Everything Everywhere Daily: History, Science, Geography & More - How Blockchains Work

Starting point is 00:00:00 One of the biggest innovations in computing over the last several years has been the blockchain. There have a host of companies that have hyped products using a blockchain. Blockchains are the basis of all cryptocurrencies and non-fundable tokens. Yet, despite all the talk about blockchains, most people still aren't totally sure what a blockchain is or how it works. So learn more about what blockchains are and how they work on this episode of Everything Everywhere Daily. What if your perceptions about the past were wrong? ThruLine is a podcast that takes you back. back in time to uncover the parts of the story that may have gone unnoticed.

Starting point is 00:00:47 It effectively turned day into night. And how it shaped the world now. Time travel with us every week on the Thuline podcast from NPR. If you've paid any attention to technology or computer news in the last few years, you've probably heard a lot about blockchains. Blockchains are the technology behind cryptocurrencies and non-fungible tokens or NFTs. However, I've noticed that while there have been many mentions of blockchains, there hasn't been a lot in the way of explaining what a blockchain actually does. My goal in this episode is to provide a high-level understanding of what a blockchain is and how it works.

Starting point is 00:01:28 I'm not going to get into the specifics of any particular use of blockchains. Also, I know I have a wide variety of people who listen to the show, so there will be some people who are very familiar with what I'm talking about, and there are some who might not even know what a blockchain is. This episode is intended for the latter group, who may have heard the term but otherwise don't really know much about it. So with that, let's start with what problem a blockchain is trying to solve. So let's create a hypothetical example and say that I'm going to allow people to vote on if I should do an episode on tomatoes. So I'll create a Microsoft Word document and make it available for download. A bunch of people download that Microsoft Word file and then vote in the Word file.

Starting point is 00:02:10 I've distributed the file, but there's an obvious problem. No one else, including myself, can see what changes you made. The file is distributed, but it's not connected. So if everyone sent me their copy of the Word document, no one else would be able to see what the votes were. Some of the votes might get stuck in my spam folder. Even if I re-uploaded the results, there's no guarantee that what I post is actually correct.

Starting point is 00:02:34 So let's solve that problem by creating a document in Google Docs that anybody can access online. Now, everyone can see and edit the same document, but this introduces a new problem. Let's say someone out there really doesn't want me to do an episode on tomatoes. So when people start adding their names to the pro-tomato list, the anti-tomato people start deleting them. This document is public and distributed, but it's inherently untrustworthy. We could solve this problem by making me some sort of admin, where I can see all the edits that everyone makes. So, again, someone votes on the tomato episode.

Starting point is 00:03:11 But I secretly don't want to do a tomato episode, so I edit the document to delete pro-tomato votes. The entire system has now been condensed into trust in a single person, me who has a vested interest in the outcome. So to solve that problem, instead of me being the admin, we'll let some third-party admin at Google handle everything. However, the problem is still there. We now have to trust that person, and we don't know. if they're pro or anti-tomato. Even if we removed all the admins and created some sort of automated system, we would still have to deal with the issues of hackers hacking into a database to change the results,

Starting point is 00:03:49 hackers who really love or hate tomatoes. This is a seemingly intractable problem. An episode about tomatoes is a trivial example, of course, but you can see how this might be a huge problem if we are talking about money or other important data. The problem of achieving consensus among groups of distributed, and possibly faulty actors in the presence of unreliable communication channels is known as the Byzantine general problem. For most things, a centralized database is fine, but any centralized system is also a centralized point of failure. Almost weekly, you'll hear news stories about

Starting point is 00:04:24 some company that had their data stolen by hackers. A blockchain can solve many of these problems. The idea behind blockchains was first proposed in 1982 by the cryptographer David Chalm and his dissertation titled Computer Systems Established Maintained and Trusted by Mutually Suspicious Groups. Further work was done in the early 90s by cryptographers with attempts to create timestamps that couldn't be altered. But the first working blockchain system was developed in 2008 by an unknown person who was known only by the pseudonym Satoshi Nakamoto. His system was used to create the cryptocurrency known as Bitcoin. However, soon after the release of Bitcoin, people realized that the blockchain technology that was at the foundation of it could be used for a wide variety

Starting point is 00:05:09 of things. The key to understanding blockchains has to do with something called a hash function. And I'm not going to get into the weeds on the mathematics of it, but a hash function is a type of function known as a trap door or one-way function. They are very easy to calculate, but almost impossible to reverse. In the case of a hash function, you can put anything into it and what comes out is a number of a fixed length. One of the most popular hash functions is known as SHA2. SHA stands for Secure Hash Algorithm and it was created by the United States National Security Agency in 2001.

Starting point is 00:05:48 There are different variants of it, but the most common is SHA 256. That means whatever you put into the function, it can create a binary number that is 256 digits long or a 64 digit hexadecimal number in base 12. For example, if you put in a single character, it will output a binary number of 256 bits. If you put in the complete works of Shakespeare, you still get a 256-bit number as an output. A 256-bit binary number is really big. If you were to convert it into a number in base 10 like we're used to, it would be a number with 77 digits. That is a number so large

Starting point is 00:06:33 that it's greater than all of the atoms in our galaxy. The thing about a hash function is that if you change even one number or character in your input, you get a completely different output. The output doesn't change by one digit. In theory, every digit could change.

Starting point is 00:06:51 Moreover, if you know the 256-bit output that's created by a hash function, it's almost impossible to figure out the input that created that output. That's why it's known as a trapdoor or one-way function. It's very easy to calculate and very, very hard to reverse. In fact, the only known way to find out what the original input was on a hash function, assuming that you know the output, would be to guess randomly.

