What’s a Blockchain?

Please note that my simple descriptions won’t be perfectly accurate – there are and will be more exceptions. I’m going to focus primarily on the Bitcoin blockchain to keep things as simple and useful as possible. There are many different blockchains. Other cryptocurrencies use a blockchain with the features & benefits that support their unique value proposition. If you see something wrong, please speak up so I can get it corrected. The last thing we need is more wrong information.

A Blockchain is The Foundation

A blockchain is the foundation of a cryptocurrency like Bitcoin. A blockchain is a specialized type of database that provides a unique set of features that makes it a powerful tool in certain usecases like digital money and other applications where accurate, unchangeable historical information is very important and multiple parties all have a vested interested in the accuracy of the information.

A Blockchain is a Database

A blockchain is a relatively new type of computer database. Almost all computer programs use a database to store information. There are a wide variety of databases and each has a unique aspect that gives it superiority in different situations. A blockchain database has several unique characteristics that are listed below.

A Blockchain is a Ledger

Your bank uses a ledger to store your account information. Your bank doesn’t really keep a separate stack of cash in their vault for each depositor. Instead, they maintain a ledger of transactions where money is either added (deposited) or subtracted (withdrawal) from your account ledger. Yes, the bank has other databases too, but your deposits and withdrawals are stored on a ledger. Ledgers are specifically designed to be very fast to add information and completely comprehensive containing all transactions related to an account. Each one starts with a zero balance and contains nothing more than transactions adding to or subtracting from that original zero balance. A ledger does not allow for records to be changed once they are entered – only a reversing ledger entry is allowed to correct a mistake. A ledger may account for one or many different accounts at the same time.

A Blockchain is Distributed

An exact copy of the blockchain exists on many, many internet connected computers. Since the ledger exists on many different computers and the ledger changes frequently with additional transactions, all of the computers must agree that their copy of the ledger is the true and most recently updated ledger. This sounds like a big problem but it is actually very beneficial to a blockchain. The distributed nature of the blockchain forces consensus among all of the computers that contain a copy of the ledger. There can only be one truth and it must be agreed upon by all the computers participating in the distributed ledger. Technically speaking, it is possible to have a blockchain run on a single computer but doing so eliminates the ability to completely validate and secure it from any changes.

A Blockchain is Immutable

Once something is written to a blockchain, it can not be changed. Accounting ledgers are similar in that transactions that have already been recorded may not be changed – an “offsetting” transaction is required rather than editing or deleting the original transaction. This immutability provides a unique historical perspective on the transactions contained in the blockchain that is largely unavailable with any other type of database. Immutability is not perfect and not guaranteed but is implemented by using a proof of work algorithm that makes it incredibly expensive to make any historical changes – typically far more than the historical change might be worth.

A Blockchain is Transparent

Blockchains can be viewed and read in their entirety by anyone with permission and/or access. While you can easily see the records in the blockchain, you may not be able to understand the origination, destination or purpose of them. Some blockchains are permissioned – meaning they are not publicly visible and you must have permission to view them.

A Blockchain is Secure

Blockchains are secured by miners. Miners compete or work collaboratively to add new records to the blockchain. The miners must all agree that a single blockchain is the single truth. Miners are either paid or rewarded for their work securing the blockchain. Miners protect the blockchain in several ways – preventing double spending, preventing changes to the historical ledger, preventing address blocking (fungibility) and minting new coins. There are a variety of schemes to secure a blockchain and Bitcoin’s blockchain is secured by Proof of Work which rewards miner’s efforts to secure the transactions and places a heavy cost in front of anyone who desires to change historical transactions and violate the security of the blockchain. Proof of Stake, Federated Consensus, Proof of Elapsed Time and Proof of Storage are examples of other security schemes used to secure different blockchains.

