George Polzer: What is Blockchain?
This is the second article in PumaPay mini-series by our Strategic Alliances Manager, George Polzer. In the first article, he explained A.I., in this article, he explains Blockchain, contrasting it with A.I. and how these two transformational technologies interconnect and complement each other.
What is Blockchain?
Unlike A.I. algorithms that learn to predict from data points, Blockchain is not a single technology but a convergence of many technologies and disciplines that have been around for years:
– Consensus algorithms
– Computer science (Algorithms, Data structures…)
– Game theory (Mathematical modeling of strategic interaction between rational decision-makers)
– Social Engineering (Account for irrational behavior)
– Economics (Choice, Incentives & Dis-Incentives)
– Human psychology (Self-interest, Self-preservation, Altruism)
As an analogy to show the challenge Blockchain tackles, imagine asking accountants in different parts of the world to come to an agreement on what the balances are in bank accounts without having access to a centralized database to access that information. It would be impossible! Blockchain technology automates building and maintaining such account balance consensus without human intervention. This accounting analogy is an extreme oversimplification but serves to understand better why so many different technologies are required to solve the “Truth state” of a ledger at any given time debits, and credits transactions are processed.
How does Blockchain Complement and Contrast with AI?
The fundamental difference is best captured in my 2-word elevator pitch: Automating Prediction to define A.I. and Automating Trust to define Blockchain. The power of their synergy lies in their yin yang relationship. A.I. is probabilistic (prediction), Blockchain is deterministic (the truth). Prediction is a statistical measurement of uncertainty using probability theory. Blockchain automates the determination of the “truth” of a ledger (tracking value exchange) on a distributed computer network.
So, who was it that finally brought all these technologies together to build and automate a truth state distributed ledger? Satoshi Nakamoto brought together multiple non-related disciplines and sciences to create this then little-known version of digital cash, i.e.; “Bitcoin”. Traditionally, these areas of study had little to no cross-over (except the top 3-4) — and so experts in each area went along their path. Specifically, Satoshi Nakamoto in 2009 for the first time in history introduced a mathematical solution (Proof-of-Work algorithm) offering economic incentives to coordinate the decentralized peer-to-peer network of participants in a way that the economic cost of attacking the system is disproportionate to the benefit of doing so. The Bitcoin miners spend computer processing power to solve a cryptographic consensus problem (financially more rewarding to solve the consensus puzzle than to hack) to enable a network to come to a consensus about the single truth of the ledger state without a centralized authority.
In the next post, George explains essential Blockchain transformational functions and features: Distributed Ledgers vs. Blockchain, block data structure, hashing, private/public/permission networks, peer-to-peer gossip protocol. He will also review the challenges the Blockchain industry is facing as the diverse technologies mature and converge.