What the Blockchain Means for You
Understanding the Basics
Been hearing all about the blockchain lately, but have no idea what it is? You’re not alone. I can’t tell you how many people ask me to explain it. I usually dumb it down with something like, “Imagine wearing a sweater and then accidentally cutting one of the stiches. The sweater would fall apart.” The answer isn’t really that complicated. There are countless ways the blockchain will improve your life, so it’s time to learn the basics. The blockchain has nothing to do with The Chainsmokers, nor is it a psychadelic spinoff of Burning Man. It’s just a new and immutable way to store data that’s pretty much tamper proof.
Let’s start by looking at the way you bank, for example. Right now, you store your hard-earned income with a bank that you trust because most people trust them too. They have some/most/all of your money and you get to see it all online every time you look. Login and there it is. Trust is a big deal. Especially when it comes to someone holding your life savings.
So how do these big banks store your data? Do you even know? On their servers, of course. Your bank is storing all of your data and records on servers that they manage. No one else is doing it. Banking systems store account information in databases such as Oracle, and databases are maintained and administered by database administrators. They’ll silo your bank data in multiple locations, meaning split up your information, and then put it all together for you each time you login to view it. Your 2018 records could be in Ohio. Your 2017 records, in Kansas. They limit access to the database by implementing access controls and they’ll audit if things don’t add up. Granted, banks take great security measures and I’m simplifying their processes, but stay with me for a moment. What if someone could hack into their servers and change your bank balance from $100,000 to $10.00? Now we all know that hackers can do anything and user data gets compromised often, even with some of the biggest companies. If you need a reminder, check out this list of the world’s biggest data breaches. Equifax. Twitter. Target. Ebay. Ashley Madison. The list goes on and on. Does this make you feel good about storing data about your life savings on your bank’s servers? Um, no.
That’s where the blockchain comes in. Originally conceived by a person or group of people who go by the pseudonym, Satoshi Nakamoto, it was developed to support transactions for the cryptocurrency, Bitcoin. But today, it’s widely used for many other transactions. Here’s how it works:
Imagine that you want to pay someone, and for all intents and purposes you’re paying them with a cryptocurrency. We can say you’re paying with Bitcoin for now, because chances are, you’re not as familiar with other popular cryptocurrencies like Ethereum and Ripple. (For the record, one Bitcoin is worth about US $7,600 at the time I’m writing this, so you better be buying a new watch. I digress.) So you’re buying this new watch and you pay someone one Bitcoin for the watch using your digital wallet that only you control. Guess what happens next? It’s as if thousands of cameras online have just taken a picture of this transaction at the same time and are all storing that picture of your transaction on a network of thousands of computers around the world. If you pay again five minutes later and send another Bitcoin to buy another watch, the same thing happens. Information held on the blockchain exists as a shared and perpetually updated database. Your data isn’t stored on one single server with one backup server, and your transactions are easily verifiable. So a hacker can’t change computer number 765 with your stored data, because it exists on thousands of other computers on the network simultaneously.
The blockchain exists in a constant state of auditing. In fact, it self-audits every 10 minutes. Each group of these transactions is known as a block. Trying to change it would be like trying to override thousands of computers at the same time and all of the data captured previously. Computers that already have a record of what the data has looked like every 10 minutes of every day.
This is a great way of protecting your bank balance. But think about all of the other possibilities. Digital voting. Medical record keeping. Weapons tracking. Credit scoring. Identification protection. It eliminates issues surrounding data integrity altogether and would instantly tell you how your Facebook e-mail address wound up in the hands of Cambridge Analytica. It couldn’t be a better time to be using the blockchain, and at the risk of promoting a social media platform that I’m a part of, we’re moving full speed ahead to release a blockchain-based version of Blinked shortly.
So now the world is up in arms because this shift in data storage frees people up from needing their banks as much. People are starting to become their own banks. If you think about it, we’ve been working with cryptocurrency for years. As my brother likes to point out, when was the last time you went to your local Chase and pulled out $10,000 in cash? You wire it. You use PayPal. You use Venmo. You transfer funds with Zelle. You bank online. You call for bank balances. You speak to operators who answer questions. You’re almost never physically touching your cash. It’s virtual funny money and has been for the last decade. Digitalization has made the entire process a lot easier for banks. Except you’re still paying hefty bank fees. You might even be paying more than before.
There’s a reason the blockchain makes people nervous. Especially people who run large institutions because they’re losing control. But understand that it’s really just a shift in control.
Julie Benlevi-Little is the CEO and Co-Founder of Blinked, a new blockchain-based social media platform for recommendations that enables users to share in up to 90 percent of advertising revenue. She’s been featured in The New York Times, Crains New York, The Wall Street Journal and has been a guest speaker at Google, E-Bay, Microsoft and NYU’s Stern School of Business.