Understanding Crypto 1: Daniel Mescheder: What Problem Do Blockchains Actually Solve?

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Jun 3, 2022

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INSIGHT

Distributed Systems and Blockchains

Blockchains are distributed systems designed to address scaling and resilience challenges in data storage.
They ensure data availability even with multiple machines or system failures.

INSIGHT

Consensus in Distributed Systems

Consensus algorithms, like Paxos or Raft, are computationally expensive but crucial for financial applications requiring agreement on balances.
Achieving consensus involves significant network communication overhead.

INSIGHT

Byzantine Consensus

Blockchains address the Byzantine consensus problem, focusing on preventing cheating within a distributed system.
This problem is exemplified by the "double-spend" issue in cryptocurrency.

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Fundamentals of the Blockchain with Daniel Mescheder

Episode 1: Show Notes

Welcome to the first episode of our limited series focusing on cryptocurrencies and everything you need to know about them. Our first guest is Daniel Mescheder, who joins us to appropriately break down some of the basic concepts and engineering of the blockchain, using his expertise as a software engineer as the lens for this discussion. We felt this chat was the best way to launch the series and prepare listeners for the following episodes on the subject, and you can expect to hear Daniel share very helpful insight and explanations of fundamental terms and concepts such as distributed systems, consensus, hashing, digital signatures, and more. We also have time for our guest to weigh in on the subjects of smart contracts and NFTs, both of which are regular points of intrigue for the uninitiated. Importantly, we do hear from Daniel about the limitations of the technology at present, and which types of technological problems that he believes the blockchain is well-suited to address. So for all this and more, and to start this journey with us into such an important and hot topic, make sure to listen in.

Key Points From This Episode:

The reasons for Daniel's interest and involvement with the blockchain and cryptocurrencies. [0:03:33]
Daniel compares the hype around AI in the 1980s and the current atmosphere for crypto. [0:04:50]
Getting to grips with Daniel's specific perspective on the blockchain and explaining distributed systems. [0:06:34]
How the concept of consensus fits into the subject of distributed systems. [0:11:17]
Looking at Byzantine consensus problems and how these occur on the blockchain. [0:13:51]
Daniel gives an overview of the elements that make the blockchain functional; hashing and digital signatures. [0:19:17]
How Satoshi Nakamoto introduced an economic incentive to comply with the protocol. [0:24:09]
Differentiating between the public and permissioned blockchains, and databases. [0:27:33]
How Bitcoin achieves consensus and some of the downsides of proof of work. [0:33:31]
An assessment of the decentralized status of the Bitcoin and Ethereum blockchains. [0:41:16]
The amount of control that is held by miners in relation to transactions. [0:45:27]
Understanding interactions between the blockchain and other external systems. [0:49:16]
Immutability and the blockchain; what the rules allow and the questions that still need to be answered. [0:52:47]
Basic engineering downsides to the blockchain. [0:54:40]
Vulnerabilities on the blockchain and how these have been exploited by hackers. [0:58:23]
NFTs, DAOs, and smart contracts; weighing how neatly these fit into the current blockchain ecosystem. [0:59:27]
The abundance of rhetoric surrounding discussion about the future and validity of the blockchain. [1:06:09]
Which problems would be well-suited to a solution found within the blockchain? [1:08:10]