BLOCKCHAIN AND DISTRIBUTED LEDGERS

This textbook focuses on distributed ledger technology (DLT) and its potential impact on society at large. The book aims to offer a detailed and self-contained introduction to the founding principles behind DLT accessible to a well-educated but not necessarily mathematically-oriented audience. DLT, which became extremely popular over the last decade, allows solving many complicated problems arising in economics, banking, and finance, industry, trade, and other fields. DLT accomplishes these tasks by developing new mechanisms for distributed consensus, using advanced tools from cryptography, game theory, economics, finance, scientific computing, and others. DLT offers optimal and elegant solutions in many situations. However, to reap the ultimate benefits, one has to overcome some of its inherent limitations and use it judiciously. Not surprisingly, amid increasing applications of DLT, misconceptions are formed over its use, not least because numerous authors identify it with cryptocurrencies such as Bitcoin, Ethereum, Ripple, and their numerous extensions. This situation calls for an impartial assessment of the situation rooted in scientific reasoning, rather than speculation, enthusiastic naivete and personal attacks on one's opponents.Blockchain and Distributed Ledgers: Mathematics, Technology, and Economics offers a detailed and self-contained introduction to DLT, blockchains, and cryptocurrencies. The book guides the reader through the development and building up of a distributed ledger suitable for one's interest. It covers the basics of cryptography and its applications to cryptocurrencies; provides historical examples of centralized cryptocurrencies; discusses theoretical foundations of decentralized cryptocurrencies, including game theory aspects and Byzantine fault-tolerant consensus; explains operational features of Bitcoin trading platform, including storage, mining, and wallets; covers alternative platforms, including Ethereum, Ripple, Stellar, Zcash, and others; defines smart contracts; covers potential financial and non-financial applications of decentralized ledgers with a detailed analysis of their pros and cons. This introductory text seeks to equip the reader with an ability to participate in the crypto economy meaningfully.