Hi friends! We’ve talked quite a bit about the crypto economy, like currencies and NFTs, in this newsletter, but not very much about the underlying infrastructure that makes crypto work. I had the chance to interview Dan Boneh, the expert of all things blockchain and cryptography. He’s the Professor of Computer Science and Electrical Engineering at Stanford, and he co-directs the Stanford Center for Blockchain Research and the Stanford Computer Security Laboratory. Here’s a quick synopsis, some edited clips, and the entire podcast.
PS - My next post will be about personal finances - what do you want to know? Send me your questions!
TL;DR:
Blockchains are like one giant, global computer. A blockchain is an open database that anyone can add transactions to, but no one can delete a transactions.
Blockchains use cryptography to securely record and verify transactions.
An open, global database that anyone can use has applications outside of crypto and finance, though its a useful application because blockchains can “cut out the middle man” responsible for these transactions.
Check out the entire podcast here.
What is a Blockchain:
A blockchain is a database (like a giant excel spreadsheet) that anybody in the world can add too, but once added, data can never be removed.
If you’ve worked in accounting, it’s kind of like an accounting ledger - you can only add debits and credits - no deletions!
How does a Blockchain Work?
I loved Dan’s example here. “Finance is a very natural application for blockchains. Julianne if I pay you $5, that would be recorded in this data structure. And once the payment is recorded, it can never be removed. And that's why it's so important for payments. I can't just go and delete that transaction and say, Hey, I never paid you $5. That is why this append only data structure is such a good fit for finance. Once you make payments, you can never remove it, unless you give me the $5 back. Which is how I might ask you to take it back. Right. So that's basically the sort of the initial innovation in the Bitcoin work. It's this structure that you can append and you can never remove.”
Why do Blockchains Matter?
Blockchains aren’t specifically finance-related, but are increasingly impacting the financial world.
Finance is really just a long list of transactions. Today, banks and the Federal Reserve keep track of these transactions.
With innovations like blockchains, stablecoins, and central bank digital currencies, we’re starting to see the influence of blockchains on our overall economy.
Listen to the entire podcast here.
Recommended Reading:
Designing a Crypto Economy for Women - Stanford Graduate School of Business LOWkeynotes
In a Decentralized World, I’ve Never Needed People More - Stanford Blockchain Club
Ladies, Are You Curious About Crypto? - Foreward by Keely
Wall Street Reluctantly Embraces Crypto - Wall Street Journal