Blockchain Fundamentals - The Fast-track Guide to Blockchain Technology | Marc Hamill | Skillshare

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Blockchain Fundamentals - The Fast-track Guide to Blockchain Technology

teacher avatar Marc Hamill, CEO of The Success Bureau

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

    • 1.



    • 2.

      What Is Blockchain?


    • 3.

      How Blockchain Works


    • 4.

      Blockchain Security


    • 5.

      Limitations and Issues


    • 6.

      Blockchain Uses


    • 7.

      Types Of Blockchains


    • 8.

      Blockchain Features


    • 9.

      Investing in Blockchain


    • 10.

      The Future


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About This Class

For the vast majority of people, the blockchain is an unknown entity. Most people who have heard the term may associate it with cryptocurrencies, but this is an extremely limited view. Blockchain technology has such huge potential. Thinking of blockchain in relation to cryptocurrency is like thinking of the Internet in comparison to email. Email was the first widespread use for the Internet like cryptocurrencies are the first use for blockchain. The elusive creator of bitcoin created the currency as an example of the potential for blockchain technology. Over recent years we have seen the use of blockchain expand into new areas. There is still a lot of experimentation taking place. This means that there are a lot of opportunities as an investor, developer or service provider, but there are also high risks. What we know for sure is that blockchain technology and the whole decentralized system is being adopted at a staggering rate and it looks set to change the way that we interact with our digital worlds.

In this class, you will learn what blockchain is, how it works, what its uses are and how to invest in the future of blockchain.

