What People Neglect To Tell You About Blockchain
An introductory guide the average person can understand
Blockchain is one of the most revolutionary technologies of the last century and you need to understand it. It’s something employers will want you to know and understand, helping you climb the corporate ladder a little faster. People often throw around confusing jargon when trying to explain it, but it’s quite easy to understand and it makes perfect sense if explained right. I will break down in simple terms; what it is, how it’s used, and why it’s so important.
Put simply, It’s a decentralized distributed ledger.
Uhh, What does that mean?
Basically, there are a bunch of computers and servers that are connected across the world, these servers and computers talk to each other and make an account of every transaction in order to provide trust, safety and assurance. Because all of these computers have a copy of every transaction that took place, if information is changed on one computer (node) all the other computers know that this change is not accurate and does not belong. Blockchain is a consensus mechanism that does not exist in a single location, rather it exists in many locations. Most importantly, it is not controlled by a single entity which makes it decentralized and safe. Originally, all information would be held in one central location and from there that central location would send information to all other parties. The problem with this is that it’s susceptible to fraud and hacking.
When you hear of cryptocurrency mining all that means is that individuals provide the use of their graphics cards on their computer for the blockchain. Basically, their computer is a node on the blockchain that is used to solve equations in order for a transaction to take place on the blockchain. In return the miners receive payment for the use of their computing power. There are both public and private blockchains. An example of a public blockchain is the one used for Bitcoin while a private blockchain is one where all parties are known. For example, a bank would use a private blockchain where it set up a bunch of computers and servers from its many branches that talk to each other.
Congratulations now you know what Blockchain is.
How it’s used:
Blockchain was originally made for Bitcoin, the digital currency created by Satoshi Nakamoto, an anonymous person with a made up name that no one has ever met face to face. Blockchain is the technology that makes Bitcoin possible. It allows bitcoin to work by providing a safe and secure network that eliminates the possibility of hackers and double spending. Double spending is exactly what it sounds like, spending multiple times on one transaction. Because blockchain is a distributed ledger which makes an account of every transaction, it can tell if a transaction took place more than once and will correct itself or not occur at all because it already exists. If it wasn’t for blockchain, Bitcoin would not be possible. Bitcoin was the first use of blockchain, until people started to realize that you can use this technology in many other ways. For example, Banks and other businesses can use blockchain to reduce transaction costs and improve logistics. Banks can use blockchain to provide easy and quick settlement of funds. The idea was to make instantaneous settlement of funds when transferring them. For example, when a bank sends money overseas, it takes about 3–5 days for the payment to settle, with blockchain it can be instantaneous. There are a multitude of ways the technology can be used these are just a few examples.
Why is it so important:
Blockchain has provided an inherent trust when making a transaction. It gives the power back to the people while simultaneously removing that power from financial intermediaries (banks) who used to be a required third party when making transactions. A door to the world of transparency has opened and it can change the way our financial system is run. Blockchain eliminates big fees and saves time with settlement. Blockchain created a peer to peer revolution where people can buy and sell on virtual platforms without the need for third parties. you will start to see many applications that allow individuals to take advantage of this technology allowing individuals and financial institutions to save money.
