Lecture 01: The Model of Decentralization

Summary

Highlights

• Blockchain isn’t just for cryptocurrencies; it powers a wide range of applications! 🚀
• Don't believe the hype that blockchain can solve all problems—know its limits! ⚠️
• Petroleum industry supply chain used as a practical example of blockchain's advantages. 🛢️
• Understand decentralization: Operating without a central authority, yet maintaining coordination. 🔀
• Trustless decentralization is the crux of blockchain's design, benefiting all stakeholders involved. 🔗

Key Takeaways

• Blockchain is more than just Bitcoin! It's a powerful tool beyond cryptocurrencies. 💡
• Myth-busting: Blockchain isn't a magical solution for every problem. Analyze its application wisely. 🔍
• Decentralization explained with petroleum industry supply chain: Coordination without a central authority! 🚚
• Blockchain's role is in fostering trustless cooperation among competitors. 🤝
• The course aims to separate blockchain myths from facts to apply the technology effectively. 📘

Overview

Chapters

• 00:00 - 00:30: Course Introduction The chapter titled 'Course Introduction' begins with a welcome message to students enrolling in the course about blockchain and its applications. It is co-taught by Shondip Chakraborty and Professor Shomik Sudhal.
• 00:30 - 01:30: Overview of Blockchain This chapter provides a broad overview of blockchain, including its architecture, functionalities, and different use cases. It serves as an introductory lecture where the speaker discusses the basic principles of blockchain. The lecture includes examples of what blockchain is and identifies specific scenarios and applications where blockchain is particularly beneficial or suitable.
• 01:30 - 02:30: The Hype Around Blockchain This chapter introduces the growing interest in blockchain technology, highlighting the excitement and attention it has garnered from both academia and industry.
• 02:30 - 06:30: Debunking Blockchain Myths: Myth 1 - Blockchain is Cryptocurrency The chapter titled 'Debunking Blockchain Myths: Myth 1 - Blockchain is Cryptocurrency' discusses the growing interest and hype surrounding blockchain technology. The popularity of blockchain is highlighted by its frequent searches on Google, sometimes surpassing other popular topics like artificial intelligence and deep learning. The chapter aims to debunk the myth that blockchain is synonymous with cryptocurrency, indicating that while cryptocurrencies are well-known applications of blockchain, the technology has broader applications. The text suggests that the intrigue around blockchain is prompting more people to explore its potential beyond just digital currencies.
• 07:00 - 13:00: Debunking Blockchain Myths: Myth 2 - Blockchain Solves Everything The chapter begins by addressing common misconceptions surrounding blockchain technology, specifically the myth that 'Blockchain Solves Everything.' The discussion is set within the context of a class where the instructor aims to debunk this myth by presenting a use case of a decentralized application that can be built with blockchain. The emphasis is on critically analyzing the capabilities and limitations of blockchain to provide a realistic understanding of where and how it can be effectively applied.
• 15:00 - 20:00: Debunking Blockchain Myths: Myth 3 - Blockchain is a Distributed Database In this chapter, the discussion focuses on debunking the myth that blockchain is a distributed database. The lecturer aims to provide clarity on the varying definitions and perceived abilities of blockchain as encountered in numerous articles online. By discussing common myths, the intention is to give a realistic view of blockchain's capabilities, moving beyond the idea that it alone can solve all technological challenges. The lecture sets out to provide insight into real-world applications where blockchain technology can be effectively utilized.
• 20:30 - 23:00: Objective of the Course This chapter discusses the objective of the course, which is to educate learners about the advantages and limitations of blockchain technology. The course aims to provide insight into how blockchain can be beneficial as well as the constraints associated with it.
• 23:00 - 37:00: Introduction to Decentralization The chapter titled 'Introduction to Decentralization' explores a common misconception that cryptocurrencies, such as Bitcoin, are synonymous with blockchain technology. The speaker addresses the questions they frequently encounter during talks, concerning government bans on cryptocurrencies and the relevance of learning about blockchain despite these restrictions.
