The world of crypto is complex and appears daunting to anyone who wants to enter it. Strong mental models can help you navigate through this world with ease. In this mental model series, I want to break down every difficult concept through analogies so that the learning sticks.
Disclaimer: I am not an expert or hold any authority in the field. But I have been reading a lot and it has taken me many months & took thousand of articles to reach to a point that I could speak about the concepts around crypto in the most simplified manner. This is my attempt to create the concept map which will speed up your understanding of the space. Some of my analogies will be a far generalized version, that it may not do complete justice to the concept. But, it will still be better to start with these fundamentals and build upon them once you create deeper understanding of the subject.
Following is my list of concepts and their related mental model:
→ Blockchain: I imagine them to be a group of indestructible blocks in space connected with each other like a time continuum. This is the eternal wisdom chain. It knows everything. There is a halo around the entire chain which protects them from any attack. They are protected by the angels (Nodes) who work 24x7 to keep the protection charm around the infinite chain. There can be many such chains in space. They are all layer 1 blockchains. E.g. Bitcoin, Ethereum, Avalanche, Terra, Deso
→ Proof of work: Remember the angels protecting the blockchain? The protection charm is archaic and you cannot break the spell sequence. So if you want the wisdom of the blockchain and wants to write your own data on them for all your next generations, it is a slow process. The demons are lurking in the dark and always looking for soft spots to wreak havoc- You may know them in modern times as the hackers. Angels therefore always have to abide by the process passed to them through generations. Every new additions to the wisdom chain is done by one angel who completes the above process the fastest and others validate the same. This is known as the ‘Proof of work’.
→ Proof of Stake: World wants to access the wisdom of the blockchain at a faster pace. Angels feel bad about being the bottleneck but the age old process is the only safe way. Until one day, a prophet introduced that they can stake all their earned ‘Karma’ to protect it instead of chanting the long spell every-time. After-all, not all angels were created equal. They were human beings who were upgraded as angels based on their earned good karma. These angels still try to earn all more good karma by protecting the sacred chain. In our world, we know the ‘karma’ as the ‘cryptocurrency’ and ‘long spells’ as the ‘computing power’ for each of these nodes (angels). One angel is assigned arbitrarily to update the wisdom chain and he stakes a portion of his ‘karma’ as a sign of his good faith. Others validate and if the created block does not adhere to all rules, angel can lose its staked ‘karma’.
→ Sybil Attack: Before we understand the Sybil attack, let’s know one rule- “Anyone who controls the wisdom chain will hold supreme power and will be the god of our realm.”
When the gods created the infinite wisdom chain which we know as Blockchains, he knew the attack from outside could still be handled, but any compromise in the internal safety through the greed for more power by the angels will take down the system forever. It will break the trust in the eternal wisdom chain forever. We will enter the chaos unforeseen. So he devised a system so that the angels do not collude to take down the wisdom chain. Or. they may also attempt to create fake identities to enter the system. System can only go down if 51% of the angels collude to make alteration in the chain. So the gods created following methods:
Any new Angel has to be verified by a minimum number of existing angels. It prevents any fake/dummy angel to enter the world.
Randomly assigned Angel will do the reference check for any new on-boarding.
There will be a fixed amount of Karma to be burned to become the angel. So there will be cost associated to join as angel and this increases the barrier to create multiple compromised Angels.
Stay tuned for the next article in the series.