Simplified Blockchain 101 Notes
Distributed Systems
Many computers (called nodes) work together to solve a problem.
Users see it as one single system.
Nodes can be honest or bad (Byzantine).
Key challenge: making sure system still works even if some nodes fail.
CAP Theorem
A distributed system cannot have all three at the same time:
1. Consistency – All nodes have the same data.
2. Availability – System always works/responds.
3. Partition Tolerance – Works even if some parts fail.
Blockchain gives up immediate consistency, but gets it later (eventual consistency).
Byzantine Generals Problem
Story: Generals must agree to attack, but some may lie.
In blockchain, nodes must agree even if some act badly.
Solved using PBFT (1999) and Proof of Work in Bitcoin (2009).
Consensus
All nodes must agree on one version of data.
Harder when many nodes don’t trust each other.
It ensures blockchain shows the correct, agreed data.
Consensus Mechanisms
Set of rules to help nodes agree.
Key requirements:
- All honest nodes agree.
- They finish the process.
- Final result is correct.
- Can handle bad nodes.
- No double decisions.
Types of Consensus Mechanism
Byzantine Fault Tolerant – Use messages, no heavy computing.
Leader-based (Paxos/RAFT) – One node leads; others follow.
Others: PoW, PoS, etc.
History of Blockchain
Started with Bitcoin in 2008–2009.
Built using ideas from e-cash and distributed systems.
Electronic Cash & Concept
Digital money, started in the 1980s.
Problems: double spending, privacy.
David Chaum introduced blind signatures.
Led to Bitcoin which solved key issues.
Introduction to Blockchain
A secure, shared digital ledger.
Works without any central authority.
Records are permanent and agreed upon by everyone.
Technical Definitions of Blockchain
Shared ledger – everyone sees the same data.
Data structure – like a linked list using hash pointers.
Consensus mechanism – everyone agrees on what’s true.
Generic Elements of Blockchain
Addresses – Like account numbers.
Transaction – Send value from one address to another.
Block – Group of transactions.
Peer-to-peer network – No central server.
Scripts/programs – Rules for transactions.
Virtual machine – Runs smart contracts.
State machine – Tracks changes step-by-step.
Nodes – Computers doing the work.
Smart contracts – Auto-executing code.
Features of Blockchain
Distributed consensus – All agree without a boss.
Transaction verification – Only valid actions are accepted.
Smart contracts platform – Code runs on blockchain.
Transfers value – Using tokens/cryptocurrency.
Creates cryptocurrency – Rewards miners.
Smart property – Digital ownership.
Security – Based on cryptography.
Immutability – Can’t change old data easily.
Uniqueness – Stops double spending.
Applications of Blockchain
Used in banking, law, media, government, health, and more.
How Blockchains Add Blocks
1. Node signs a transaction.
2. Shared to other nodes.
3. Validated and added to a block.
4. Block added to the chain.
5. More blocks confirm previous transactions.
Tiers of Blockchain Technology
1.0 – Bitcoin, cryptocurrency.
2.0 – Smart contracts, finance apps.
3.0 – Government, healthcare, arts, etc.
X (Future) – AI + Blockchain for all areas of life.
Types of Blockchain
Public – Open to all.
Private – Only selected members.
Semi-private – Mix of both.
Sidechains – Move tokens between chains.
Permissioned ledger – Known participants.
Distributed ledger – Data spread out.
Shared ledger – Common data store.
Fully private – Internal use.
Tokenized – Uses cryptocurrency.
Tokenless – No currency, just data sharing.
Consensus in Blockchain
Two types:
- Proof-based (like PoW) – Do work to propose a block.
- Voting-based (like PBFT) – Agree by vote.
Examples:
PoW – Bitcoin
PoS – Stake-based
DPoS – Vote-based
PoET – Secure wait
Proof of Importance – Usage + stake
Federated – Trusted nodes
PBFT – Classic method
CAP Theorem and Blockchain
Blockchain chooses availability + partition tolerance.
Gets consistency over time = eventual consistency.
Benefits of Blockchain
No central authority needed.
Everyone can see data (transparency).
Hard to change old data (immutability).
Works even if some parts fail.
Secure due to cryptography.
Simplifies current systems.
Faster transactions.
Saves costs.
Limitations of Blockchain
Scalability – Hard to grow quickly.
Adaptability – Not easy to adopt.
Regulations – Laws unclear.
Immature tech – Still developing.
Privacy issues – Too transparent.