• 37:00 - 46:00: Use Case: Supply Chain Management in Petroleum Industry The chapter clarifies a common misconception in the field of supply chain management within the petroleum industry. It distinguishes between blockchain technology and cryptocurrencies such as bitcoin. Although often confused, blockchain is the underlying technology used to create cryptocurrencies, but it serves various other purposes outside of them.
• 46:00 - 48:00: Summary of Decentralization and Closing Remarks This chapter draws an analogy between cryptocurrencies and the technology that powers them, blockchain, comparing cryptocurrencies to electrical equipment and blockchain to electricity itself. The discussion suggests that it is possible to debate or critique one without necessarily engaging in debate about the other, indicating a separation between application and technology that supports it.

Lecture 01: The Model of Decentralization Transcription

• 00:00 - 00:30 Welcome to all of you in this course on blockchain and its application. So, this is a course that myself, Shondip Chakraborty and my colleague Professor Shomik Sudhal are going to teach jointly in this semester.
• 00:30 - 01:00 So, in this course that is going to give you a broad overview about what blockchain is and its different functionality, its architecture as well as different use cases which we are going to cover as a part of this course. So, today is the introductory lecture. So, today I am going to discuss about ah the basic primitive of blockchain that ah what broadly we are going to cover as a part of this course and at the same time going to give you an example about ah what blockchain is and ah in which particular cases you are going to use blockchain or which particular use cases are more suitable for different types of ah blockchain applications.
• 01:00 - 01:30 So, let us start our journey on this interesting topic on blockchain which has now see a lot of hype from the community, both from the research community as well as from the industry.
• 01:30 - 02:00 So, people are talking about blockchain and very recently as per the Google matrix that blockchain is one of the topic which sometime are such more compared to the popular topics like artificial intelligence and deep learning. So, you can see there is a lot of hype about blockchain and people are talking about different popular blockchain applications including the cryptocurrencies and that way this concept has been a kind of very interesting one which people have started looking upon.
• 02:00 - 02:30 So, ah to start with ah our journey on blockchain, ah I will start with ah ah the different types of myths which are roaming around ah on this particular topic of blockchain. And ah in today's class, we are going to talk about a use case ah which is a kind of ah decentralized application that can be built up using blockchain.
• 02:30 - 03:00 will give you a kind of fair idea about ah the different application use cases where blockchain can be utilized ah. So, these are the kind of keywords for today's lecture ah. So, let us start with the different myths which are around blockchain. So, ah in the first class itself I would like to make you aware about this kind of myths because if you just start with a simple Google search ah about blockchain you will get a millions of articles possibly and different articles defines blockchain in different way and ah they basically try to quantify blockchain as a kind of stellar technology which can possibly solve all the problems in our life.
• 03:00 - 03:30 But just like any other technology blockchain also has its advantages as well as limitations and this ah the purpose of this particular course is to make you aware about those kind of ah advantages that you can get using blockchain and at the same time the type of limitations which are there on top of this particular technology.
• 03:30 - 04:00 So, the first myth ah which roam around on this ah particular idea of blockchain is that ah bitcoin or any kind of cryptocurrencies are equivalent to blockchain. So, whenever I I I go to give a talk on blockchain majority of the times I heard this query that well ah the governments are banning cryptocurrencies, the government ah ah is not allowing ah to trade using bitcoin, then what is the use of learning blockchain.
• 04:00 - 04:30 So, many of the times people actually mess up these two concepts the blockchain and the cryptocurrencies or bitcoin. So, on the first day itself I would like to make it clear that blockchain is not equivalent to cryptocurrency or bitcoin. So, these are kind of two different technology rather what you can say that blockchain is the technology which is been used to design bitcoin or any other cryptocurrencies.
• 04:30 - 05:00 So, it you can you can just ah make it similar to like that ah the cryptocurrencies or bitcoin is ah particular electricity equipment and blockchain is the electricity which is which is powering the ah equipment. So, if you just want to have a kind of debate about one of the equipment That does not mean that ah you need to also have a debate on the on the technology which is providing ah energy or providing power to that particular application.
• 05:00 - 05:30 So, indeed there are multiple different applications or numerous other applications around blockchain ah which are not related to bitcoin or cryptocurrency. And rather in this particular course we are going to focus on many of such different applications which are which are not related to bitcoin or cryptocurrency. Even today itself I am going to introduce you with one of the application of blockchain ah which is not related to bitcoin or cryptocurrency.