Meet Your Teacher

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Marc Hamill

CEO of The Success Bureau

Level: Beginner

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1. Introduction: Hi, I'm Mark. I've been working in digital asset management and education for over ten years. And I've worked with organizations such as Sony, the British Home Office, Cambridge University, Harvard Business Council, and many more. In this class, I'll be teaching you the fundamentals of blockchain technology. This knowledge will help you to understand the current applications and implementations of blockchain in areas such as cryptocurrency and FTEs and d phi services. As well as give you an insight into the huge potential for future use and opportunities for investment. Whether you're looking to apply this information in software development, industrial application, Crypto investment, or you just want to stay ahead of the game. This class will provide you with a solid foundation. You'll learn what the blockchain is, how it works, how it is used, how to invest in it, and how it will likely develop in the future. For our class project, I've left a worksheet in the class resources. This will help you to reinforce your knowledge and deepen your understanding of blockchain technology. Just fill it out and post it in the class. Ready to get started. I'll see you in the first lesson. 2. What Is Blockchain?: For the vast majority of people, the blockchain is an unknown entity. Most people who have heard the term may associate it with cryptocurrencies. But this is an extremely limited view. Blockchain technology has such huge potential. Thinking of blockchain in relation to cryptocurrency is like thinking of the Internet in comparison to email. Email was the first widespread use for the internet. Like cryptocurrencies are the first use for blockchain. The elusive creator of Bitcoin created the currency as an example of the potential the blockchain technology. Over recent years, we've seen the use of blockchain expand into new areas. There are still a lot of experimentation taking place. This means that there are lots of opportunities as an investor, a developer, or service provider, but there are also high risks. What we know for sure is that blockchain technology and the whole decentralized system is being adopted at a staggering rate. And it looks set to change the way we interact with our digital worlds. Blockchain technology was outlined decades before the invention of cryptocurrencies. The idea was first introduced by two researchers in 1991 named Stewart Haber and W Scott stomata. They wanted to create a system where document timestamps could not be tampered with. The first real-world application came almost two decades later in January 2009, with the launch of Bitcoin, the Bitcoin protocol was built on a blockchain. The pseudonymous creator of Bitcoin, Satoshi Nakamoto, outlined the protocol in a paper referring to it as a new electronic cash system that's fully pair to pair with no trusted third party. Bitcoin is only one example of how blockchains can be utilized to store and record data. Theoretically, blockchains can be used to record a limitless amounts of data points. With the success and popularity of cryptocurrencies, blockchain technology was proven to be a robust and practical system with the potential for application across all fields and industries. 3. How Blockchain Works: So now we're getting into the nitty-gritty of blockchain. But blockchain is simply a ledger. A database. Ledgers have been used since the earliest records began. Some of the oldest known writings on tablets by the Sumerians. And the Babylonians were essentially ledgers of transactions with some bare recipes thrown in for good measure. The blockchain is a digital equivalent to a written ledger. The main differences between stone tablets and Blockchain ledgers. Blockchain ledgers are not stored in one location. They are decentralized and cannot be changed without the agreement of all the storage locations. The blockchain, as the name suggests, is also a chain with each block dependent on the previous block, making a sequence which forms a continuous line. This line is immutable, meaning it cannot be re-sequenced. Each block contains three elements. It has data, the hash of the block, the hash of the previous block. The data can contain almost any kind of digital data. Digital data contained in a block is what is used to create the block hash. In the case of cryptocurrency, that data would include the transaction data, including information about the sender, the receiver, and the amount. The previous hash is what makes the blockchain work. Each block contains the previous block's hash. This makes the chain a linear sequence unsecure. The block hash is a digital signature, a unique identifying code specific to that block. Each block in the chain uses the same configuration. The only exception is the first block, because that one can't include a previous hash because there isn't one. The first block is called the genesis block. When a block is generated, a 32 bits whole number is created called a nonce, which stands for number only used once the nonce is randomly generated and is used to generate the block hash. The block hash is a 256 bits number, minors, most guests the nonce number in order to find the target hash. The target hash is a number between 0 and the maximum value of a 256 bit number. This number is set by the blockchain. Working out which string to use as the nonce requires a process of trial and error. A non-string must be appended to the hash of the current header. It is then rehashed. The value is compared to the target hash. If the resulting hash value is correct, the block can be added to the blockchain. Adding blocks to the blockchain requires a substantial amounts of computer power. The individuals and companies that add blocks are called miners. Miners who meet the requirements to find the target hash are awarded the block and are often compensated with cryptocurrency for their efforts. Funding. The target hash is a lottery. The target is a predetermined 256-bit number, extremely large. If the resulting hash is below or equal to the target, the miner wins. If not, the nonce is incremented and the process starts again. So the more powerful the computer is, the more guesses it can do in a short space of time, and it's more likely to win to find the correct hash. The process starts with the block header. This contains