The Bitcoin Blockchain Summary

  • Bitcoin, the dominant cryptocurrency, is stored on a single Bitcoin blockchain.
  • All Bitcoins are stored on the bitcoin blockchain = Database.
  • Bitcoins consist of an Address on the blockchain with transactions = Ledger
  • The Bitcoin blockchain is distributed all over the world and run by Miners and Nodes = Distributed.
  • The Bitcoin blockchain cannot be changed to prevent double-spending = Immutable
  • You can see the Bitcoin blockchain at https://blockchain.info = Transparent
  • Bitcoin Addresses can be seen by anyone but can’t be changed by anyone without the proper key = Secure

A short video explaining blockchains in 2 minutes – https://youtu.be/r43LhSUUGTQ

Summary

A blockchain is a powerful technical tool in certain use cases like digital money. There are new uses for blockchains being devised or discovered every day. Maybe the best summary of the power of a blockchain is a publicly viewable database of historical transactions that is verified to be true and secured to prevent malicious actors and only allow the owners of each data record to control that data. You’ve already heard the words “Accountable” and “Transparent” used by the younger generations. These traits are highly valuable to the younger generations as a way to control and improve society. Blockchains provide and promote these traits, so it’s not a surprise they are one of the driving forces of technical and social innovation.

My Personal Take on Blockchains

I like blockchains as a technical tool for storing and retrieving information. But, I’m also skeptical that they can solve every problem out there as I frequently see and hear in the news media. I see blockchains as very useful for managing accurate historical information among a diverse group of interested parties – and that’s about it. Sure, it can apply to almost every situation that needs a database, but the cost of running a blockchain as a database is higher than other types of databases so the benefits of using a blockchain need to be relatively high and unique. They’re almost the only viable option for digital currencies where they prevent double spending. But, just because it has a blockchain doesn’t mean that it actually solves a problem.

Links

https://lifehacker.com/what-is-blockchain-1822094625

PermaLinks

Curated Bitcoin Resources by Jameson Lopphttps://lopp.net/bitcoin.html
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BBBC #1 – How I Got Started

 

How I Got Started in Bitcoins, Blockchains & Cryptocurrencies

How I Got Started in Bitcoins, Blockchains, and Cryptocurrencies

I got interested in Bitcoin in early 2013 when I read about it on Reddit. It was interesting and I started learning and accumulating bitcoins. As Bitcoins gained momentum and increased in price & popularity, I started asking people if they knew about Bitcoins and most just laughed. A few got annoyed.

2014 thru 2017 have been a crazy roller coaster ride for Bitcoin prices. I’ve learned a lot and formed a number of opinions and ideas about blockchains, bitcoins, and cryptocurrencies. I’m still excited about these for a number of reasons that I’ll explain.

What I’m Doing

During the Fall of 2017, Bitcoin had a huge rise in popularity, notoriety, and price. Information about Bitcoins started flooding out of every device we own and every program we saw or listened to. Hell, even TV sitcoms were talking about it.

But, when I talked with my friends and family, I discovered that they had a bunch of misconceptions and fears about Blockchains, Bitcoins & Cryptocurrencies (abbreviated BBC). Most folks were curious but very wary of bubbles and scams. They wanted to hear simple explanations, facts and helpful links where they could learn more and form their own opinions.

I decided to improve and sharpen my own learning by explaining what I know, sharing what I learn and improving my own beliefs and strategies.

I’m going to write a periodic blog post about a single topic and share it with you via newsletter.

My goal is to share useful insights into Bitcoins, Blockchains & Cryptocurrencies and what I think that means.  Possibly more importantly (Keith Cunningham taught me to love great questions), I’m going to share some powerful thinking questions about BBC with you as well.

I encourage you to do three things.

  1. DYOR – Do Your Own Research and form your own opinions. Please, use my thoughts and questions as a starting point. Learning by asking great questions.
  2. Get Involved. I recommend a very small monthly investment in one or more cryptocurrencies. Think of it as very tiny dollar cost averaging. There are a couple benefits. You’ll be more motivated to learn about BBC. You’ll almost certainly make a little profit and the downside is very small. Possibly even spend some in online transactions. Learn by doing.
  3. Share your enthusiasm, curiosity, and learnings with other people. Discuss and debate. The BBC is still in the early innings and how the game plays out will depend on how the rest of the world perceives and uses BBC. Sharing what you learn will sharpen your own opinions, beliefs, and strategies. Learn by sharing.