• 05:30 - 06:00 So, that way ah these two technologies are completely different rather as I have mentioned that bitcoin or the cryptocurrency is the application and the blockchain is the technology that is providing power providing support in the development of cryptocurrencies. So, that way ah ah learning blockchain will will will give you many perspective will will help you to understand that in which particular application you can apply this technology ah ah to to get a solution out of it.
• 06:00 - 06:30 ah It is it is ah not like that we are not going to learn cryptocurrency we will also learn a part of cryptocurrency because ah it is one of the foundational application behind blockchain ah to understand the true power of blockchain you need to understand that what it can provide in terms of cryptocurrency or that kind of decentralized money or decentralized currency ah architecture that we we are obviously going to learn, but as I have mentioned that because this course is not
• 06:30 - 07:00 focused on cryptocurrencies rather it is more focused on blockchain. So, that is the reason we are not going to discuss about any debate which is around cryptocurrencies like why why cryptocurrency is not legal or ah how I can make it legal. And and and in in in a consequence that if you are thinking of that well you want to trade cryptocurrencies and if you learn this particular course that you help in trading cryptocurrency it is not like that.
• 07:00 - 07:30 We are we are not going to touch upon many of the economic aspects which are behind the market aspects of cryptocurrency and that way ah do not do not kind of mix up these two concepts together that blockchain is equivalent to cryptocurrency or bitcoin. So, this is the kind of first myth ah. So, so just keep it in mind and at the same time ah the second myth that we have around blockchain is that ah anything and everything in the world can be solved using blockchain.
• 07:30 - 08:00 So, I I keep on hearing this kind of statement that well ah whenever there is a kind of ah fraud fraudulent activities or there is a kind of corruption, we can possibly utilize blockchain to solve that fraud or solve that corruption. So, it is not like that. So, blockchain is again nothing, but a technology which has been invented by ah different people from different domains from the cryptographer, from the computer scientist, from the people who are there in the ah behind the economic model of blockchain.
• 08:00 - 08:30 But, but ah it is not like that any technology in the world can be can be or any problem in the world can be solved using blockchain. So, it has its own limitation as well. So, as I have also mentioned earlier. So, that way blockchain is good you can you can solve many of the interesting problems using blockchain, but it is not like that you can change the society using blockchain. So, you need to carefully think of that which is the application ah that can be potentially get benefited by applying blockchain as a technology for its solution, but it is not like that you can you can apply blockchain in any of the
• 08:30 - 09:00 ah problem that you that you get well ah. So, so that way ah well it might also happen that you you have a problem ah which is related to this fraudulent activities or corruption or something like that. It might always happen that there can be a better technology which can solve your problem and you do not require a blockchain there.
• 09:00 - 09:30 So, always remember that there is there is as such no So, it is not like that you can invent a technology and there is no shortcoming of that technology. So, it can it can only provide the good that will never happen ah. So, that way ah from that particular perspective you should always keep in mind the trade off that what is the good thing of blockchain. And at the same time what is the ah bad things in blockchain. So, the both the pros and the cons ah you should you should keep it in mind and accordingly you should understand or you should analyze this trade off to understand whether blockchain can be the best technology to solve your problem.
• 09:30 - 10:00 If blockchain is the best technology to solve your problem then go with it otherwise think of that what can be potentially a better solution to solve your problem well. So, that is my suggestion to all of you who are going to take this course to learn blockchain and trying to apply blockchain in certain problem ah before applying blockchain to certain problem think carefully whether whether blockchain is the best solution to solve your problem or not.
• 10:00 - 10:30 Well and the third meet ah that is that is pretty interesting that ah many of the cases many of the articles or many people I have seen they mess up between blockchain and the distributed database well. So, people think of that when I have a distributed database potentially I would be able to replace a distributed database with the help of a blockchain and it is not like that blockchain is not at all a distributed database.
