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Farez For Me Podcast Ep 3: What is a blockchain? Layer 2s, DAOs, Binance.US in Idaho, & intravenous oxygen!
plus Farez For Me is now available on Apple and Google Podcast apps.
Hello friends, welcome to episode 3 of the Farez For Me podcast aka newscast aka young man yells into the cloud.
I’m your host Farez Vadsaria, @farezv on the internet.
What the podcast is about
On this podcast I talk about Web 3 concepts, & interesting news; in the tech, music, cryptocurrency, web3, gaming, science & general pop culture space in approximately 15 minutes.
What today’s episode is about
We understand how blockchains work, and their two basic types. We also talk about DAOs, aka Decentralized Autonomous Organizations and why they’re important.
Binance launches in Idaho, Solana goes down…again! And some tech news regarding Meta, Tesla & SpaceX.
What is a Blockchain?
If you've ever seen an accounting ledger, you're already halfway there in your understanding of what a blockchain is. In simple terms, it's a connected list of records. Imagine a growing list of digital records, resembling real a life ledger book, known as blocks that are connected using cryptography.
These blocks each have cryptographic signature associated with another block in the chain, a timestamp, and some transaction data signifying the connectivity of the chain. This cryptographic signature is known as a hash, it's implemented in computer code and is essentially a one-way mathematical algorithm to obfuscate simple information into complex information.
For example, there may be a function
f(x) such that if
x = hello,
f(hello) may return some value that resembles
0x43a5fc78 (which is some made up gibberish). There's no way for someone who reads
0x43a5fc78 to decode it back to the original message
hello. This one-way nature of these hashing algorithms or hash functions as they're commonly known, ensures secure obfuscation of data (in this example, the term "hello"). Applying this same concept to blockchains ensures that each chain of blocks is unchangeable (especially by malicious 3rd parties).
Here’s how it works, from the book Mastering Bitcoin.
Each block within the blockchain is identified by a hash, generated using the SHA256 cryptographic hash algorithm on the header of the block. Each block also references a previous block, known as the parent block, through the “previous block hash” field in the block header. In other words, each block contains the hash of its parent inside its own header. The sequence of hashes linking each block to its parent creates a chain going back all the way to the first block ever created, known as the genesis block.
By the way, hashing is different from encryption. Encryption is two-way. Data obfuscated by encryption can be decrypted to be human readable again whereas hashing is a one way data obfuscation method.
Think of a game of telephone, where person A whispers something to person B who whispers something to person C, and so on all the way down to person Z.
In real life, people mishear at some point and the message changes. But imagine a perfect communication method where each whisper is clear and person Z actually hears what person A originally said to person B.
Imagine this conversation:
Anna to Bob:
Hi Bob, the code word is apples
Bob to Cathy:
Hi Cathy, the code word is apples
... and so on
Yasmin to Zoey:
Hi Zoey, the code word is apples
If you were a malicious third party, in order to make person Z believe they heard something else (other than
the code word is apples), you'd have to ensure person Y heard something else, and for that, person X would've heard something else and so on. Essentially, you'd have to modify the whole chain to mutate the real message.
This is why blockchains are resistant to modification, and essentially a trust-less peer to peer system of record keeping because it's in their very nature to preserve the original transaction data. The ledger or record(s) these blockchains keep, are distributed along various nodes (or people in the above
code word is apples example) so that even if some subset of nodes (aka computers) were corrupted in some way, there would be consensus or agreement by the network on what is the true value of any particular record.
Consensus protocols are just methods in which various computers that are part of a blockchain network agree on the information stored on the blockchain. More on consensus protocols in later episodes.
So why is this important?
Haven't we always had cryptography and encryption in some form or another since the World Wars? You're right! But not in the world of finance. Mostly in the world of government/military communication, diplomacy or espionage.
Side note, The Imitation Game is a great movie to watch about cryptography’s role in espionage during WW2 and how it shaped the outcome of the war between Allied forces & the Nazis.
In the world of finance, this application of cryptography in the form of blockchain technology has a tremendous opportunity to disrupt traditional 3rd party trust based financial systems such as banks, and payment processors.
If we have a secure form of paying each other via digital currency such as bitcoin, while ensuring there's no way to mutate or modify (for malicious purposes) a secure blockchain, then we can eliminate a whole host of wealthy high income middle-parties who take advantage of middle and lower income populations. We can provide those who are less fortunate a secure financial identity, prevent theft, fraud, and increase trust in financial systems.
The blockchain was invented by a person (or group of people) using the anonymous name Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.
To date, no one knows who Satoshi Nakamoto is!
What problems are we solving?
Blockchains' secure immutable nature ensures transactions in cryptocurrencies like Bitcoin aren't falsified like fiat currency such as cash bills and coins may be. It solves the double spending problem, where the same unique token of value (may it be a metal coin, a painting, or a cash bill) is maliciously replicated and spent twice. Once by the true owner of the token, and once by a malicious actor who has successfully replicated that token. This ensures there's no devaluation of the original currency.
