Allison Tharp has some notes on an edX course entitled Blockchain for Business. This looks like it will be a multi-part series. Part one:
A distributed ledger is a data structure that is spread across multiple computers (which are usually spread across locations or regions). Distributed ledger technologies have three basic components:
- A data model to capture the current state of the ledger
- A language of transactions to track the changes in the ledger state
- A protocol that builds consensus among participants around which the transactions can be accepted
In other words, we can think of a distributed ledgers as databases which are shared among peers and do not rely on any central authority or intermediary. Instead of having a central database, every participant has their own copy which stays in sync via the pre-established protocol. Each participant verifies transactions and speaks a common language to ensure universal agreement on the state of the ledger.
Another consensus algorithm is called the Proof of Stake algorithm. With this algorithm, the nodes are known as validators and instead of mining the blockchain, they validate the transactions to earn a transaction fee. Instead of creating new coins (as is the case in Bitcoin), all of the coins exist from the very beginning. Another way to look at this is that the nodes are randomly selected to validate blocks. The likelihood of the random selection will depend on how many coins the node holds (this is known as the amount of stake they hold).
Blockchain has gone from wacky idea to interesting business concept over the course of about a decade. It’ll be interesting to see if it catches on to be a vital business concept in the next ten years.