The Oxford Academia at Yale’s Future of Finance: Cash to Crypto seminar was taught by Professor Demetrios Tseas, who wrote an introductory blog post on blockchain technology. This post was previously published in the 2024 Oxford Academia at Yale program blog.
Welcome to Oxford Academia at Yale summer program! We’re thrilled to have bright young minds ready to dive into the fascinating world of blockchain technology. Whether you’re a tech enthusiast or simply curious about the buzzwords of today’s digital age, this blog will guide you through the basics of blockchain and why it’s considered a groundbreaking innovation.
What is Blockchain?
A blockchain is essentially a digital ledger of transactions that is distributed across a network of computer systems, each holding an exact replica of the ledger. The technology can be used to transfer value (among other) in a secure and tamper-proof way, without the need of an intermediary or centralized party, all made possible via the use of computers and cryptography.
Key Features of Blockchain
- Decentralization: Unlike traditional databases that are controlled by a single entity (like a bank or a company), a blockchain is managed by a network of computers (nodes). This decentralized nature makes it more secure and transparent.
- Security: Transactions must be agreed upon by the majority of the network, and once they are recorded, altering them is nearly impossible. This makes blockchain technology very secure against fraud and tampering.
- Immutability: Once a transaction is recorded on the blockchain, it cannot be changed. This ensures the integrity and reliability of the data.
Key Properties of the Bitcoin Blockchain
- Open: The Bitcoin blockchain is accessible to anyone. There are no barriers to entry for participating in the network. Any individual or entity with the necessary software and internet access can, join the network; view the entire blockchain transaction history and validate new transactions via a process called mining and earn new Bitcoins in the process (though this requires specialized hardware).
- Public: Refers to the transparency and availability of the Bitcoin blockchain’s data. Every transaction ever made on the Bitcoin blockchain is visible to anyone. This transparency ensures that the network is auditable and that anyone can verify the authenticity of transactions and the current state of the blockchain.
- Permissionless: Means that anyone can participate in the Bitcoin network without needing approval from any central authority. This characteristic encompasses several key aspects.
Together, these properties ensure that the Bitcoin blockchain remains decentralized, resistant to censorship, and secure. They enable a system where trust is established through cryptographic proof and consensus mechanisms rather than centralized control. This open, public, and permissionless nature is a foundational aspect of Bitcoin, distinguishing it from many other digital and traditional financial systems.
Hands-On Experience: Install a Bitcoin Testnet Mobile Wallet
During this program, we took a hands-on approach to understand blockchain technology, and downloaded a Bitcoin testnet mobile wallet. The Bitcoin testnet environment is identical to the Bitcoin realnet, however, the two networks are not compatible, meaning you cannot transfer testnet Bitcoin to the realnet network and vice-versa. Thus, the testnet is perfect for educational purposes, as we can experiment with testnet Bitcoin, which have no real value. Installing testnet wallets allowed us to conduct peer-to-peer transactions, giving us practical insights into how cryptocurrency transactions work. This exercise was crucial in illustrating both the opportunities and challenges associated with blockchain technology.
Hands-On Experience: Using a SHA-256 Hashing Algorithm
In addition to exploring the Bitcoin testnet, we also delved into the world of hashing algorithms. A hashing algorithm takes an input (or “message”) and returns a fixed-size string of bytes. SHA-256 is one of the algorithms used in Bitcoin mining, to ensure data integrity. Students used their first name and generated a SHA-256 hash. This exercise was crucial in illustrating some unique properties of hashes; for example even the slightest change in the input, will generate an entirely different hash, emphasizing the algorithm’s sensitivity and the security it provides.
Why Should You Care About Blockchain?
As the next generation of innovators and leaders, understanding blockchain technology equips you with knowledge about a pivotal aspect of our future digital world. Blockchain is not only transforming how transactions are conducted but also reshaping how trust and transparency are maintained in various sectors. By learning about blockchain now, you position yourself at the forefront of technological advancement, ready to tackle future challenges and opportunities.
Conclusion
Blockchain technology holds immense potential to change the way we interact with digital systems. By understanding its fundamentals and engaging in practical activities, like using a Bitcoin testnet mobile wallet, you’re taking significant steps towards becoming an informed and proactive participant in the digital revolution. Embrace the opportunity to learn, explore, and innovate. The future is in your hands!