So, we've talked about this many times. But now, we're going to boil it down to how the custody responsibility and control is really on a continuum. We talked about how when you eliminate third parties, you become your own third-party. You become responsible. So, it's all pushed out to the end-user and the ledger is immutable. But the responsibility for managing that private key which is the ultimate thing that allows you to change the ownership of your cryptocurrencies, that's the thing you have to be responsible for now. So, it's pushed out to the end-user. So, the way traditional financial institutions maintain custody is on behalf of their customers. The old model customers relinquishing control of all that to the financial institutions, well, we're reversing that. That's what we talked about. So, essentially, owning cryptocurrency is synonymous with having custody. Therefore, in the pure Bitcoin model or thinking about it in the context of Bitcoin specifically, you have 100 percent responsibility and control. That's the essence of cryptocurrencies and blockchain, is that you have 100 percent responsibility and control. Now, we talk about it being a continuum because you can again be on some spot on there, on one end being the traditional model and the new end being 100 percent responsibility and control. You don't have to be there. You can actually choose to be in between. So, the biggest thing here with blockchains and cryptocurrencies is you now have a choice. We only had a one-choice world before. You actually have a choice now about how you want to do it. So, actually, if you don't like having 100 percent custody and responsibility, you can choose other models rather. It's like some third party platforms that are more akin to your third party financial institutions if that's what you like and that's what makes you comfortable, you can choose that. They are not required. You're not require to. But the essence of it is that there is this continuum. So, on the left, there's no third parties, and therefore you have 100 percent control. You have 100 percent control, then you have 100 percent custody responsibility. It means then, you have also to be 100 percent. Responsible. Responsible for the security of it. So, custody, responsibility, control, and security, all of those are one and the same thing. Again, you can be anywhere on the spectrum and it doesn't have to be all or nothing either. You may have one instance where you are on that left-hand point of the spectrum and you may have another instance where on the right-hand side. So, your your entire, let's say, blockchain, cryptocurrency landscape, you can have multiple points that fall along that. If that makes sense. You don't have to be all in one. You might actually have a particular, say, bitcoin for instance, you might hold it where you have it in a while, you control the private keys. There might be another thing that you have that you actually are managing risk because you think it's actually works better to have it in a third party on the other end of the spectrum. So, you could be all over the place. I always like to apply these things to simple things where, when you think about the Great Depression and our grandparents, that they were hiding money in peanut butter jars in their house and deciding how much money they kept themselves that they knew that they couldn't lose because the financial institutions have lost it, and how much money they decided to spread amongst different institutions at that time because they got harmed so much. That's perfect analogy. Exactly. So, figuring out how you can spread your risk, right? As the accountant working with a client, really talking through that of how do you spread your risk and we have a module that we'll be talking more about that of giving you suggestions of how to have those conversations. Yes, it's a very, very risk-based thing because there's a new realm of risk here that has to be managed. So, again, just some other points around the spectrum here is that, we talk about there being a choice. So, for instance, most exchanges where you would buy and sell cryptocurrency are centralized exchanges, ironically enough in this decentralized world. So, those are going to be closer to the end of the spectrum with a third party financial institution. So, true custody on the left-hand side is one place you can be and that only happens again when the owner controls the private key. So, this is what we're talking about here. We showed the spectrum, this, before and now, we're saying we talked about where there can be choices. So again, there's these different platforms or software and so forth and all those things that you use are going to fall along the spectrum we we're just showing. Here's a couple of points. So, for instance, decentralized exchange, closer to the being more like a traditional bank that we know. A permissioned blockchain. Well, it doesn't have all the attributes that Bitcoin blockchain does, but it may have some, so it falls in the middle of the spectrum somewhere. So, just talking about this in summary. The main takeaways here are the four core components: the ledger, the peer-to-peer network, the consensus mechanism, and the incentive mechanism. Cryptography and encryption, the science of secret communication is the math piece that makes all of the things work especially with the consensus mechanism. Public key cryptography, that's the asymmetric cryptography that allows for the secure messaging on a scaleable nature. The push versus pull paradigm that we talked about