• 10:30 - 11:00 Well, so it is it is just like a kind of replicated data structure we learn about its ah structure ah ah in in in the next ah the in the subsequent classes, but but blockchain is not a distributed database. So, it is not like that if you learn blockchain you do not need to do a course on database ah. These two particular technology the database technology and the blockchain technology both have their own applications. So, that way for certain applications your database might work good or even sometime a distributed database might work good for some other application blockchain might be useful.
• 11:00 - 11:30 So, it is not like that ah whenever you see a distributed database you can immediately replace that distributed database with the help of blockchain. So, here also you need to carefully think of that what you can put in a blockchain, what is the overhead to put that particular thing on the blockchain and how you can utilize blockchain better to solve your problem. So, it is not like that you can store any data on a blockchain.
• 11:30 - 12:00 So, it has its limitation you cannot ah or or if you just plan to store large files on a on a blockchain that is not potentially a good use case for blockchain well ah. So, so that way it is it is ah also necessary to understand the scope and limitations of every technology and ah accordingly try to apply it to solve your specific problem. So, these are the kind of myths which are which are roaming around blockchain and ah as I mentioned that if you simply do a Google search you will see that 20 stellar applications ah for blockchain or 50 different problems where where blockchain can completely solve.
• 12:00 - 12:30 It is not like that all these problems the blockchain is the best solution. Well, I I it is it is ah there are problems for which you can apply blockchain, but ah But, again you need to carefully think of you need to carefully analyze the trade of it of it and accordingly try to apply this blockchain.
• 12:30 - 13:00 So, from here as I have mentioned that well blockchain is not equivalent to god, it is not like that you can solve any problem using blockchain right ah, but obviously, it has its own use case well. So, here comes the question that why this course. So, why we are going to this course. So, the objective of this course is broadly to understand the technology better. So, that you can avoid all these hypes and myths and apply blockchain as a solution at the right place where it is really needed.
• 13:00 - 13:30 So, comes the question that what is the right place well. So, let us have our journey on this course to understand that what is that right place well. So, to start with ah. the terminology which roam around across blockchain is something called a decentralization well. So, let us try to understand that what decentralization means and why I would like to apply a technology or I would like to need a like to have a stellar technology to solve the problem of decentralization.
• 13:30 - 14:00 So, to start with we will we will take a particular use case ah where blockchain is actually very much useful ah. So, the application of supply chain management ah. So, let us take an example and let us have our journey on this example to understand that what is the potential problem which are there inherently in supply chain management and why a solution like applying blockchain in a decentralized architecture ah is best for it well.
• 14:00 - 14:30 And in this process we are also going to learn also going to understand what this what decentralized truly means. So, ah let us take the supply chain architecture in a petroleum industry. So, if you look that how the petroleum industry ah work ah with different kind of products and different kind of ah
• 14:30 - 15:00 in the entire end to end path. So, it all starts with the crude purchase. So, ah purchasing the crude oil, then once the crude oil is purchased, then ah this crude oil is transported ah to certain crude storage, where it is being stored. And from the storage it is being sent to the refinery for ah refining the crude oil, after refining the crude oil you get different type of products like ah the petrol, diesel and the other subsidiary products which are which you are getting from the crude oil.
• 15:00 - 15:30 And these products are distributed to different retailers well ah. So, so that is the kind of a very simplified view of the end to end supply chain ah for petroleum industry. Now, this if you just try to look into that who are the players in this entire end to end ah petroleum supply chain.
• 15:30 - 16:00 So, let us try to look into a use case for India well. So, if you like if you if you just try to debug that this petroleum supply chain in the context of India ah. So, the entire thing comes under the ministry of petroleum and natural gas. And under that ministry there are certain players which are at the upstream direction. So, upstream direction means they are mostly in the exploration and the production of the crude oil site.
• 16:00 - 16:30 they take the crude oil and ah ah then then they produce or or say they basically explore the location where you can get the crude oil and and they ah then supply that crude oil to the corresponding storage and they are at the downstream operators or the downstream players. ah who basically refine the crude oil and then then take care of marketing different products which are basically ah extracted from the crude oil.
