. So if I wanted to,

[07:07] you know, change something in this blockchain, I could just go over to block number five right here. We could change it. I'll put high. And then we could re-mine it, you know, and pick up different

[07:22] months. We'll do that right now. And we could essentially alter the chain. So we've done it. So we should be good now, right? All right. Well, what happens if I go back in time to here and I

[07:35] break it here. Now I have to mine this block, which will pick a nonce that makes this block hash out to four zeros, if we can find one. Sometimes it takes a while because it's got to run through a lot of narratives. I found one at 138,000.

[07:54] All right, but this one is still broken because although this one starts with four zeros, adding the four zeros with different stuff up here still makes this block hash out incorrectly.

[08:07] So I also have to mine this block. All right, and that takes some amount of time. That one was a little bit quicker, and then I have to mine this block to fix it. Alright, so what we're showing here is that if I go and change this last block, all I have to do is re-mine this block.

[08:28] If I go way back in time to back here and I make a change like that, I'm going to have to mine this one, this one, this one, and this one. So the more blocks that go by, the more blocks in the past that we are, the harder and harder and harder it is to make a change.

[08:49] And so that how a blockchain is going to resist mutation resist change Okay so now like you know I did

[09:02] if I do this in this block here, you can see that I've changed it to high and I remined it, blah, blah, blah. How would I know that my blockchain has been remined? All right,

[09:17] Let's take a look at that. I'm going to hit this little distributed thing. So now we have a distributed blockchain. It looks exactly like the last blockchain, okay, up to five. But this is Pier A, the first Pier.

[09:31] If we go down here, you can see here's Pier B, and it happens to have an exact copy of the blockchain. There's actually also a Pier C down here, right? And this could go on forever. There's many, many piers out on the Internet,

[09:44] and they all have a complete copy of the blockchain. So in this case, if I look at this hash, it's your E4B, right? If I go down to this one, I notice it also has E4B.

[10:00] If I go down to this last one, it has E4B, so they must be identical. And I'm going to demonstrate that by going here and typing something. I'll type hi again. And then I will remine this block.

[10:14] And I've got some other number. Now let's put some other number up here. So I should be able to mine this block. Okay, now all the chains are green, right?

[10:26] They're all green. However, this chain says the last hash is E4B. The bottom one says that too, E4B. And this middle one here says 4CAE.

[10:41] So I know just by glancing at this one little hash that something is wrong in this blockchain, even though all of the hashes start with four zeros. I know that this one is different,

[10:53] and it's different because I have two. It's essentially two against one. We have a little democracy here, right? This guy argues that it's E4B. This guy argues that it's 4CA,

[11:06] and this one is E4B. So E4B wins. So that's how a completely distributed copy having a copy on many different computers,

[11:18] they can all very quickly see if all of the blocks are identical. Remember, blockchains can have, you know, four or five hundred thousand blocks very easily. So rather than checking through all of them,

[11:30] all you really have to do is look at the hash of the most recent one, and you can see that if anything in the past, anything way back here was altered, you can tell by looking at the last block in the chain.

[11:48] You know, it's going to hash out to something that doesn't start with four zeros and looks very different from what the hashes on the good chains are. Okay, so that's a blockchain. That's the entire thing.

[12:00] There is no more to it than that. But it's kind of not really useful because we don't have something in this data area that means anything.

[12:12] I keep typing my name or hi, and that's sort of irrelevant information. So what we really want is a token. So let's do a token on our blockchain. All right, now look at this. So I have this token just totally arbitrarily.

[12:26] I'm calling these, I guess, dollars, right? So we have $25 from Darcy to Bingley. $4.27 go from Elizabeth to Jane. You get the idea. It's basically there's all these transactions that are happening,

[12:41] and I've just replaced the data with these transactions. And just like we saw before, you know, so there's multiple blocks here. This one has more transactions. It doesn't matter how many transactions there are. They can be many or they can be few or none.

[12:55] If we keep going forward in here, just like we saw before, If we go down, we notice we have all these other copies of the same blockchain, right? So now here's where the immutability is important.

[13:09] If I change something back here, you'll notice that this is, you know, A7FC, blah, blah, blah. It something else So it something different than what down here So in this way I mean it very important that if I were to go back in time and change some value that we would notice

[13:32] It's very important with money that you don't lose track. And that's the whole point of using a blockchain here. This is the whole point of resisting any kind of modifications, you know, of things that have happened in the past.

[13:46] So that's the reasoning behind using a blockchain to remember tokens. Now, one thing I would mention here is that we're not listing, you know, Darcy has $100 and he's giving 25 of it to Bingley.

[14:08] The only thing we're saying is Darcy gives 25 to Bingley. We're not remembering a bank account balance. We're only remembering money movements. So this begs the question, does Darcy have $25?

[14:24] Well, we have a problem here in this version of the blockchain. We don't actually know if Darcy has $25. So let's look at a Coinbase transaction.

[14:36] So if we look back here, a Coinbase, we're going to add a Coinbase transaction to our blocks. And this is very similar to what we've seen before, but we're just adding a Coinbase at the top. And what that's saying is we're going to invent $100 out of thin air and give it to Anders.

[14:53] And there's no transactions in this block because nobody had any money previous to this. In the next block, another $100 comes out of nowhere and goes to Anders. I'm a fan. I love it, right? I'll take $100.

[15:06] Now we have some transactions. You can see that they're all from Anders. They're all for me because I'm the only one who has any money at this point. So I'm sending 10 of my dollars to Sophie. Do I have $10?

[15:19] Yeah, I do. I look back and I see that this Coinbase transaction has given me 100, so I have at least 10 and I can send it on. And you add all these up and they don't go over 100, and it follows sort of the basic rule of a currency.

[15:33] Like you can't invent it out of thin air. You can't create money out of thin air. where its dispersion is controlled. So now, if we look at this blockchain that we've created,

[15:46] and we zip forward in time, and we notice that we see that Jackson is giving Alexa $2. And so does Jackson actually have $2 to give Alexa?

[15:59] Well, we go back a block before, and we see that Emily, who had gotten $10 from Anders, gave $10 to Jackson. And so Jackson does have the money. So we can just go backwards and find that out.

[16:13] That's actually one of the benefits of having a previous here. It's easy to go backwards. We just look for the block that looks like that, that has that hash. And here it is right here. It points to blocks back in time and allows us to trace the provenance of any coin that we want.

[16:31] So that's a basic blockchain, and we're running a currency on top of it. And as you know, blockchains, there are many copies. Everybody has a copy of it. So if we mutate this and make it $6, these go invalid.

[16:46] It does not agree with these blockchains down here, these copies of the same blockchain down here. So this resist tampering, which is what you want for a currency,

[16:58] it works very well for things that are small and transactional like this. I'll go ahead and fix that. And they're just a very efficient way to handle agreement on what has happened in the past.

[17:18] It's kind of this immutable history that goes down with time. So that's a basic blockchain and a token on it. We're glossing over some main points, but if you dig into the demo and click through these things and play around with it,

[17:38] you get a better and better idea of how this works. There will be a part two where we go into a little bit more detail about how the transactions are created. Till then.