32 episodes

Block Shots provides a basic understanding of the most important blockchain concepts in five minutes. Learn blockchain, consensus, hashing, signing, governance, nodes, etc. and many more fundamentals while having your morning coffee, commuting, or whenever you've got a moment.

episodes.blockshots.fm

Block Shots - Blockchain in 5 minutes‪!‬ Gautam Dhameja

    • Technology
    • 5.0 • 1 Rating

Block Shots provides a basic understanding of the most important blockchain concepts in five minutes. Learn blockchain, consensus, hashing, signing, governance, nodes, etc. and many more fundamentals while having your morning coffee, commuting, or whenever you've got a moment.

episodes.blockshots.fm

    Episode 32 - Decentralized Autonomous Organizations (DAOs)

    Episode 32 - Decentralized Autonomous Organizations (DAOs)

    Blockchains allow seamless and transparent distribution of tokens and these tokens can represent pretty much anything. It can be something of a financial value, identity, or right to vote that can be tokenized on the blockchain.

    Recall that to update the state of a blockchain, users send signed transactions, and based on the validity of these transactions the updates are applied to the blockchain. When an update requires multiple users to approve it, we use multi-signature transactions and wallets.

    Now let’s combine these two concepts and imagine an organization’s entire governance based on a blockchain, where users have the right to vote by sending transactions. We can design an organization by programming the decision-making logic in the smart contracts. This logic can then be used to govern the finances, strategy, and other important aspects of an organization in a fully transparent and decentralized manner.

    Users can have voting rights based on the tokens they own. The voting can be done using any of the popular approaches — a majority, supermajority, delegation, etc. The decisions made using this process can be applied automatically by distributing funds in specific account, or approving strategy and in many other ways.

    These organizations that could function autonomously based on the business logic or governance rules programmed in blockchains are called Decentralized Autonomous Organizations (DAOs). 

    It is also worth pointing out that while the governance process of DAOs is more inclusive and transparent, it is still a challenge to apply the decisions made by a DAO in the outside world in a legal and enforceable manner.

    Music: https://www.purple-planet.com

    This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit episodes.blockshots.fm

    • 4 min
    Episode 31 - Non-Fungible Tokens (NFTs)

    Episode 31 - Non-Fungible Tokens (NFTs)

    If we look at the dictionary definition of the term fungible, it says “being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.”

    https://www.dictionary.com/browse/fungible

    Let’s take an example. If you have a 1 dollar bill, you can exchange it for another 1 dollar bill. When we deposit cash in a bank and then withdraw some or all of it, we don’t get back the same currency notes that we deposited. But we still accept that money because these notes have the same total value. Hence, fiat currencies are fungible.

    The same applies to cryptocurrencies, a bitcoin can be easily exchanged for another bitcoin because all bitcoins have the same value.

    Non-fungible would then mean that something cannot be exchanged for another thing of the same kind. Let’s take an example — an original painting from a painter cannot be exchanged for another painting of the same kind because there is only one original and it has it’s value. Think Mona Lisa. You cannot exchange one Mona Lisa with another because another doesn’t exist.

    The same concept applies to Non-Fungible Tokens. NFTs are used to represent unique assets on the blockchain. These unique assets could be anything — a painting, a gif, a piece of land, etc. This is important to note that NFTs are only representing physical or digital assets on a blockchain. Just like we represent the ownership of a piece of land using registry papers, we can represent the ownership of something unique by using an NFT.

    NFTs make sense because they represent assets that have some specific context associated with them. This context makes these assets unique and hence non-fungible. Examples of such context are — a particular art by a specific artist, a piece of land with coordinates on Earth or Mars or Moon, the original manuscript of a particular book, etc.

    Music: https://www.purple-planet.com

    This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit episodes.blockshots.fm

    • 4 min
    Episode 30 - Crypto Exchanges

    Episode 30 - Crypto Exchanges

    Exchanges allow users to buy, sell, and exchange cryptocurrencies. Just like we have stock and forex exchanges for buying and selling shares and foreign currencies, similarly we have exchanges for cryptocurrencies.

    In general, crypto exchanges allow buying and selling of cryptocurrencies using fiat currencies or stablecoins or other cryptocurrencies. For example, you can buy bitcoin using USD and sell bitcoin for USD. You can also convert bitcoin into ether and vice versa, using a crypto exchange. 

    Crypto exchanges are of two kinds — centralized and decentralized. 

    Centralized exchanges are basically order book based platforms that manage keys for the users, and make blockchain transactions on behalf of the user. All trades go through a central server. They allow exchange of crypto with fiat and accept fiat payments and withdrawals. Centralized exchanges generally provide custody services to users for their purchased tokens. This means the users don’t have control on their wallets when transacting using centralized exchanges.

    Decentralized exchanges are implemented using smart contracts (or logic on a blockchain) and allow users to directly make trades on the blockchain. They are more secure and allow full control of keys to the users, but they only work within the blockchain network and do not allow exchange with fiat currencies. The smart contract logic acts as automated market maker and matches the demand-supply for making token swaps. The market making and swapping of tokens is based on liquidity pools.

