The cryptographic online recordkeeping system known as blockchain, originally invented by the person (or group of people) known by the pseudonym Satoshi Nakamoto, has quickly revolutionized the nature of online currency transference (especially regarding Bitcoin). As its uses continue to grow, however, it’s becoming increasingly important that everyone in the tech industry understands just what blockchain is. Therefore, we’ve developed a handy introduction. Read on to discover the nature of blockchain systems, and just how they’re revolutionizing the online landscape.
The Basics of Blockchain
Let’s start with an analogy: when you are working on a collaborative project with an individual or a group, such as a Word document or a presentation, what is the best way to share it? If you save the document on your computer, then send it to someone else for them to make edits, any changes you make after you send it will not be visible to them, and you will not see their changes until they save it and send it back to you. This is extremely inefficient in terms of both time and effort. Shared documents via cloud servers capitalized on this problem; if you share something via Google Docs, for example, you and your colleagues can make simultaneous edits, and it is continually shared and updated in real time, eliminating the need for constant saving and re-sending of documents.
Surprisingly, however, many business and technological systems in the world still operate in a similar way to the old save-send-edit-return process that is so inefficient. For example, every time you make a transaction with a business, the business has a shared ledger with you via your credit card, another ledger with the credit card company for the use of their service, and another with your bank account to actually charge you for the transaction. Similarly, when banks lend and transact with each other, they will operate on two separate ledgers, which leaves room for miscommunications and discrepancies between the two. Even in something like a Venmo transaction, which seems so high-tech and seamless, think about the different contracts being used – you have a ledger with Venmo, Venmo has one with your bank, Venmo has an internal ledger between its users to transfer balances, and another with the person you are transacting with! Wouldn’t everything be easier with the Google-Doc type scenario, where people can just securely transfer money and information between each other without an intermediary?
The Brilliance of Blockchain
This is where blockchain comes in. It is a continually updated and shared database for all sorts of information: financial contracts, titles and records, legal documents–the sky is the limit. There is no central authority that oversees everything, so there are no transaction fees for transferring between users. It operates as one network, and all the information within it is owned and implemented by the users. However, it is important to underscore that the information is still quite secure. Every transaction in the blockchain is continually verified and encrypted, so only the relevant users can access it. Each transaction becomes part of the network itself, so you can’t simply go in and edit one line of code to hack or corrupt something. Rather, you would need to take down the entire network – which represents the power of millions of computers – to be able to tamper with any of the data. This makes data in the blockchain extremely secure and verifiable.
The overarching idea is a system that is secure, efficient, public, incorruptible, and free from any outside authority or governance that can restrict or tamper with it. Using a system like this necessitates using a currency that has the same properties – something you can’t manipulate and that isn’t tied to an outside entity. That is why transactions on blockchain are often done in cryptocurrencies, such as Bitcoin; these are not centralized by any bank or country, so they are not tied to any authority other than the network and the code behind them.
The future ramifications of this technology are extremely far-reaching, from the streamlining of every type of transaction to the secure sharing and storage of all information. It could potentially revolutionize the way business is done, the way people interact, and how we consume goods.