the block version number a timestamp, the hash used in the previous block, the hash of the Merkle root, the nonce, and the target hash. The process used to guess the nonce is called Proof of Work. The data inside of a block is arranged in a system called a Merkle tree. This is a type of binary tree that is used to summarize and verify parts of a large dataset. In Bitcoin, for example, a block contains an average of 500 transaction data entries. A Merkle tree creates a single value by hashing together all of the contained hash data. The single hash value is called the root hash, and it sits at the top of the tree. At the bottom of the tree, we have the data. The data is used to create a corresponding hash node. This is called a leaf node. Pairs of leaf nodes are then combined to create a parent node. The parents from the first layer up are known as non-leaf nodes. The reason why this structure is so useful is because it allows an efficient verification of whether or not the data has been tampered with. For example, if someone wants to change a value in the database, they would need to recalculate every single leaf nodes hash and update them accordingly. For a single transaction in a block to be verified, there is no need to check the data from the previous or following blocks. As the data can be verified from the hash values in the Merkle tree. In this example, t stands for transaction and H stands for hash. As you can see, the transaction data is hashed and added to the binary parent in the tree. That parent is then added to another parent higher in the tree. At each stage, the parent hash contains a summary of the child hash values. This carries on up the tree to the top where the root hash contains all hashed data from the tree. Since the Merkle tree root contains all of the information from the entire tree, you only need to verify the transaction hash a sibling node if there is one, and then proceed up the tree until it reaches the top. The Merkle tree and the root hash mechanism significantly reduce the levels of hashing required, which speeds up verification. When a miner wants to add a new block to the blockchain, this information is broadcast to all of the nodes on the network. Nodes are the stakeholders on the blockchain network and their devices are authorized to access the distributed ledger. They also act as a communications hub. The main role of the nodes is to verify the validity of a block before it's added to the blockchain. They also store the information on their devices and it's cross-referenced with the rest of the nodes on the network to confirm that there is a consensus for the validation and addition of a block to the blockchain. At least 51% of the nodes must be in agreement. There are a few different kinds of nodes on a network. There are online nodes which are permanently online and are constantly updated with the latest version of the ledger. And there are offline nodes that only download and sink their information when logging onto a blockchain network. As the nodes are decentralized. This improved security, both in terms of ensuring that there's always a copy of the ledger somewhere in case of things like power failure or network outages. But also in terms of susceptibility to hacking or rogue node manipulation. Generally speaking, the more nodes there are on a network, the stronger the security will be. Nodes are not required to be miners, but minors must also be complete nodes as they require access to the blockchain ledger in order to determine the correct values required. Some blockchains also use a master nodes. These nodes have more functions and capacity than regular nodes. They are often used to manage voting, execute protocol updates, and enforce the rules of the blockchain. This type of node often requires more RAM than regular nodes, and he's on line 24 hours a day. As master nodes have more responsibility and influence on the blockchain, managers of master nodes are usually required to pay a deposit which acts as security. A master node violates the rules of a blockchain. The deposit is used as collateral. Nodes which require the most energy and computing power are often incentivized with cryptocurrency rewards. One such incentive is staking. Staking requires the node owner to deposit cryptocurrency and keep their node active 24 hours a day. By doing this, they enter a lottery. A staking node essentially places a bet on which miner will add the next block to the chain. If the staking node wins, they receive cryptocurrency rewards, usually in proportion to the amount that they have staked. 4. Blockchain Security: The hash system already provides a high level of security. Changing just one block would mean changing the hash. And the hash is specific to the data in that block. If the hash changes, all following blocks would become invalid. The system just wouldn't allow it unless all of the subsequent ashes could be changed. Although it's unlikely, it is theoretically possible for a super-fast computer or a hacker to change a block and calculate all of the following hashes and fool the system. Well, that's only where blockchain technology stars. There are additional layers that make tampering almost impossible. Almost. One of the added security features is a mechanism called proof-of-work. This slows down the creation of blocks, as there are so many blocks in the chain, limiting the speed of creation means that anyone who tries to change a sequence of hashes, in the example of Bitcoin that'd be waiting over ten years for the creation of the new blocks. The proof of work refers to the way that the blocks are created. In most cases, a cryptographic puzzle must be solved to create a new block. This is the work to prove that the work has been done. The other computers on the network have to verify that the solution is correct. This is the target hash that we covered previously. It's easy for the computers to verify correct solution without having to go through the whole process of working out. The nodes can use the miners nuns to verify that it meets the target hash requirements. The nonce is like a key. The verifying nodes don't have to search for the key. They just have to check that it opens the door. If 51% of the computers agree that the solution is correct, the block is added to the chain. In a proof-of-stake system, instead of mining a network, participants will be selected to add a block to the blockchain and earn rewards in exchange, much like staking nodes, which we've