1.3 Explaining the Innovation of Blockchain - Video Tutorials & Practice Problems

In this lesson, I want to talk to you about the innovation behind Blockchain and to do so, I want to place a comparison between a traditional ledger and a Blockchain. To do so, I'm actually going to be using blocks, just to put into context the difference of how transactions are recorded in a ledger versus a Blockchain. So, let's say that you're using a traditional centralized ledger and you are an executive and you're actually filing your sales results. So basically Q1 comes along and you begin filing your results on your ledger. Now, in many organizations there's more than one version of a ledger. There could be a public facing one and there's a private internal use ledger. So there's different versions of the truth. The one that you file publicly and the one that you run internally. In a regular ledger you would file your Q1 results. That would be followed by your Q2 results. Now, if you're an executive and you really want to present the best results of what's going on with the company, you really want to be a hero. Therefore, first and second quarters, you're doing great. You're right on path. Then third quarter results start coming in. And you know, you're starting to deviate from what you really want to achieve with your results. So third quarter results aren't really that good. And then you end up with fourth quarter results. By this point, if you file publicly, these results, it's really going to look very negative on the company. So with a centralized ledger, what you could really do is just basically remove these results, and replace them with a more flattering picture and simply file that. That is what you can do with a centralized ledger, because basically you could change the results and file those. Now, we're going to look at how a Blockchain records the information so that it's permanent and immutable. Now let's look at a Blockchain and we state it against a regular ledger. In a Blockchain, the information is actually captured in blocks, and each one of the blocks is linked to the previous block using hash cryptography. And we'll go more at length in this in a subsequent lesson within the course. But the key reason behind this is that there is only one version of the truth that's captured on a Blockchain, and all the parties agree on that version of the truth. And as new results are coming in, they keep getting added, and each one of those is actually captured within a block, not one result per block, but you keep all the results and individual blocks and these blocks are ordered chronologically, so you have the truth at every step of the way until you have one single truth that everybody agrees upon. And if at any moment, anybody wanted to make any changes to that, (blocks hitting table) it would just topple the whole structure, and it would be obvious that somebody had tampered with the information. And that is the key difference between a regular ledger and a Blockchain.