if there's a top five things you should know, that's one of the things that you should get as a takeaway overall and everything that you study in the cryptocurrency and blockchain. The custody responsibility and control, and that's important because again, in this model, you have the responsibility shifted to the end-user and when that's the case, you have to step up the standard of care and how you manage assets in that case. Yes. So, these are some use cases in current day. I don't know if you want to talk about some of these things, but centralized databases are giant attack silos of personal information. So, going back to talking about how all of our credit card information can get hacked and credit card fraud and how much money is spent on those types of things. Blockchain technology really eliminates this attack by using a distributed network. Yes, if you think about it. So, you have these giant attack silos. So, let's just say for instance and this does take the USA had the same. So, Target, Home Depot, TJ Maxx, all these big box stores, they had the same 50 million customers or whatever it is. So, each of those stores redundantly, the same information over and over again. So, it's bad enough to have one attacked silo. But to have it be duplicated over and over again, each big box having its own same version that the other big box has, and you have all these giant attack silos and in this case, you don't even need to have it. Yes. You don't even need to have that information anymore because the need to store the information is eliminated with blockchain technology. Yes, and that is a key thing where it's not just one credit card account that someone can go try to get and be able to take over your whole financial history and harm you financially. So, this really helped with that. Another big piece of this that we've talked about before is that this gives you a secure ledger providing one version of the truth. We started out today's module talking about that, but it can be used to transfer value, payments, securities, intellectual properties, manage escrows, contracts, and supply chains, or even health care records. When you think about not having control of all that, we've got a whole module. We'll be talking about those things as well. Yes, it's financial and non-financial, and in many cases, the non-financial is as important or more important than the financial aspect. Then, the immutability value of the blockchain technology, specifically Bitcoin as the standard, that's why we've used it as an example today, will change the way everything gets audited. We're moving into a realm of self-attestation even though auditors still have to gain comfort around the technology. So, this is a really important thing anyways because even without this, audit has really transformed a lot to needing to understand technology as we've moved to the cloud and all these other technologies out there. So, this is really just taking it to that next step of being comfortable with the controls and security people put around the technology they choose to use, whether it's permissionless, permissioned, how they're securing their assets, and so forth. Right. Well said. So, we're going to have you actually create hashing yourself and use the hashing told to demonstrate the change to an input that results in a different hash. That way, it will be more visual for you of how this works. So, for this demonstration, we show you three blocks in a sequential blockchain and assume that all these blocks have been mined and committed to the blockchain. So, the components of each block that are important to the demonstration is the data entered into the blocks, the previous block's hash, and the currents block hash. Right. So, this is a very simple app that demonstrates many of the things that we've been talking about. So, we talked about how you got one hash that ties into the current block's hash, ties into the previous hash, and so forth. We said that if you change even one character in a input value, it changes the hash, or whether it's the, remember the 600-page manuscript or just the word ice cream, right? Whether or not you capitalize the word ice cream, so it could be ice cream and capitalize that. So, you can go to the website here, and then you can either copy the information that's there. You can just simply, basically take one phrase and put it in block one and then you can just capitalize just even change one character on block two, and maybe even change the second character when you put it in block three. So, you put your input information in each of the three blocks, and again, just changing as little as one character. If you feel like changing more characters, you can do that. But you only need to have one character difference even if it's capitalization. Then you click the little blue mine button on each of those and when it mines, it actually produces a hash and then all of the blocks will turn green. So, I want you guys to go ahead and do the mining exercise, click mine on each of those, and then what the exercises after that is I'm just going to change one character in each of those. As you change each character, you'll find out that the block turns from green to red. It shows that the hashing no longer matches up, even if you just change the one character. Now, sometimes, this app is a little bit quirky and the hashes may not change exactly, but the point is, when it turns red, that's the equivalent of the hash changing and that's the part of the exercise that you want to focus on. We'll be right back.
