So is Crypto a pyramid scheme or something else?

[LAS14]

86. The use of blockchain in Crypto

I started watching this video and got inspired to dig on my own. I went to ChatGPT and got the best answers to my questions I've ever seen. In the foggy past I was a programmer, hence my references to ancient programming languages. (Note. I'd actually typed "PowerPoint" instead of "PowerBuilder" myself, but I left that part in because the answer was also interesting.

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Explain blockchain to a person who only understands Basic+ and PoweBuilder
ChatGPT said:
ChatGPT
Sure! Let me break down blockchain in a way that's simple, using concepts you might already be familiar with.

Think of Blockchain Like a Digital Notebook
Imagine you have a notebook (this is your blockchain) that records important things. Every time someone does something that needs to be remembered—like a transaction—it gets written down in this notebook.

Blocks = Pages in the Notebook
In the blockchain, every "block" is like a page in the notebook. Each page contains a list of things that happened, like transactions. These things are recorded in a specific order.

On one page, you might have someone sending money to someone else.
The next page might have another transaction, and so on.
Blockchain = A Chain of Pages
Now, imagine you connect each page (block) in a chain. Each page not only has its own information but also refers to the page before it. So if anyone wants to change something on a previous page, they'd have to change every page after it, which is nearly impossible. This keeps everything secure.

Everyone Has a Copy
Instead of just one person controlling this notebook, everyone who is part of the system has their own copy of it. If someone tries to cheat and change something on their copy, the others will notice and not agree with the change. This is like everyone checking each other's slides in a PowerPoint presentation and agreeing that all the information is correct before moving forward.

Security
To make sure that only the right people can add new pages to the notebook (or add new blocks to the blockchain), we use a system that requires people to solve very complex math problems. This is like a lock on the notebook, ensuring only the authorized person can write the next page.

Powerpoint Analogy
In PowerPoint, imagine if every slide (block) had a list of things happening, and after creating a slide, it couldn't be changed without affecting all the slides before it. The whole group of slides (the blockchain) would be a secure presentation where every slide has a reference to the one before it, ensuring everything stays in order.

So in summary, blockchain is like a notebook or PowerPoint where:

Each page (block) records something important.
Each page links to the one before it, creating a chain.
Everyone has a copy, so it's hard to cheat.
Special math problems make sure only authorized people can add pages.
Does that help?


You said:
Yes, pretty good. Except you changed "PowerBuilder" (a programming language) in my prompt to "PowerPoint."
ChatGPT said:
ChatGPT
Ah, I see! Thanks for pointing that out. Let's now explain blockchain in terms of PowerBuilder instead of PowerPoint.

Think of Blockchain Like a PowerBuilder Application
PowerBuilder is a tool used to build applications that manage data. You might use PowerBuilder to create programs that handle information in databases. Now, let's imagine you are creating a database system with PowerBuilder, and this system needs to securely store data, track changes, and make sure no one can tamper with the data.

Blockchain = A Database with Special Rules
In the blockchain, instead of just storing data like a regular database, we use a special type of database that records data in blocks (which are like records) and links them together in a chain. Every time new data is added, a new "block" is created, which contains information about transactions, or events, that happened.

Blocks = Data Records in PowerBuilder
In PowerBuilder, you might create a data window or table that stores individual records. In the blockchain, each "block" is like a new data record or entry in a PowerBuilder database. It contains the details of a specific event, such as a transfer of data or money.

Example: You have a table that logs transactions, and each record has information like who sent money, who received it, and the amount.
In the blockchain, these records are grouped together in a block.
Chain = Linked Records (Data Integrity)
In PowerBuilder, you might set up a system where every new record references previous ones to ensure that they are all connected in the right order. In blockchain, each block contains a reference to the previous block, linking them together in a chain.

This is like when you set up foreign keys or references between tables in PowerBuilder to make sure the data is linked correctly.
If someone tried to change a block, it would break the link, and everyone else would know that something was wrong.
Blockchain = Everyone Having a Copy of the Database
Instead of having just one central database where the data is stored, with blockchain, everyone in the system has their own copy of the entire chain of blocks (the blockchain). This is like multiple users having access to the same PowerBuilder application, where each one has a copy of the database.

