fundamental of blockchain

Back in 1999, the file-sharing network Napster made it easy to share audio files (usually containing music) on a hybrid peer-to-peer network (“hybrid” because it used a central directory server). That file-sharing network did more than just share music files: It allowed all users to retain copies of those shared files such that a single digital asset resulted in a limitless number of perfect copies across a global network. The casual ease with which technology was leveraged by anyone with a computer caught venerable Tower Records by such surprise that it was forced to close all of its 89 U.S.-based stores by 2006.

In 2008, the subprime debacle occurred, during which long-­established, powerful U.S. financial institutions and insurance companies declared or teetered on the brink of bankruptcy. Those circumstances called for immediate federal government intervention in order to avoid a domestic and possibly global financial meltdown. This important event left a populace leery of centralized banks and exposed the danger of having financial ledgers closed to public scrutiny. In March 2008, the Heartland Payment Systems data breach exposed more than 130 million credit card numbers, many of which were later used to make fraudulent purchases.

These events illustrate the perils of living in a digital, connected world that depends on transaction-fee-generating middlemen and leaves people vulnerable to digital exploits, greed and crime. The academic challenge became how to create an available, disintermediated digital infrastructure on which a digital asset can be openly and reliably transferred (rather than copied and shared) from owner to owner, that has no corruptible or fallible central authority, is secure, and can be trusted. read more