This lecture began to put the ideas of cryptographic functions and how they interact with the humans who create/use/interface with them. However, before talking about policy and regulations, the lecturer began with the idea of consensus in Bitcoin. Note, this is a very short section that has some important concepts. While there is nothing difficult discussed, after thinking about these concepts for a while, I’ve had a new found respect for their foundational value. Also, there’s been a craze in the blockchain ecosystem about HashGraph. HashGraph is an alternative consensus protocol that is much faster and therefore scalable than Bitcoin. I’ll need to spend more time on it but I’ve put two links here and here that will explain more to those interested. Also next lecture will likely be more meaty.
Consensus, by definition, just means general agreement. It’s tame, more like the French phrase “D’accord”. However, “chill” the word suggests, it’s the crux of what makes the Bitcoin network functional and consensus takes place in many types.
Questions answered in this Post:
- What are the three types of Consensus discussed?
- What does consensus of rules mean?
- What does consensus of history mean?
- What does consensus of value require?
Rules, History, Value
I gave the answer right in the header. The three types of consensus discussed related to the block rules, blockchain history, and the value of Bitcoins.
Consensus about rules means there needs to be agreement on the technology and infrastructure. People need to know what makes a transaction valid and what makes a block valid. It also gives structure to how P2P nodes behave and the protocols and formats. Without consensus in this layer, none of the nodes would be able to communicate with each other and they each may validate different blocks. Thus there would be no consistent way for the system to move forward without this. One real world thing I think about is hard forks. During a hard fork, there is a division with the nodes and certain nodes become incompatible with others. Thus all the nodes need to move to one standard eventually to persist.
Consensus of history means one needs to agree on the contents of the blockchain. Furthermore, this means which transactions have occurred, which coins exist, and who owns them. Bitcoin can be simplified to being a store of value and thus everyone needs to agree on this distributed ledger. While it seems so simple ie one big shared database, that has to be true for people to remove trust from central parties and apply trust to these systems.
Lastly, there is consensus of value. Having looked at the price fluctuations of Bitcoin, it’s hard to deny there is value. Coins have value and currencies need this. However, likely in 2009, people needed to believe. The lecturer then speaks about the “Tinkerbell Effect.” It’s a circular argument that you get value from something because someone tomorrow will also see the value. It’s clear the the rules and history are closely tied because rules determine which blocks and transactions come into existence. History and value are tied because to claim ownership is due to having consensus on the history. It’s a two way relationship because block reward means miners expect value for maintaining rules to the correct input of transactions and blocks.
I think this statement was important since he calls it “Genius of Bitcoin.” The “Genius of Bitcoin” was that it’s extremely difficult to get any consensus by itself. I’m curious if other protocols rely on these three pillars. While HashGraph may have a different consensus protocol, do they still need people to believe in them?