already covered, proof-of-stake requires the participants to stake their own cryptocurrency to be eligible to win. The winner who gets to add the block can be selected randomly from a group of validators who meet the minimum state requirements. Or it can simply be determined by the amount of crypto that is staked on the amount of time has been staked for. This rewards the most invested participants. Once the winner validates the block to be added to the blockchain, the rest of the validators confirm that it is accurate and they are also rewarded. The reward amount is usually determined by the amount state. A second security feature is found in the way that the blockchain ledger is distributed. The ledger is decentralized, meaning that it exists in multiple locations and must be validated at each location before a new block is added. There are also other features such as smart contracts that make things even more difficult to manipulate. More about that later. To successfully change the blockchain, you would need to change all of the blocks in the chain, redo the proof of work for each block and take control of the decentralized network. As blockchain transactions must be verified by multiple nodes. This can reduce errors. If there is a mistake by one node in the database, dealers would notice that it's different and correct the error. 5. Limitations and Issues: Blockchain technology is certainly revolutionary, but it's still in the early stages of development and implementation. Like any new idea, problems and limitations need to be identified and overcome. Let's take a look at some of the current problems. This is one of the most immediate problems with the blockchain system, with the amount of time and costs associated with the processes needed to keep the system secure, the scalability becomes limited as more people use blockchain, the slower the system becomes. People who have become accustomed to instant transactions with bank transfers and credit card payments. Waiting for any length of time for a transaction to process is inconvenient. But in the current financial world, it actually costs money. The scalability issues are already being tackled though, through a variety of processes, some faster than others. So more secure than others. It's highly likely that this issue will be overcome over the next few years. Many of the solutions currently in operation are already working to speed up the process. Although each solution needs to be refined further, this will eventually lead to wide adoption across blockchains. Some of the current solutions include increasing the block sizes so that more transactions can be processed per second. But this creates its own issues because that means that more data has to be distributed across the decentralized network. Sharding is another technique being explored. In this process, the validation nodes are assigned randomly in smaller numbers. This means that the numbers can be crunched faster. This also weakens the overall security and the sharpening system itself becomes a security risk. In the case of cryptocurrencies where cryptography puzzles need to be solved by computers. The blockchain requires lots of computing power to process and create the blocks. This requires large amounts of energy, although it's highly likely that blockchain technology will actually help to solve environmental issues further down the line. Currently, the reliance on fossil fuels to power the blockchains is damaging the planet and it must be changed. This issue is being worked on and many newer blockchains have significantly reduced the amount of energy required. As blockchains are still relatively new. And I certainly an exciting concept. More and more people are becoming interested in the technology and especially in the investment side. With news of crypto NFT, a multiverse millionaires finding overnight success. Blockchain fever is starting to take hold with so much interest and very little knowledge surrounding blockchain technology. Scammers are finding easy picking in would-be investors. Fake cryptocurrencies are unregulated and unscrupulous exchanges and fraudulent investment Ponzi schemes are rife. These types of scams are not exclusive to blockchain. Well, there are so many of them, like the golden age of the Internet scammer as blockchain and associated digital assets are not regulated like traditional investments. Practices like insider trading and pump-and-dump strategies, which are illegal in traditional investment arenas, are a regular occurrence in blockchain. As blockchain is becoming widely adopted across many industries, regulations will surely follow. Blockchains decentralized nature will make it difficult to police, but many areas of the use of blockchain will become regulated and make it more difficult for scammers. Education about blockchain may be introduced at a school level as every part of our lives will become more integrated into the digital multiverse. The financial services industry including banks, lawyers, brokers, lending agents, regulatory bodies, and a myriad of other middlemen have had a longstanding relationship with central governments around the world. They hold huge influence over entire countries and socio-economic systems. The blockchain threatens to remove the need for many of those traditional middleman roles. This would usher in a power shift never seen before in modern history. Some countries, governments and financial institutions are embracing this move to the blockchain, but the vast majority remained publicly skeptical. Some of the skepticism is well-founded, such as the investment risks posed by the volatility and non regulation of cryptocurrencies. But there were also political motives for discouraging the general public to adopt the new decentralized financial system, or what we call d phi. 6. Blockchain Uses: Blockchains potential for application is ever-expanding, has new features and processes such as smart contracts are introduced. The technology lends itself to a greater number of uses. Let's take a look at some of the current and developing uses for blockchain. Since the move away from the gold standard in most Western countries, fiat currency has not encountered any major issues yet. But as fiat currency is not tied to a physical assets such as gold, the value is only determined by the users, or in this case, the government. A piece of paper with ten written on it could be determined to represent the value of ten apples, or it