INTRODUCTION TO BLOCKCHAIN When trying to explain blockchain, many start by introducing concepts of cryptography and network engineering. But I have a plan that is much more fun. Let's go on a trip to the paradise beaches of the South Pacific. In one of the islands of Micronesia lives the Yap tribe which has a peculiar monetary system. Instead of coins and bills, their money are Rai Stones. These are stones with a hole in the middle, up to two meters tall and 4,000 kg. Since they are hard to move, the Yap discovered it's more practical to just leave them in one place. In order to make transactions, they decided to create a ledger so they could know who owns each stone. Now, how to develop this ledger? One option is to delegate the task to an honest yap with an excellent memory. Someone who will not forget who owns each stone nor will try to tamper with the data for their own benefit. But, of course, how to make sure this will not happen? Instead of centralizing the task in a single agent, the Yap created a mental database shared by all members of the tribe. Every Yap knows by heart who owns each stone. He knows who carved it and who were all the previous owners until the present day. Let's imagine Bob sells a chicken to Alice. They agree that she will pay with the stone to the west of the beach. They gather the whole tribe and announce: "The stone west of the beach is transferred from Alice to Bob". Following the announcement, each Yap checks its mental database. The stone to the west of the beach really belongs to Alice? If the tribe consensus says that the stone belongs to her, the transaction is approved and all Yaps update their mental record. The new version of the database now indicates that the stone to the west of the beach belongs to Bob. Should Alice want to spend it again, the moment she announced it publicly, the community would not accept the transaction. That stone no longer belongs to her. The combination of a shared ledger and transactions done in public allows the Yap to maintain a monetary system without a centralized registry. Basically, the blockchain is based on the logic of the Yap monetary system. The genius of Satoshi Nakamoto was to develop a clever scheme of economic incentives and cryptographic security allowing a network of anonymous computers to collaborate in maintaining a shared database. That ledger records the transactions and ownership of an asset called Bitcoin. The Yap used another type of computer called “brain” to record the transactions and ownership of another type of asset called “Rai Stones”. As in the case of the Yap, in the blockchain, no node monopolizes the ledger. Since the information is distributed, it cannot be lost and nobody can introduce fraudulent modifications. The Yap considered that the database distributed among the members of the tribe was the only source of truth on the ownership of Rai Stones. The Bitcoin network considers that the distributed database is the only source of truth on the ownership of bitcoins. Alice agrees to buy a product from Bob in exchange for a bitcoin. Before delivering the product, Bob has to make sure that Alice has enough funds. Historically, this was done by asking an intermediary, such as Alice's bank. With bitcoin, mechanics are different. Alice owns the "X" address on the Bitcoin network, represented by a long string of digits. It's like her bitcoin bank account. With her private key, she can move the funds in that address. The private key is the equivalent of her bank account password. Bob owns the "Y" address, also represented by a long string of digits. Once they have agreed on the purchase of the product, Alice announces to the network: "Transfer one bitcoin from address X to address Y". Nodes check in the shared database if there are enough funds in address "X". As it's an open ledger, anyone can see the available funds. In case there are enough funds, a bitcoin is transferred to address Y. In the course material, you will learn more about the technical aspects. You will learn about the role of miners in validating transactions and how bitcoins are put into circulation. Conceptually, the blockchain solves the problem of digital cash by thinking from the first principles. What is a monetary system? Basically, a ledger that records account numbers and units. Solving the problem of digital cash is solving how information circulates in computer networks. Most people know about blockchain through its financial applications. Cryptocurrencies can be used to make payments at a much lower cost than in the traditional financial system. However, the implications go much deeper. The blockchain is a ledger system that no party can fraudulently modify. As we will see, this has key applications for the future of the legal industry.