• 16:30 - 17:00 ah In between the upstream and the downstream operators there are different other industry bodies which are associated with this ah entire petroleum supply chain. So, if you just look into the different upstream and the downstream operators or the downstream players who are there and the different industry bodies who are who are associated with this petroleum supply chain the list is pretty large. So, if you look into the upstream ah which who who the the companies who does this exploration and production you have this ONGC, OVL, Oil India Limited ah so so so ah and and different other private enterprise and companies
• 17:00 - 17:30 So, so that way there are different players or different companies which are ah participating in this ah upstream ah supply chain of petroleum industry. In the same way in the downstream direction there are ah different refining and marketing companies. Say for example, there is Indian oil, so Indian oil who actually does the refining and produce the product and then CPCL, BRPL who takes care of the marketing.
• 17:30 - 18:00 Then Bharat Petroleum, Bharat Petroleum again they takes care of the refining, whereas NRL they takes care of the corresponding marketing. Then Reliance India, they take care of both refining and marketing. Then there is Hindustan Petroleum who takes care of refining and the MRPL they correspondingly do the marketing. So, these are the different downstream ah industry bodies which are there.
• 18:00 - 18:30 And at the same time ah there are multiple other industry bodies which are associated with this petroleum supply chain like the petroleum planning and analysis cell, the center for high technology PRCA, petro fed, oil industry safety directorate, petroleum India international and many more well. So, that way you see that if you look into the end to end petroleum supply chain management at every level there are different ah operators different bodies some of them are government some of them are private and as a consequence the entire system is very much complicated well.
• 18:30 - 19:00 So, the different companies they purchase the crude oil from different others and then take it to the market well and and there is this demand and supply requirement based on which they have to take a kind of planning of doing that entire thing and so on. Now, if you just think of that ah what makes the petroleum supply chain successful. So, there are multiple requirements. So, first of all I need to minimize the material procurement.
• 19:00 - 19:30 ah I need to maximize the manufacturing of capacity and sales, I need to meet the demand numbers, then I need to respond quickly to the market opportunity by purchasing the production shortfall from other players ah. So, that is very interesting because say for example, whenever ah one downstream company say Hindustan petroleum has a shortfall, they can possibly take it from the Indian oil well and and and can ah make the corresponding supply. So, that way ah this industry bodies they also do a kind of ah cross business among
• 19:30 - 20:00 ah then then the interesting fact here is that that the objective of each of this production unit ah which is there in this end to end supply chain ah their objective would be to maximize their individual profit individual throughput and its margin well ah. So, that way if you if you just look into the ah requirements of this kind of complete supply chain management
• 20:00 - 20:30 You will see that to have a kind of proper ah supply chain architecture all these different players need to coordinate with each other. Well, so, ah I I need a kind of strong coordination among all these players at different level of the supply chain starting from ah the production of the crude oil to its distribution, then refining, then ah marketing and finally, going to the ah ah that final retail in this entire end to end part I need need a kind of strong coordination.
• 20:30 - 21:00 So, the question comes that who is going to establish this coordination, because you know here ah you see that the basic ah architecture or basic or the fundamental ah ah structure of this entire supply chain is that I have different organizations and each organization try to maximize their profit margin.
• 21:00 - 21:30 So, everybody is sharing that common product the crude oil and then ah the products which are been produced from the crude oil well ah they are they are doing business on top of that, but everyone has their objective. So, they are the competitors of each other everyone tries to do a kind of ah ah proper manage manage a kind of proper demand supply and so on well. So, that way if I can design a kind of architecture or design a kind of platform through which they can coordinate with each other in a successful way that means, they can get the information about demand, they can understand that well this particular company or this particular organization has this much of ah ah free petrol or free diesel that I can possibly procure ah to meet my requirement.
• 21:30 - 22:00 So, if I can share such kind of information among them, then I can possibly better do a kind of management of this end the product in the end to end supply chain.
• 22:00 - 22:30 So, this is basically a kind of decentralized architecture, where you have multiple different business organization, everyone has their own governing structure, everyone has their own policy of doing the marketing, doing the business. But, at the end of the day they are basically working on a common product, working on a common marketplace. And that way if they can collaborate with each other or coordinate with each other in some way everyone might get benefited out of it.