Why I’m doing this

I think there are four reasons I’m doing this – there may be more later as I learn more.

  1. I like learning and sharing. It forces me to sharpen what I learn and ask better questions. I’m not teaching a class but it’s well known that is the best approach to learning a topic.  I hope you learn from what I’m learning.
  2. I see tremendous opportunity and I want my friends to benefit. More on this in a later post but most of what I’ve seen, experienced and learned over the past 5 years leads me to believe that BBC is a lasting and increasingly valuable phenomenon. Sure, it has risks but I believe the long-term outlook for BBC is far more laden with opportunity than peril.
  3. I make a small amount of crypto when you click and complete a transaction from some of the links on this site. It costs a little money to run the website, email, and newsletter so making a little money here will be nice. I won’t include any links that I haven’t used my self. But, as always, DYOR!
  4. My cryptocurrencies get more valuable and so will your’s. It’s simple. Bitcoin supply is fixed at a max of 21 million coins. So, in the supply-demand curve that determines prices, increasing demand when there is a fixed supply increases the price.  If I can convince you to buy BTC, my BTC becomes a little more valuable. When you get disillusioned and dump your BTC, mine possibly becomes a little less valuable. Increasing the value and adoption of BBC is my ultimate goal.  There are numerous benefit from this happening and increasing the price of BTC helps my portfolio immensely. I want you to have a portfolio and feel this way too.

Lastly, Do Your Own Research – DYOR

Don’t believe me or trust me.  I’m not a financial advisor and you shouldn’t take any advice I give you. I hope you enjoy the explanations and questions but Do Your Own Research.

A Final Thought

I named this Boomers, Bitcoins, Blockchains & Cryptocurrencies because I’m 56 and a tail end Baby Boomer. Most of the folks I talk with are of a similar (distinguished) age. Mostly, what we hear about are Bitcoins but blockchain and other cryptocurrencies are important to understand as well.

I’ll explain and link here later but I believe that the current generation of Millenials+ believe more in data and technology than banks and credit card companies.  Bitcoins, Blockchains & Cryptocurrencies appear to be the most likely path forward for the Millenials+ to create, accumulate, store and trade their wealth.  We could keep insisting that this is a bubble but it’s their world and we’re just living in it. Wouldn’t it be wiser to watch what they’re doing and where they’re headed and then learn and adjust to where the world of capitalism and commerce is going than to sit back and loftily claim it’s doomed?

Or, said another way, these kids are going to be keeping our retirement funds solvent and growing through their future work and efforts. Doesn’t it make sense to get a detailed understanding of where they are taking capitalism and commerce? I think we ignore this at our peril.

And, PS. I’m not an expert. I’m more of an educated fanboy. I promise I will make mistakes and tell you things that are wrong.  If you find a mistake, by all means, tell me and I’ll make sure to update and correct the mistake. I’m not an expert.

– Jeff

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What Do You Believe?

I’m fixin’ to get a new hunting dog.

Jill, my 9-year-old Brittany (that’s her digging -> ) is showing signs of slowing down.  Me, too but that’s beside the point.  There is still a lot of big, wild country out there that I haven’t hunted yet and I need a dog that can cover some BIG country.

See, Jill is my first and best hunting dog – ever. I got really lucky because she has such a strong hunt drive. I want my next pup to be as good or better than Jill. And, picking a great hunting dog puppy is really hard – well beyond my capabilities.

Here’s what I’m going to do and why.

I’m in line the get a Deutsch Drahthaar (DD) – that’s German for Wirehair Pointer. But, DD’s are a special subset of all German Wirehairs. Their secret lies in the DD breed association and the rules they’ve set and agreed to regarding which dogs can be registered as a DD. Not every dog get’s to be a DD – even though they may have DD parents.