Blockchains remove the need for a central entity that manages the ownership of currencies or any resource that specific blockchain is backing. Blockchains can manage assets outside of currencies as well and as a result, they can power different types of applications.
A blockchain is simply defined as the concept of a distributed trust less peer to peer ledger. It just so happens that the first serious implementation of a blockchain is the cryptocurrency Bitcoin.
Layer Two Blockchains
Remember those block headers we spoke about earlier? Well, they have a limited bandwidth on the amount of data they can carry. Meaning each block in a blockchain, can only carry a certain limited number of transaction data. This makes blockchains (especially early iterations such as the Bitcoin blockchain) incredibly inefficient.
Enter Layer 2 scaling solutions such as "rollups" on Ethereum and the Lighting Network on top of Bitcoin. We’ll explore Layer 2s in detail in later episodes as how they optimize more transaction volume on their blockchain is a massive rabbit hole.
In simple terms, layer 2 blockchains are scaling solutions on top of layer 1 blockchains. They’re the side streets people redirect to whereas layer 1s are the main highways, which can often get congested with traffic during peak times.
Decentralized Autonomous Organizations (DAOs)
Decentralized autonomous organizations aka DAOs are entities that don’t have a central governing, or authoritative figure who makes decisions that the DAO oversees.
Each member of a DAO, generally has an equal say in how the DAO makes governing decisions. This new structure of governance, enabled by tokenized voting on blockchains could change how we think about governments, corporations and that pesky housing committee in your apartment building that won’t let you change the curtains or paint the fence of your house blue.
In Crypto News
Binance.US launches in Idaho. If you’re surprised by this news, not all cryptocurrency exchanges launch in all states. There are state specific laws that allow certain exchanges to do business in one state but not another. Speaking of crypto laws, I might dedicate an entire episode to states offering favorable crypto laws. There’s 5 of them, but we’ll explore them in a separate episode as there’s a lot there.
Optimism; a layer 2 blockchain token, not the feeling of optimism, is now listed on Coinbase.
So is SAND, the native token of the Metaverse play to earn video game The Sandbox. We’ll explore these in detail in later episodes as well.
Solana had yet another outage, this time for 4 hours. This seems to be a pattern folks. If you remember, Solana had an incredible run up to the top 5 spot right after Bitcoin, Ethereum, Tether and Binance Coin back in late summer of 2021. Since then, plagued with outages, the token has dropped in value and is now struggling to stay in the top 10 by market cap.
In Tech News
Facebook aka Meta’s Chief Operating Officer Sheryl Sandberg is stepping down after 14 years in her role that transformed the company from a bunch of college kids trying to spy on their crushes into a massive multi-app social and advertising behemoth. Javier Olivan will be taking over as COO this fall. Sandberg wants to focus on philanthropic work, which is rich people for “doing my taxes the smart way and writing books.” She will continue to serve on the board of directors for Meta.
Tesla and SpaceX workers were told to work from the office at least 40 hours a week or quit, in internal memos from Elon Musk. Not sure how this is going to go well, people might quit and work for competitors like Rivian and NASA…ah okay I guess Tesla and SpaceX people are back in the office. But hey, the dude can casually buy Twitter, so what the hell do I know. I only know that I save around 1 to 1.5 hours not having a commute and can spend more time with my family which improves my quality of life, which improves my desire to work for the company that values my quality of life. Funny how that works. But hey, if people go back to work, they start commuting. If they start commuting, they’ll listen to podcasts. So yeah, let’s all go to work, except me.
In Science News
Scientists may have found a way to inject oxygen directly into the blood stream. A lot of injuries and illnesses, such as COVID-19 can cause the human body to struggle for sufficient oxygen that’s needed for our basic survival. In critical cases, patients are put on a ventilator. You know, the device that was in shortage throughout the pandemic.
The scarcity is a problem, in addition to the injury or potential infection that ventilators can cause the lungs. This intravenous oxygen delivery, is a breakthrough technology which can completely change how ventilators are used. Mechanical ventilation of lungs aside, there’s a technique called Extracorporeal Membrane Oxygenation (aka ECMO) where blood is carried outside the body so that oxygen can be mixed in and carbon dioxide taken out. Thanks to this new discovery, oxygen may now be directly added and the patient’s blood can stay where it is!
This can significantly reduce ventilator related lung injury known as refractory hypoxemia, aka a severe lack of oxygen in your arteries. This new technique works by channeling oxygen laden liquid through a number of small nozzles that keep getting smaller until the oxygen bubbles are smaller than red blood cells. They’re then injected directly into the blood stream. Fascinating stuff!
That’s all folks! If you enjoyed this episode, please share it on social media and tell your friends and family about it! As always, I’m grateful for your time and support.
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Follow me on Twitter @farezv. Stay tuned & I’ll see you in the next episode. Thank you for listening.