Blockchain 101 for dummies
When most people think of the term blockchain automatically Bitcoin pops into their head. And to be honest Bitcoin has not had the most rosy past and has been associated with a lot of illegal activities or plain misunderstandings. Most people just think of it like “magic internet money”.
But the technology behind all this is blockchain and that is probably one of the most important technological evolutions to come about since the internet. Blockchain powers Bitcoin and vice versa. The original purpose was a trustless currency launched as a reaction on the crisis of 2008. This has now evolved into only just one application of this powerful technology.
To start explaining blockchain for dummies step by step you must think of it as:
- a public spreadsheet in the cloud that can be programmed to record and track anything of value
- once a transaction occurs, a record is created and is validated globally by computers participating in the network
- when the transaction is validated, the record is permanent and immutable
- the owner of the transaction has the power to move anything of value freely and instantly without borders or intermediaries
Some examples that can apply to Blockchain are financial transactions, logistics, medical records, or even land titles.
So what exactly is special about blockchain technology when there are already current processes in place?
One of the best videos explaining blockchain I have come across was made by Anders Brownworth and the main benefits are listed below that as well. And of course there is always the topic of wikipedia on blockchain. And if that was not enough you can start digging into the two volumes of Andreas Antonopoulos called the internet of money. Part 1 and part 2 give you a collection of talks about why bitcoin and open blockchains matter, for everyone. And if that was still not enough then you can dig into the more technical aspects with his book Mastering Bitcoin. There are also a big amount of youtube videos under the name @aantonop
so keep on reading this small blockchain tutorial!
let’s breakdown why blockchain will revolutionize the way we interact with each other:
- Blockchain stores information in batches, called blocks that are all chained together in a continuous line.
- If a person makes a change to the information then that block isn’t altered or rewritten.
- Instead a new block is created to store that information displaying that a new change has been made at a specific date and time.
- Blockchain is the evolution of the centuries old “general financial ledger”. Essentially blockchain is a non-destructive way to track data changes over time.
For example, let’s say there is a dispute between two people on who owns a piece of land, blockchain can identify through it’s immutable ledger who exactly owned that property and to whom it has been transferred to over time.
Rather than keeping records in an age-old book or a single file system database, we come to one of the most important aspects of blockchain.
- It is is designed to be decentralized and is distributed across a large network of computers.
- Since the information stored on the blockchain is decentralized, this reduces the ability to tamper any data significantly.
- This decentralized model creates a unique characteristic that humanizes technology, it creates trust in the data.
- Before a new block is added on the chain, there is a procedure that has to happen.
- First, a cryptographic puzzle must be solved which creates the block.
- Whichever computer solves the cryptographic puzzle, it shares the solution to all the other computers on the network, in other words, “proof-of-work.”
- The entire network of computers will verify this proof-of-work that the original computer solved, and if correct, the block will be added to the chain.
- The combination of these complex math puzzles and the verification from other computers on the network ensures, above all, that we can trust every block on the chain.
This phenomenon allows the network to confirm, validate, and build trust with each transaction. As such the user can simply interact with the data that has already been fully insured. This is one of the most important features of blockchain technology and how it transfers total power to the user.
No more intermediaries:
Typically when you facilitate a transaction between two parties there is a middleman such as a bank or a lawyer to view records and keep the information confidential. As such These intermediaries act as the trust between the parties and are responsible to verify, for instance, Person A is the rightful owner of a specific property.
This method limits risk but adds another step into verifying a transaction which means more time and money is spent. For example, If land titles were stored in a blockchain then there would be no need for middle-men. Since all the information stored in a blockchain has been verified to be true and can’t be tampered with, the data is secured.
This type of trusted peer-to-peer interaction with our data can revolutionise the way we access, verify, and, in short, transact with one another.
Blockchain isn’t a single network. It’s a type of technology that can be implemented in various ways with many different applications. When you spend more time thinking on real-world use cases that Blockchain is applicable for, you will begin to realise the technology can disrupt multi-trillion dollar industries. Blockchain as of today is disrupting the monetary system, financial markets, and democratising venture capital via its first killer application, cryptocurrency.
The common person now has the opportunity to invest into the newest technologies that were previously only available to private institutions or the very rich. Blockchain has forced banking to rethink its current practices as it has enabled the individual to act as its own bank. This allows everyone to move cryptocurrency freely without any intermediaries or borders. The cryptomarket is projected to be worth multi-trillions. As you can see, in conclusion, the underlying theme of decentralisation is the transferring of power from institutions to the individual.
“Down the road, you won’t have to physically leave a place to choose a better government. From wherever I am, I can get social security from Chile, healthcare insurance from Canada, education from Russia. The whole system will be much more virtual.” — Draper (via Cointelegraph)