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- 00:00Now, let's summarize what we found in the first week of our openHPI course on Blockchain.
- 00:08Because we've already got, as we're about to discover, a naive approach to such a blockchain, everything that's necessary.
- 00:17So we saw, that consistency is difficult in distributed systems, there are different models.
- 00:26That is the challenge we have according to the different models we have different errors.
- 00:33We were particularly interested in a mistake like that, that's not easy to spot now, like a crash bug,
- 00:38but we've come to terms with the Byzantine errors, so with all the random mistakes,
- 00:43that always consist of doing something. not following the rules.
- 00:51We have seen, even if we have such Byzantine models, so if we - and these were the traitors in the network -
- 00:57so if we also have traitors in such a network, then cheaters, that we could then use a consensus algorithm like that to still be able to ensure consistency.
- 01:09We have been successful with such a democratic approach, namely that simply the number of votes is evaluated in such a 0/1 decision.
- 01:21You can always take that quite well as a model of thought, how to do that for more complex messages.
- 01:28Then we saw what we could do, to attack this democratic consensus algorithm,
- 01:37is to use such a Sybil attack to fake participants, to simply influence the voice ratio.
- 01:45We've seen how we can stop it, and we've now seen in the last clip how we've changed the chronological order of the commands or messages sent in the network,
- 01:58how we can determine the timing beyond any doubt without a central timestamp service, those were the linked timestamps.
- 02:08We had also seen with the consensus algorithm, that if we have 2m+1 participants, we'll be up to m scammers, up to Byzantine errors.
- 02:23And when we have this together, then we can think about it now,
- 02:29that we're not going to put this on a situation like this with old generals, who want to attack a city or retreat,
- 02:35but when we apply that to a bank like this. and wants to use the banking business, that's what it's all about,
- 02:43that the bank, as an anchor of trust in such a system. always precisely records the exact order of the transfers
- 02:53and anybody who wants to check it out. I have to see this bank's ledger.
- 02:59The bank thus becomes an anchor of trust.
- 03:03Now we had seen that this approach with Bitcoin was just that, we can't run the whole system without a bank, without a central point of confidence recognized by all
- 03:22and we've seen or we've seen that we can do it.
- 03:27Because if we now in this picture of the bank instead of in this picture of the old generals as messages to take the referrals,
- 03:36then we can be in such a cryptographically linked list to record exactly the individual instructions and their sequence.
- 03:46And we can create consensus over the head of such a linked list that all participants, even if they don't trust each other, acknowledge this flow of news.
- 04:00Now, in order to cast an activity vote there. and prove that you're not a fake participant in such a network, we had the idea of the Proof of Works,
- 04:15and are now simply in a situation where our Byzantine generals they're no longer at war, they're at a bank.
- 04:25So we actually made it - of course that's a little simplified - to see how we could run such a bank, such a financial institution, without having this central, trustworthy office of a bank.
- 04:42So we've made a trustworthy account book.
- 04:48Our distributed bank keeps its account book on all instructions, she runs the distributed and without a coordinator.
- 04:57So it is decentralized like in a distributed network.
- 05:01The Byzantine mistakes that there are quite among the participants fraudsters are tolerated if there are not too many.
- 05:10So it may not cheat more than half of the participants, and we can attack the Sybil that a participant because several other participants are faking,
- 05:23we can fight it with a proof of work.
- 05:27So there's no need to trust anyone, with the help of the cryptographic procedure this trustless account book is guaranteed beyond doubt.
- 05:43And with the Linked Timestamping, so with these linked Hashlisten of the individual transfers we have a data structure,
- 05:53so that every new link in the chain can only be inserted by a proof of work,
- 06:00which is also unchangeable. and not allowing anyone to block this referral process.
- 06:09And, of course, that was a huge sensation, because the banks, of course, had central positions,
- 06:14that is also the big question in the years when the banking crisis was, as well as the confidence in the banks was shaken,
- 06:22so that this approach of the blockchain then suddenly in all areas, in the media, was celebrated
- 06:30and the meaning has just been recognized, that it is possible in such a distributed system, in a network of equals,
- 06:39to keep a decentralised, trustless and unchangeable accounting book.
- 06:45Naive we have understood everything by now how it is with the blockchain, but it's a little more complicated than that.
- 06:57Namely, what have we achieved with our solution?
- 07:00We've seen a lot of messages that need to be sent, every participant must to build that consensus, the voice of every other participant,
- 07:12and he must be informed of the other participant's vote. ask another participant.
- 07:20It was this democratic consensus algorithm.
- 07:23So you got the message from the network subscribers, and you have inquired with other net participants, what message they got from a particular net subscriber.
- 07:33So if we just add that up, when we have a subscriber on the network to send 2n² -2n messages, to be within this consensus algorithm.
- 07:45And if now n is a large number, if we think of a bank with many, many participants, then of course is this square effort, which scales poorly and is impracticable for large networks.
- 07:58So the way we've been doing this so far, it's not working out well yet. and not yet efficient and cannot be applied in practice.
- 08:06And then this great pioneering work of Satoshi Nakamoto appeared, where the Bitcoin system was introduced, which was the same way,
- 08:22namely not to create trust through a central instance, but in a network where there is no central trust authority, To establish trust with the help of cryptographic mathematical methods.
- 08:39And this work then brought a way, how to make such an electronic payment system, a currency, namely Bitcoin,
- 08:49how to actually use them in practice can have as pure a peer-to-peer network as any user, Participants in such a distributed system can participate in it.
- 09:05There's no instance, no trust anchors, and yet financial transactions can be made.
- 09:12So, and how this works now, Bitcoin, that's what we want on the basis of knowledge, what we acquired this week,
- 09:18then take a closer look next week.
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