Invest Like the Best with Patrick O'Shaughnessy
Hash Power – Ep. 1 - Understanding Blockchains
Episode guests
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Quick takeaways
- Blockchain technology enables trustless global collaboration through economic incentives and decentralized networks.
- Mining in blockchain involves solving computational problems to secure the network and earn cryptocurrency rewards.
- Cryptocurrencies like Ethereum introduce smart contracts and distributed governance, revolutionizing traditional centralized systems.
Deep dives
Introduction to Hash Power and Blockchain Technology
The advent of cryptocurrencies like Bitcoin started a wave of innovation, heralding the potential of blockchain technology. Hash Power delves into the foundational concepts behind blockchain, explaining the decentralized, globally distributed database nature of blockchain. It highlights the importance of distributed ledgers, emphasizing their security and immutability by linking transactions and blocks in an unchangeable chain.
Mining and Digital Scarcity
Mining in the blockchain context involves creating new blocks through a process called mining. Miners use powerful computers to perform complex calculations and secure the network by verifying transactions. These miners are incentivized with cryptocurrency rewards, contributing to the digital scarcity of assets like Bitcoin. Through cryptographic functions like hashing, miners compete to solve computational problems, ensuring the integrity of the blockchain network.
Network Coordination and Economic Incentives
Blockchains provide a new way to organize humans by creating trustless, decentralized networks. These networks are driven by economic incentives and protocol-based coordination. By rewarding participants for contributing resources like computing power or storage, blockchains encourage collaboration on a global scale. The self-organizing nature of blockchain protocols fosters innovation and sovereignty, enabling individuals to participate and transact without centralized control.
Future Implications and Decentralization Trends
As blockchain technology evolves, it promises to revolutionize various aspects of society, including work structures and wealth distribution. The shift towards individual sovereignty and decentralized systems signifies a departure from traditional centralized models. By incorporating incentives, cryptography, and digital scarcity, blockchains facilitate secure transactions and enable trustless collaboration, paving the way for a new era of decentralized innovation and coordination.
Understanding Ethereum's Smart Contract System
Ethereum differs from Bitcoin as it functions as a network for contracting value rather than just transacting value. Transactions on Ethereum involve smart contracts, allowing for a wider range of interactions beyond simple transfers. Smart contracts enable the creation of sub currencies like ERC-20 tokens, introduced through initial coin offerings where users exchange Ether for tokens based on predefined conversion rates.
Cryptocurrency Governance and Decentralization
Cryptocurrencies represent experiments in distributed governance, where developers create laws, miners execute them, and users serve as adjudicators. This decentralized structure ensures that power is not consolidated and prevents the dominance of a single entity or elite group. The value in blockchain protocols accrues to the protocols themselves, creating a new model of governance that is flexible, scalable, and fair. This system allows for the creation of alternative coins while maintaining a transparent, permissionless environment.
Welcome to the first episode of Hash Power, an audio documentary that explores the world of blockchain and cryptocurrencies with leaders in the field like Naval Ravikant, Olaf Carlson-Wee, Fred Ehrsam, & Ari Paul. Hash Power is meant to be an introduction, but really, it is an invitation to explore this emerging world on your own.
In the coming weeks, we will cover the technology, the power of decentralization, bitcoin, Ethereum, ICOs, cryptography and hashing. We will spend time with the leading active hedge fund managers in the field, and with outside investors who are both optimistic and skeptical. Episode one covers the big picture, and answers the question: what is blockchain and why might it significantly affect our world?
If you enjoy what follows, you’ll still be very early in understanding this field. Most don’t. So help me spread it like wildfire, because the more people that understand blockchain, the better its impact might become. Please enjoy episode one, and stay tuned next week for episode 2, which explores investing in cryptocurrencies.
Hash Power is presented by Fidelity Investments
For comprehensive show notes on this episode go to http://investorfieldguide.com/hashpower
For more episodes go to InvestorFieldGuide.com/podcast.
To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
Follow Patrick on Twitter at @patrick_oshag
Books Referenced
The Sovereign Individual: Mastering the Transition to the Information Age
Links Referenced
Bitcoin: A Peer-to-Peer Electronic Cash System
The BitCoin Model for Crowdfunding
Show Notes
CHAPTER 1 – Understanding the Concept of Blockchain (3:25)
4:30 – Jeremiah Lowin explains how blockchain is like a database
5:14 – Bitcoin: A Peer-to-Peer Electronic Cash System
5:46 – Owning a digital asset
7:14 – Naval Ravikant, CEO of Angelist on how blockchains can help to create personal networks and organize humans
13:33 – New coins popping up around data storage and utility needs like solar panels
14:57 – Permission vs permissionless networks
18:13 – Keeping track of scarcity and the introduction of tokens
18:51 – The Sovereign Individual: Mastering the Transition to the Information Age
21:55 – The role of blockchains in the informational age and the rise of more individual sovereignty
23:29 - Fred Ehrsam, co-founder of Coinbase, on the increasing shift to digital worlds led by incentive structures
CHAPTER 2 – Blockchain Technology (27:48)
29:09 - Reddit User jav_rddt
30:43 - SHA-256 Calculator
31:53 - Charlie Noyes, Pantera Capital, explains how SHA-256 was developed and what make its so special
35:48 – How miners create new blocks and the incentives to do so
46:54 – Ethereum, the “spiritual successor” to bitcoin
48:36 – How the Ether network is an ecosystem in which other tokens can sit
50:51 - Naval Ravikant on alternative coins or tokens
50:50 - The BitCoin Model for Crowdfunding
52:35 – Fat Protocols
53:22 – Blockchain as an experiment in distributed government
54:47 – How cryptocurrency is more than just technology, it’s a movement
54:50 – Nostalgia for the Absolute
57:27 - #cryptotwitter
1:00:58 - Peter Jubber, of Fidelity, on how huge institutions, like theirs, are getting into the cryptocurrency game
1:05:21- Olaf Carlson-Wee, first employee at Coinbase and the founder of Polychain, on the early excitement for cryptocurrency
1:06:56– Closing thoughts from Patrick
Looking to work in this space - hashpowerdeveloper@gmail.com
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
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