• 22:30 - 23:00 So, this is the kind of decentralized architecture that we are talking about that I do not have a kind of central body or central coordinator who is coordinating all these different players in the supply chain well rather it is like that that in everyone is taking their own decision in an independent way rather every of the each of these organizations have their own policy of maximizing the profit doing the business and so on. they are they are in a common market place.
• 23:00 - 23:30 Now, with this kind of decentralization architecture the question comes that how do we obtain the real time information from the stakeholders. Now, here you can think of multiple different solutions, you can possibly think of that well we will have a web based portal where I will put up all the information that who has how much of crude oil, what is the current price of the crude oil, ah how much barrels of crude oil currently I have, how much barrels of petrol and diesel that have been produced and so on ah.
• 23:30 - 24:00 So, so that can be one possible solution. But here comes the problem of decentralization. So, the problem is that what is the guarantee that the information submitted to that portal is correct. So, the first problem is that who is going to manage that portal. So, as I have mentioned that in this entire business I do not have any central coordinator who is making this entire coordination or finding out an algorithm for meeting the demand and supply in the global market place well.
• 24:00 - 24:30 So, rather it is working like a complete decentralized way. Now, when it is working like a complete decentralized way ah in that space ah I I I do not ah know that or I we cannot guarantee that who is going to maintain that web portal or even if I am submitting certain information to the web portal what is the viability or what is the guarantee that information is correct who is going to validate that well I will have no way to validate it. So, that is the kind of ah my requirement
• 24:30 - 25:00 And ah another problem which may arise that what if someone denies that information later on. So, if someone may say that hey I have not submitted that information to that web portal, someone else has included me and and they have submitted that information. So, how you are going to prove that it is not that someone else has submitted the information rather you have submitted the information ah to this portal. So, this is the kind of challenges the kind of problem that we have well ah. So, we need a decentralized solution that means, ah no one trust each other, but they should cooperate with each other.
• 25:00 - 25:30 So, that is the kind of requirement which I have. So, to solve this problem blockchain is the answer. So, blockchain can specifically solve this particular problem of decentralization in this context well. So, in the next class you are going to see that how blockchain can solve this problem. But, the problem that I wanted to highlight is that because of such kind of decentralization, such kind of competition among individual stakeholders, where every stakeholders runs their own business, they have their own policy of managing the staffs.
• 25:30 - 26:00 So, the entire entire system becomes complex and you do not have any central coordinator which will say that hey this much of barrel of crude oil has been delivered to company X. So, if you have a shortcoming, if you have a shortfall then you take that additional barrels from company X. Well no one is going to provide that information to you, but if you get that information somehow
• 26:00 - 26:30 ah in a real reliable way in a realistic way ah then then that can that can help the business ah of everyone that can help the entire business platform to grow together. So, that way ah my architecture is complex I have different players who have their own objective who have their ah own policy, but at the end of the day if they can coordinate with each other they can possibly
• 26:30 - 27:00 return a better benefit not only for themselves, but for the society as a whole well. So, this is somewhere where we can ah apply blockchain and in the next class we are going to see that how we can apply blockchain in this context. So, just to summarize ah for today's class. So, what we have seen that ah we have this concept of decentralization So, decentralization basically means that I have a network of different players ah. So, this different players can be different businesses enterprises commercial establishment government or private bodies or even the individuals.
• 27:00 - 27:30 Everyone has their own interest in this ah among this players ah they want to fulfill their goal, but the interesting fact here is that they do not trust each other. Well, although they want to collectively fulfill their goal, but they do not trust each other and because they do not trust each other, so comes the problem well. And as you have seen that if they cooperate with each other, the society as a whole can get benefited well.
• 27:30 - 28:00 So, that way the basic crux behind the design of this blockchain is to have something called trustless decentralization. So, I want to have a decentralized architecture in a trustless setup. So, where the individual stakeholders do not trust with each other, but still they can coordinate and there is my answer which is blockchain.
• 28:00 - 28:30 So, that is all for this class and in the next class we are going to see that how this particular architecture is actually going to solve ah ah ah my problem of ah having this kind of trustless decentralization in the marketplace. Thanks for ah attending ah today's class ah. So, in the next class ah we are going to take it forward from here.