Introduction

An introductory course on the basics of blockchain and asset management

A blockchain is a decentralized, trustless, and open source way of storing and exchanging value that remove the need for a middleman, or a bank, to transfer digital assets all over the world. A good analogy is that a blockchain is a ledger, like one a bank might keep, that details which accounts hold what value, but the major difference is that this ledger/blockchain is shared to all participants in the network instead of kept secret by a centralized party. This is why blockchains are often called distributed, or decentralized, ledgers.

Since a blockchain is decentralized there is no single point of failure, instead, many separate groups or individuals maintain the network for a small reward. So, any one of them could leave the network or go offline and the system will continue without them. Since everyone can see and verify all transactions and there is no need to trust any one party to maintain the blockchain or validate transactions, the network is said to be trustless. Just as the blockchain's accounts and transactions are visible to anyone, so is the computer code and rules that describe how the network will operate. There is no trust in people or companies with a sound blockchain system, only an agreement in the rules and code that govern the possibilities on the blockchain. In the software world, we refer to publicly available programs like this as open source. All the code can be inspected by anyone who wishes to do so.

Some important definitions:

Private Keys are digital keys that allow you to access your holdings and generate signatures for transactions on a blockchain. They may appear as a long string of random characters. Crypto wallets store your private keys. They allow you to send, receive, and spend your coins. The Lattice1 is a type of secure wallet called a cold (hardware) wallet which keeps your private keys safe and offline whereas a wallet like MetaMask is a so-called hot wallet which stores your keys locally on your computer exposed to the internet. Transactions and Signatures. A transaction is any event on a blockchain that moves coins around or runs programs in terms of the Ethereum Virtual Machine (EVM). Every time a transaction is initiated, it must also be signed by the user's private keys. That way everyone participating in the blockchain can tell the transaction is legitimate. Only a wallet which holds an asset has the correct signature to send that asset. Blocks are distinct parts of the overall ledger that is a blockchain. Each block is made up of pending transactions and when the block gets verified by individuals in a process called "mining" or "validating", all the transactions from this block are added to the ledger. Consensus in crypto terms generally refers to a network's participants agreement on the state of the blockchain, or an individual block. A consensus mechanism then is the set of rules by which a block is programmatically validated on each blockchain (e.g. proof of work and proof of stake).