    Music: https://www.purple-planet.com

    This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit episodes.blockshots.fm

    • 4 min
    Episode 29 - Stablecoins

    Episode 29 - Stablecoins

    Cryptocurrencies are generally volatile. There are several reasons for that — low liquidity, speculation, and several other factors. There could be more reasons, but generally speaking, cryptocurrencies have been relatively more volatile compared to fiat currencies.

    This volatility does not help with the value transfer use cases of cryptocurrencies. If the price is not stable, the value transferred or committed may not represent the services provided in return. For example, if a buyer and seller agree to transact using a cryptocurrency for a service or product, and by the time it is delivered if the value of that cryptocurrency changes too much then the entire trade could be unfair or undervalued, or overvalued.

    To avoid these volatility issues and to still use the features of cryptocurrencies (decentralization, middlemen-less transfers, security, etc.), stablecoins are used.

    Stablecoins are cryptocurrencies backed by or pegged to other currencies or commodities that have relatively stable prices. Generally, stablecoins are pegged to fiat currencies (USD, EUR, etc.), precious metals (Gold, etc.), and a combination of other cryptocurrencies. 

    Stablecoins are of two types — reserve-based and algorithm-based. Reserve-based stablecoins are minted based on the off-chain reserve maintained by the issuer. For example, if an issuer maintains a reserve of X USD in a bank then they can mint the same quantity of USD pegged stable coin on a blockchain. Algorithm-based stablecoins are less popular and work based on an algorithm that mints and burns coins based on the demand and supply, maintaining the stability of the price.

    While providing a stable price, stablecoins also provide most of the benefits of cryptocurrencies like secure and trust-less transfers, pseudo-anonymity, etc. Hence, they are preferred as a value transfer mechanism.

    Music: https://www.purple-planet.com

    This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit episodes.blockshots.fm

    • 4 min
    Episode 28 - Central Bank Digital Currency (CBDC)

    Episode 28 - Central Bank Digital Currency (CBDC)

    Central bank digital currencies broadly refer to the digital versions of fiat currencies.

    The fiat currencies are issued by the central banks of respective countries. These currencies are issued based on the economic conditions and needs for trade and commerce in a country. Previously, the fiat currencies were issued based on gold reserves. The process of minting and maintaining these currencies requires quite a bit of work in terms of printing, logistics, transfers, reserves, etc. There is a lot of paperwork and many of layers of bureaucratic processes in currency management at the central bank level.

    On the other hand, digital/crypto currencies like bitcoin are issued on a decentralized network and are relatively easy to manage considering they are governed via code and consensus rather than via bureaucratic processes. This brings in a ton of efficiency.

    Inspired by the idea of crypto currencies, some of the fiat currency issuers have been experimenting with the idea of issuing digital versions of fiat currencies using decentralized systems. This could allow more liquidity, more security, and faster digital payments while simplifying processes and overheads.

    CBDCs would also allow increased efficiency in cross-border payment settlements where the processes take quite a bit of time at in the current system. 

    How open and transparent CBDCs would be? Would they all follow the same practices and would they all have their blockchain? Would they even use blockchain or just be a sufficiently efficient centralized digital payment system? These and many more questions are still unanswered while the idea of CBDCs is still in the exploratory stage.

    Music: https://www.purple-planet.com

    This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit episodes.blockshots.fm

    • 5 min
    Episode 27 - Liquidity Pools, Swaps, and Yield Farming

    Episode 27 - Liquidity Pools, Swaps, and Yield Farming

    Financial services are generally based on transfer of funds between parties. For example, when we borrow money from banks that money is deposited by someone. They earn interest for depositing their money, and we pay interest on the loan. The money moves between the depositor and borrower through the bank. On a larger scale, many people deposit money at the bank and the bank then lends that money to potentially many borrowers. 

    This involves the bank to manage large amount of currency, which, in turn, allows the bank to provide several financial services (forex, etc.). The bank basically pools money from many depositors to create a liquidity pool. The bank is also a centralized service provider.

    Now let’s try to apply the same concept to decentralized systems. To provide financial services using decentralized applications — also known as DeFi or Decentralized Finance — users deposit (lock) their tokens in smart contracts to help create liquidity pools. Borrowers then borrow these tokens as loans and pay interest. Depositors earn interest for locking their tokens. 

    Liquidity pools are the basic building blocks and enablers for financial services in the DeFi space. In addition to simple lending, liquidity pools are also used in decentralized exchanges for token swaps. In such setting, the pools are maintained in token pairs so that users can easily swap or exchange their tokens with other tokens. The fee charged for the swap is (partly) distributed among the pool contributors/depositors.

    The term for earning from contributing to liquidity pools is called Yield Farming. Users lock their tokens or token pairs in DeFi smart contracts and, in return, earn tokens. These could be some percentage of the same tokens and/or DeFi app specific tokens. Several DeFi apps provide features and strategies for users to maximize their yield by locking their tokens in multiple pools.

    Music: https://www.purple-planet.com

    This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit episodes.blockshots.fm

    • 4 min

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