The reason I selected a DD is that I believe that their process for breeding, testing & measuring the hunt characteristics in each dog and their parents is far beyond any other breed association. Many dogs are bred for specific characteristics but DDs are bred specifically for the hunt – and nothing else.

Since the chance of picking a good hunting dog pup is well less than 50/50, I’m going with what I believe to be the best chance of getting what I want – a dog that hunts hard! Wish me luck!

Yeah, and this isn’t actually about hunting dogs, it’s about Belief. If you want more hunting dog stories, take a look here for more tales of my adventures with Jill.

No, this is about my Belief that DDs are my best option to get what I want and how I got to that point.

But Why Beliefs?

Because money, currency, and technology all have a basis in Belief as well. In fact, some of the many comments you’ll hear about Blockchains, Bitcoins & Cryptocurrencies (BBC) is “I don’t believe in that stuff” or “SCAM/Ponzi!” or “Rat Poison“.

And, you currently have some beliefs about money, currencies, and technology that you may or may not realize!

Beliefs influence our behavior in powerful and sometimes, curious ways.

In fact, you probably have a belief right now about BBC.

Take a minute to just check in with your brain and see what it’s telling you about what you’ve read thus far. I’ll wait…..

Too soon. OK, keep thinking…….

See, you do have some beliefs about BBC! Even if you aren’t perfectly clear on what they are – there’s something there, isn’t there?

And….that’s rub and the friction. We all hold many beliefs and probably don’t realize it or even know what they are!

So, I Have a Belief. Who Cares and What Does It Matter?

Well, you do have a belief that I know of.  You believe that the US Dollar is worth something because it is backed by the full faith and credit of the US Government. If you didn’t have that belief, you wouldn’t work for or spend US Dollars. And, thus far, the US Government has done a very good job of maintaining your belief in them.

People in Venezuela used to believe in their currency. It was and is backed by the Venezuelan government. I don’t think many people in Venezuela believe in their currency anymore. I don’t think the Venezuelan government believes in their currency either because they’re trying to launch their own cryptocurrency – the “Petro”.

Meanwhile, back the States, the US government just passed a new income tax law and a fiscal budget that dramatically increases our debt and their credit. At some point, there’s going to be a problem repaying or servicing that debt behind a massive reduction in taxes. It won’t happen overnight. It will happen gradually. We’re already losing “faith” in the government’s ability to honor their promises in how they govern us. It might not be long before we stop giving them so much “credit” either!

OK, this isn’t about politics either. It’s about Belief so I’ll just stop there because I think you get my point.

You also probably believe something about Blockchains, Bitcoins & Cryptocurrencies (BBC).

What you may not realize and that I have learned while searching for my next hunting dog is that we use “facts”, “information” and “experience” to inform and build our Beliefs.

I believe that a DD is my best chance at getting what I want based on the facts I have researched, the information shared with me from other DD owners and my experience hunting with DDs.

You probably have a very strong set of facts, information, and experience regarding the value of the US Dollar. Heck, just being able to exchange them for beer and pretzels alone is enough for most people to believe it’s valuable! You use it and it works – that’s enough for most to believe, isn’t it?

Back to those beliefs you may have about BBC.

What set of facts, information and experience do you have that are informing and supporting your belief about BBC? If you’re like most, you have almost no facts, no experience and some crappy information you’ve heard from newscasts and advertisements.

You might consider, then, that your belief in BBC is based on a weak set of evidence.

That’s fine if it’s getting you what you want. But, it may actually be working against you.

Yeah, Who Cares?

Well, I care and you should too!

Here’s why –

In most cases, a poorly formed belief will almost always lead to a poor outcome. It’s not the belief so much as it is a very large set of facts, information and experience that are ignored which leads to situations with bad outcomes.