could represent ten houses. All works fine as long as everyone agrees on the value. If the government starts to print more money, such as in the case of the COVID pandemic, the value of the notes is diluted as new notes. And to the system, we then see inflation and that's the devaluation of the currency with digital currencies and in particular cryptocurrencies, the value, again is not tied to a physical asset, but the value cannot be changed by a centralized system like a government. The value is determined by the people using it. And manipulations of any kind become more difficult as everything is stored and is accessible to see on the blockchain. In 2008, Satoshi published his white paper outlining the creation and use of a cryptocurrency, which used Blockchain technology to essentially remove banks and centralized systems completely from the equation. The birth of Bitcoin signaled the start of a new era. Today, money transfers are the most popular use for the blockchain. As we all transition into the digital world are online and offline identities can be difficult to manage and verify. Fast and accurate solutions have been a problem in the past, and identity theft has become a global problem. Blockchain technology can help to solve this issue. Companies like Microsoft use their Blockchain for their own identification apps. The immutable nature of the blockchain means that data cannot be tampered with and it's difficult to steal to gain access to the data in a closed network, a key is required. Proving ownership of anything in the physical world or the digital world can be extremely difficult. We've all heard the expression, possession is nine tenths of the law, but with the blockchain, proof of ownership can be determined in seconds. The ledger states the owner's name or wallet address and any other associated data in relation to an asset with a corresponding code. Blockchain can replace paper files and all of the legal middleman usually required to prove ownership. Recently, we've seen this use case implemented in the form of LFTs or non-fungible tokens. The most famous FFTs or digital artworks which you've sold for millions of dollars. The value lies in the proof of ownership. This is now expanding into many areas, from gambling to metaphors, land a smart contracts are introduced, which we'll cover later. This opens up even more possibilities for the blockchain. One feature that has become popular with LFTs in particular is the ability to build in royalties. For example, an artist could sell an artwork and a royalty payment could be built in to pay the artist a percentage of every future transaction price. This is particularly useful in the music business. Over recent years, music artists have encountered administration issues with streaming and digital music platforms. The blockchain can be used to build royalty payments into every transaction. Property, deeds and records have always been a challenge to store, record, and process. Multiple intermediaries are usually required to register ownership and look up records. Deal with transfers of ownership, cross-reference with local bylaws is a minefield. In the extreme case of war and displacement, records can sometimes be totally lost and can be difficult to prove. Ownership. Blockchain can be implemented to solve these security issues, as well as make the whole process more accurate and efficient. Medical records have always been difficult to store and administrate without significant human resources and budgets. Paper records are still used in most countries, along with digital systems, which have been prone to errors and hacking, health care fraud is also a major issue, especially in the United States. The national healthcare anti-fraud Association estimates a loss of $80 billion annually. The blockchain can solve all of those problems. Smart contracts can help to streamline the supply chain management process. The larger the supply chain is, the more complex the process becomes. Logistics companies like UPS have extremely large complex supply chains. Smart contracts will help them streamline all of these chains by providing self-executing contracts. Technology is already utilized heavily in transport and logistics. But there are still human errors in the supply chain. The wrong load can be placed on the wrong transport. For example, with smart contracts and blockchain systems, this can be eliminated completely by only allowing a certain truck, which will be a smart drug to depart when the correct load is on board. This can be integrated with barcodes or other physical scanning equipment. A small vehicles become more widely available. Further parameters can be added to the contracts. The immutability of blockchain means that fraudulent voting would become far more difficult to occur. As soon as the votes are cast and committed to the blockchain, the data is immutable and transparent. Banking and finance will potentially see the greatest benefits from blockchain in the immediate future. Although cryptocurrency is may be seen as a threat, the underlying technology can be used to advantage of banks and financial institutions. Traditionally, financial institutions and banks only operate during business hours. This also usually means that they're close on weekends due to the sheer amount of transactions that banks have to deal with across different countries and between countless accounts and intermediaries. It can often take days for a transaction to complete. But blockchain works 247 in the financial markets such as the stock exchange. The clearing and settlement process can currently take up to three days on a national basis and longer if it's international, mean that money in shares or frozen for that period of time. These delays cost time and money. There is also a large human resources cost involved in auditing and processing transactions. Blockchain can revolutionize this process. In some developing countries where inflation, corruption, and structural volatility is high, many people do not use otros banks. In many cases, people will work for cash and have to physically hide it away. Unlike banks, most blockchains have no restrictions on who can access and use them. Cryptocurrency can be stored securely and a crypto wallet. And it can be accessed by a k, which can be memorized, written down, or stored on a basic smartphone. This offers a new opportunity for people to build wealth regardless of their location or the financial situation of their homeland. 