If someone tries to change something in their version of the database (blockchain), the others will notice the change and reject it, because their copies don’t match.
Security and Validation = PowerBuilder's Data Validation
When you create an application in PowerBuilder, you might have checks to validate data before it is saved (e.g., ensuring that data is correct or follows a rule). In blockchain, before a new block is added to the chain, there are checks (like solving complex math problems) to ensure the data is valid.

Think of it like running a validation script in PowerBuilder to make sure everything is correct before a record is added to the database.
Summary with PowerBuilder Analogy:
Blockchain is like a PowerBuilder database that stores data in blocks.
Each block is like a new record in a PowerBuilder data table, containing important information.
Blocks are linked together like related records in a database, and altering one would affect the others.
Everyone has a copy of the blockchain (like users having access to the PowerBuilder app with their own database), so no one can cheat or change data without being detected.
The system uses validation checks (similar to PowerBuilder’s validation) to ensure the data is correct before it is added.
I hope this version better aligns with PowerBuilder! Let me know if you'd like to dive deeper into any part of it.


You said:
How does the authorized person solve the very complicated mathematical problem? How does the authorized person even find out what the problem is?
ChatGPT said:
ChatGPT
Great questions! Let me explain how an authorized person (often called a miner or validator) solves the complicated mathematical problem in the blockchain. This process is called Proof of Work (in Bitcoin, for example) or other consensus mechanisms in different blockchains.

How Does the Authorized Person Find Out What the Problem Is?
The "problem" is not something a person needs to find; it's automatically generated as part of the blockchain's structure. Here's how it works:

Blockchain Nodes: There are many nodes (computers) that participate in the blockchain network. Each node is a copy of the blockchain, and all nodes are involved in verifying and adding new blocks.

Creating a New Block: When a new block of transactions is ready to be added to the blockchain, a mathematical problem is created. This problem involves finding a specific number that, when combined with the contents of the block, meets certain criteria. This process is called mining.

The Problem = Hashing Puzzle:

The "problem" is essentially a hashing puzzle. A hash is a special kind of cryptographic function that takes an input (in this case, the data in the block) and transforms it into a fixed-length string of characters (the hash).
The mining problem is to find a specific hash that meets a predefined condition. For example, in Bitcoin, the condition is that the hash must start with a certain number of zeros. The only way to find the right hash is through trial and error.
How Do They Solve the Problem (Mathematical Puzzle)?
Hashing the Data: The miner takes the contents of the block (including the previous block’s hash, transactions, and some additional data) and applies a cryptographic hash function (like SHA-256 for Bitcoin) to it. This gives them a string of numbers and letters.

Finding the Right Hash: The miner has to keep changing a small part of the data in the block, called the nonce (a random number), and re-hash the block until the result meets the condition. For Bitcoin, the goal is to find a hash that starts with a certain number of zeros.

Example: Suppose the block's data produces the hash "abc123", but it doesn’t meet the condition (e.g., it doesn’t start with four zeros). The miner changes the nonce, re-hashes the block, and gets "xyz456". The process continues until they find a hash that satisfies the condition.
Proof of Work: Once the miner finds the correct hash, it’s considered proof of work. This proves that the miner has spent computational power (work) to find the solution. This process is energy-intensive because it requires trying many different nonce values to find the right one.

Broadcasting the Solution: Once a miner finds the correct hash, they broadcast the solution to the rest of the network. The other nodes in the network verify that the hash meets the condition and, if they agree, the new block is added to the blockchain.

Why Is This Secure?
Difficulty and Time: The reason the puzzle is so difficult is that the miner doesn't know which nonce will work, so they must try many possibilities, which takes time and computational resources. This makes it hard for anyone to cheat and change the blockchain, because changing even one block would require redoing the proof of work for all the following blocks.

Cryptographic Security: The cryptographic hash functions are designed so that it is impossible to reverse-engineer the hash and figure out the correct data without trying many possibilities. This is what makes the system secure.

So, to summarize:
The problem is generated automatically when a new block is being created. It’s a hash-based puzzle that requires finding a value (nonce) that, when combined with the block’s data, creates a hash that meets certain conditions.
The authorized person (miner) doesn’t know the solution in advance but uses their computer to try different possibilities until they find the correct answer. This process takes time and computing power.
Once the correct solution is found, the miner broadcasts it to the network, and everyone agrees that the new block is valid, adding it to the blockchain.
This process of solving the mathematical problem ensures that new blocks are added securely and that the blockchain remains tamper-proof.