Starting point is 00:07:18 You'd probably win the lottery a billion times before you could figure out the correct input to get the same output from a hash function. So what does this have to do with a blockchain? The first part of a blockchain is the block. Using the original example of people voting on tomato or not tomato, let's assume that each vote will be a block. The first person voting will enter tomato. Entering tomato in the hash function will then create a very long string of numbers

Starting point is 00:07:49 that is unique to the word tomato. I'm now going to chain the second block to the first block, hence a block chain. The second block will be the output of the first block plus whatever the second vote is. This creates a very new, very long number as the output of the second block. Now remember what I said,

Starting point is 00:08:10 if you change even one number or one character in the input of a hash function, you get a completely different output. That means if anybody were to tamper with the first vote and try to change it to not tomato, it would radically change the output, which itself was part of the input of the second block. Changing the input anywhere along the chain

Starting point is 00:08:31 changes everything that comes after it because everything is chained together. You can chain hundreds, thousands, or millions of blocks together and you will in the end get a unique result, a result that can only appear if every link in the chain is valid. Moreover, this verification in the chain can be done by anyone. There doesn't have to be a single computer. that does all of the computations.

Starting point is 00:08:56 Because every link on the chain needs to be verified. In theory, everyone could have a copy of the blockchain and verify every step in the chain themselves using the same hash function. Because everyone using the same hash function can get the exact same result, and everyone has a copy, this is known as a distributed public ledger. It is public, transparent, distributed, tamper-proof, and it requires no trust in a single individual. Now, the example I gave of the tomato voting is trivial, obviously, but it illustrates the point.

Starting point is 00:09:30 A blockchain is a chain of blocks. A hash function creates each block with an output that is nearly mathematically impossible to tamper with without ruining the entire chain. Real-life blockchains are much more complicated than this. For starters, each block isn't necessarily a single entry. It could be a collection of entries. One issue with real blockchains, like with Bitcoin, is the creation of very. new blocks. Because multiple transactions are in a single block, creating new blocks isn't done willy-nilly. Creating a new block is difficult. It's so difficult that the process is literally called

Starting point is 00:10:05 mining. To create a new block, you have to find a value that when run through the hash function starts with a long string of zeros. How many zeros will depend on the difficulty of the setting. Because there's no way to predict what number will come out of a hash function, the only way to find such a number is by just testing random numbers at massive scales. And this is called hashing. As of the time of this recording, there are about 424 million terra-hashes conducted every second for the Bitcoin blockchain. That's 424 million trillion hashes every second, just trying to find a number that could start a new block. Even with all of these mathematical guesses, only one new block is created about every 10 minutes. This difficulty in creating new blocks is known as

Starting point is 00:10:56 proof of work. So what's the point of all this? The biggest use today is for cryptocurrencies. The blockchain literally tracks every single transaction that has ever occurred. A few years ago, in an effort to learn more about all this Bitcoin stuff I was hearing about, I went and started my own Bitcoin note on a tiny Raspberry Pi computer. When I first turned it on, it took a week to verify every single transaction in history, and the entire blockchain now takes up about 500 gigabytes of storage. However, there are other uses beyond cryptocurrencies. There's a service called PodPing that actually uses a blockchain to inform services when podcasts have been updated. It cuts down on the tremendous bandwidth costs that are incurred, constantly checking to see if a podcast has been

Starting point is 00:11:41 updated. Rather than checking the RSS feed for every single podcast over and over and over, you just need to follow the updates of a single blockchain to know when a show has been updated. blockchains allow non-fungible tokens to be assigned to a single user. Many of the current uses of NFTs have just been for collectibles, but it also works on anything digital that you want to be something that can't be infinitely copied. Blockchains have been proposed for other types of data that need to be secured and potentially available anywhere. Real estate deeds are an example of something that could be stored in a blockchain to ensure that records aren't lost and are accessible by anyone.

Starting point is 00:12:15 It could also potentially remove many of the intermediaries required for a real estate transit. action. Likewise, there are many things that do not make sense to put on a blockchain. I've heard many proposals for things that are really just large databases that would require a large data center that would never work well on a distributed blockchain. What I've covered in this episode is a very cursory overview of blockchains and how they work. And if my explanation didn't sufficiently explain how blockchains work, I suggest visiting blockchain demo.org. There, they have a sample tool that you can mess around with to see how hash functions work when you input data and how different blocks can chain together. Blockchains do have a lot of potential uses. It solves one of the

Starting point is 00:12:57 trickiest problems with electronic communications. How can you verify data in a decentralized manner? But at the same time, it isn't a panacea, and it isn't designed to be used with everything. The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Peter Bennett and Cameron Kiefer. Today's review comes from listener Alicia from Denver over on Apple Podcasts in the United States. They write, Great way to learn about a variety of topics. Gary's podcast covers a wide variety of topics,

Starting point is 00:13:28 from historic events to geographic facts to cultural heritage. In 15 minutes, you can get educated on a topic in-depth and in detail. And Gary's voice is very pleasant. Love it. Thanks, Alicia. I appreciate your kind words, and I'm always glad to hear from listeners up in the Mile High City. Denver is one of my favorite cities,

Starting point is 00:13:45 and I always look forward to returning. Remember, if you leave a review more, send me a boostogram, you two can have it right in the show.

Everything Everywhere Daily: History, Science, Geography & More - How Blockchains Work

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