7. Types Of Blockchains: When a company, institution, or community decides to create a blockchain, they must first determine its function. Blockchains are not all born equal and there is no one type of blockchain which can serve all purposes. Blockchains are used for supply chains may have vastly different requirements than cryptocurrency transactions. For example, let's take a look at the different types of blockchains that are currently used. Private blockchains are usually developed for internal use by businesses, organizations, or individuals to perform a specific function or variety of functions. This could be anything from simple record keeping to complex software applications using smart contracts, private blockchains, as the name suggests, are closed networks that are controlled by a single entity, although they're controlled by a centralized organization, the blockchain itself is the centralized nodes are used to verify the data added to the blockchain, but nodes can only be created by authorized users. These types of blockchains are often called permissioned blockchains or enterprise blockchains. The security of the blockchain is administered by the centralized organization who can set permission levels and determine which nodes have access to view the ledger and add blocks. This type of system is often accessed by a small number of users. And as such, the system can run very fast in comparison to other blockchains. The main disadvantage of private blockchains is the fact that there are a smaller number of nodes. This means that for a consensus to be reached on the validity of data, a 51% majority might only be a small number of nodes. This could be a security risk. Public blockchains are designed to be used by a community. This could be for things like transaction information for cryptocurrency. Or it could be far open-source software developers, research data or gaming. Public blockchains rely on a consensus algorithm whereby the participants and community members of the blockchain collectively reach an agreement on the validity of the ledger when blocks are added. The most common consensus methods are proof of work, POW and proof-of-stake POS. Public blockchains are permissionless and require no authorization to join the network. Anyone can sign onto the blockchain and become a node. All users have access to the records of past and present activity and also have the option to conduct mining, which is the process of conducting complex computations to solve cryptographic puzzles. By solving these puzzles, users can verify data and add this to the ledger. In the case of cryptocurrencies, this is often the transaction data, as well as the hash numbers of the previous add new blocks. As the source code is also open source, users can also proposed changes. Most public blockchains offer incentives to miners, often in the way of native tokens. The disadvantage of this system is that networks often slow down as the number of nodes increase. This type of blockchain has many use cases including public government records, property ownership, and any other type of auditable record keeping, as well as cryptocurrency transactions. This type of blockchain works in much the same way as a hybrid system. But instead of a central entity controlling the system, a group of entities collaborate on a decentralized network. The consensus is reached by using preset nodes, which are often a selection from each group in the consortium. The preset nodes act as validators. Member nodes can initiate and receive transactions. Although these types of blockchains can be faster in operation, the nature of the consortium means that administration and implementation procedures require a consensus which can slow things down. This top of blockchain is ideal for banks as they conform Consortium's with other banks. This system also works well with most types of supply chains. There is often a need in organizations to retain control of data, but also offer public access. In a hybrid blockchain, a private permission based system can be used simultaneously with a public ledger. Parts of the ledger can be concealed, such as private data and other parts can be open to the public to view. One common use for this type of blockchain is when private data, such as transaction details, must be kept private, but can become accessible to a user who is granted permission, often through the use of a smart contract. For example, all users may be given access to the blockchain, but identity information is hidden. The data is only revealed when a user is engaged in a transaction. When the transaction takes place through a smart contract, the identities of both parties are revealed. This type of system has many use cases for financial institutions, real estate, and government entities. For example, governments could store citizens information privately on the blockchain, but it could be accessed securely between authorized institutions when needed. This type of blockchain is often fast, but lacks the full transparency of public blockchains. 8. Blockchain Features: Smart contracts can be referred to as self-executing contracts or blockchain contracts. Just like a traditional contract, smart contracts contain an agreement between two parties. The difference with a smart contract is that because it's digital, it can be used as a program which self executes to perform the action agreed between the two parties. The contract is stored on the blockchain and there is no need for a central authority like banks or lawyers. The contract is stored on a decentralized blockchain network, meaning that there are always multiple copies. Unlike traditional contracts, smart contracts cannot be misplaced or lost. Another advantage of smart contracts is there speed as their self executing and don't rely on any third parties in a traditional process chain, the speed of execution is extremely fast. In the case of money transfers, the self-executing program is distributed on the blockchain so that no individual or central authority has control of the money while it is transferred from one person to another. As it's part of the blockchain, this makes it a mutable, meaning that it cannot be changed or tampered with. In contrast, in a traditional database, if an individual makes a mistake, it may go unnoticed. In addition, every asset is individually identified and tracked on the blockchain ledger. So there is no chance of double-spending. The downside is that if there are any