So, if beliefs shape your behavior, outcomes, and success, doesn’t it make sense to examine your beliefs about BBC and see how well they’re working for you?

Well, I Don’t Really Care That Much

Look, I really don’t care what you believe as long as it’s working for you.

Heck, even if it’s not working for you but you’re happy, go for it!

But, bad outcomes for you doesn’t make me happy and I want you to have good outcomes and situations.

So, if I can help you form a better belief about BBC, then that will make me happy.

Hopefully, it will make you happy too!

What DO You Believe and More Importantly, Why?

You have some sort of belief about money. You may not think about them as beliefs but they are – and they’re chatty little things that are talking to you all the time – usually *really* quietly.

For example, when you look at your paycheck, what thoughts cross your mind?

  • This isn’t enough
  • This is more than I deserve
  • This won’t go very far
  • This is more than I need
  • I earned this

Those thoughts come from your beliefs about money and value!

Here are some more questions about money to consider:

  • What do you believe about the value money?
  • What do you believe about the USD Vs Euro Vs Canadian Dollar?
  • What happened or have you learned that informs those beliefs?
  • Is your belief helping you get better or is it dragging you down?
  • What Do You Believe About Blockchains, Bitcoins & Cryptocurrencies?

Yeah, thanks for sticking with me this far.

So, given what you’ve learned that you believe about money & currencies, what do you believe about Blockchains, Bitcoins & Cryptocurrencies?

What do you believe about technology and how it will impact the future?

What do you believe about data transparency, privacy, and the internet?

Why Are You Asking All These HARD Questions, Jeff?

OK, I’m sorry for all that. We’re almost done.

I’ve learned that there is far more going on underneath the surface of Blockchains, Bitcoins & Cryptocurrencies than most folks know. A lot!

And, most of what is happening is the result of a younger generation having some beliefs that are different than the ones you and I have as Boomers.

Make no mistake. The younger generations and their beliefs are going to control and influence the world that you and I retire into. I don’t want to wind up 15 years in the future and not have a clue what’s going on or how I wound up there.

I don’t need to understand everything but some very big things are going to change dramatically and I don’t want to be caught by surprise.

If I can learn more about what they believe and use then use that to inform my own beliefs, then I can build opinions and strategies that help me improve my situation and achieve my goals.

If I don’t learn more and just stick with a poorly informed belief, I give myself no better than a 50/50 chance of success – at best – and probably worse.

Yeah, I’m not going into retirement as a poorly informed rube. I hope you aren’t either.

I’m going to learn my buns off!

I hope you’ll learn with me and form your own opinions, strategies, and beliefs so that you can get everything you want and live a life you love.

Welcome to my adventure!

PS – you may not be a Boomer but that’s OK. Your time is coming sooner than you think so you just have more runway than I do and you’re definitely in the right place!

Thinking Questions

  • What do you believe about money and USD?
  • Where did you get that belief?
  • What do you believe about Blockchains, Bitcoins & Cryptos?
  • What does the younger generation believe about Blockchains, Bitcoins & Cryptos?
  • How well is your belief about Blockchains, Bitcoins & Cryptos working for you?

The Rules of Bitcoin

  1. Always talk about Bitcoin.
  2. Never talk about Your Bitcoin.

Links

A Guide To Bitcoin’s Technical Brilliance (For Non-Programmers)
Shelling Out | The Origin of Money by Nick Szabo

Podcasts

Unchained | Laura Shin – Blockchain 101 with Andreas Antonopoulos: How Bitcoin Makes Each of Us as Powerful as a Bank

PermaLinks

Mastering BitcoinAndreas Antonopolous
Curated Bitcoin Resources by Jameson Lopp – https://lopp.net/bitcoin.html
BBBC Subscribe! – Subscribe to Boomers, Blockchains, Bitcoins & Cryptocurrencies
BBBC #1 – How I Got Started
BBBC #2 – What’s a Blockchain?
BBBC #3 – What’s a Bitcoin?

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