bugs in the contract, they can't be changed. This could cause security issues. Has many smart contracts are stored on public blockchains. They're instantly visible to anyone who wants to see them. If there is a bug that causes a hole in the security of the small contract, this can be exploited. In June 2016, a book in a smart contract lead to $50 million worth of ether B and extracted. Luckily, this contract had a time delay in place, which gave the developers enough time to create a hard fork with a consensus from the developers which stopped the transaction just in time. Smart contracts can be used on many different blockchains, all with different standards. Some smart contract networks run in parallel to major blockchains, while others wrote on primary blockchains, some blockchains have limitations on what types of contracts can be used. Others provide a variety of templates which can be used. And some of our open source blockchains allow for additional application resources like smart contracts, others like the Bitcoin blockchain, they don't. This is mainly due to the age of the Bitcoin blockchain. Smart contracts were not developed until later in the evolution of blockchain. There are however, solutions for adding functions to blockchains that don't have the native ability to implement them. One method is to use a side chain. Side chains are in network that joins blockchains. This allows secondary blockchains with their own consensus protocols to interact with the main blockchain or main net. In the case of bitcoin, tokens on the Bitcoin blockchain can be sent through a side chain to a secondary blockchain, and then data can be returned to the Bitcoin blockchain. In reality, the tokens are not moved by a locked on the main net. And with the equivalent amount released in the side chain. This is performed using what is known as a two-way peg. This can be thought of as a two-way transport tunnel. Smart contracts are used to confirm cross blockchain transactions. The advantage of using side-chains is that the secondary blockchain can often perform more complex processes, such as smart contract execution, which may not be available on the main net. Secondary blockchains may also use faster validation, which can speed up processing times, enhance security or privacy, and add scalability to the main net. For example, bitcoin has a ten-minute block time, whereas the liquid network side chain block time is just one minute. Blockchains store data. That data is created by protocols. Sometimes the developers of the protocol may have a disagreement over the way the protocol develops over time. In cryptocurrency, we often see developers breaking off to create new versions. Protocols are essentially software which is open-ended and will continuously develop. Just like with software applications, new updates are introduced regularly. Sometimes these updates are subtle and sometimes there is a complete overhaul. We see this regularly with operating systems and crypto. Some of the developers might not like the way that the protocol is developing. It may be heading in a direction which shows a little resemblance to the original protocol that brought them on board in the first place. Now at this point, like in any kind of relationship, there are a number of options. If the developers cannot come to an agreement, a split must take place. As the name suggests, at this point, the blockchain becomes a fork. At a designated block number, the chains split into a hard fork is a simple split in the blockchain. One part of the fork follows the old rules of the protocol and the new thought follows the new rules. After the block number for the fork is decided. From that point on, the two chains are incompatible. As you can see here, after block number 102, chains carry on with subsequent blocks. A soft fork is the equivalent of partners splitting up, but staying friends. In the future. If differences are reconciled, the chain can be reconnected. In the case of blockchain, the chain splits at a designated block as before, but the new chain follows both the new rules and also the old rules. It is compatible with both. If more users follow the new chain, that becomes the stronger chain. If a consensus is reached, the new rules can be implemented across the whole chain. And the chain discards the redundant nodes. 9. Investing in Blockchain: Although blockchains are merely a system and not an entity, there are ways to invest in blockchain infrastructure and protocols. You can, for example, invest in companies that use blockchain as an integral part of their production or services. For example, you could invest in banks which are early adopters of blockchain technology. If diversification is more your style of investment, you can invest into an exchange traded fund that is composed of blockchain based companies and assets. An ETF is a group of different stocks from a number of different companies. The benefits of this approach are that if one stock underperforms the other stocks in the fund help to even out the losses and gains. Another way to invest in blockchain technology is to invest in the native tokens or cryptocurrencies on a blockchain. For example, if you like how a theorem blockchain is performing and you see it facilitating innovation and growth in the future. You may consider buying into ether, a theorems native token has this is what is needed to power the Ethereum network. Another way to earn money through blockchain is to become a proof-of-stake node. By staking your cryptocurrency on the blockchain, you have the potential to earn from block allocations and validations. 10. The Future: The future potential for blockchain technology is virtually limitless. Has more people, companies, and institutions implement the technology. The benefits become more apparent, which sparks further interests in its development. It certainly looks like blockchain is here to stay. Although blockchain is currently dominated by cryptocurrency processing, the acceptance and implementation across industries is moving at a lightning pace. There are opportunities for developers, investors, and users to benefit from the technology at almost every level. Well, that brings us to the end of this course. Congratulations on completing all of the modules. Don't forget to fill out the worksheet which are left in the class resources and post it here in the class project section. Thank you for joining me on this course and I hope to see you on another course soon.