The next revolutionary thing after Internet: Blockchain.
On a rainy day, I was browsing YouTube and I found a TED talk on this translucent concept of so-called Blockchain on it. After watching that video, my mind was blown. After that, I did reading on blockchain for 2 whole months, Here are some of my findings on the concept Blockchain the public ledger.
So the question arises, what is a Blockchain?
In a layperson’s language a blockchain is a big RED register which has unlimited pages and there are some properties of this register (or ledger) it is immutable (which cannot be changed) and it is public (anyone can read this ledger). That means if you make some bawdy picture on this ledger, which is public, your mother can probably see this picture and you are in big trouble. In Computer Science languages these sort of things is called Data Structures, which are the ways to read, write and store data. The blockchain contains two words block and chain, these two words have their own meanings. Each page of this ledger is called a Block and the glue which is used to bind these pages together is called Chain. Let me take an example to explain it further.
A school teacher decides to take his students to the movie, the problem was he didn’t know how many students will be coming to the movie so he was not able to buy the tickets in a single row. So he only bought one ticket and remembered the seat number, when the first student came he gave him that first ticket, after that another student came he bought another ticket and wrote the seat number of the previous ticket at the back of the new ticket and remembered the ticket number of the new ticket and continued this process until all the students came.
When the movie ended teacher went to the seat number he remembered last, which was of the last student who arrived. At that seat, he told the student sitting there to go to the seat number which is written at the back of his ticket and tell the student the same thing which teacher said to him and meet the teacher at the exit door, do this until there is no number is written at the back of the ticket. Like this, he was able to link all the tickets or chain them together.
In similar fashion, the blocks of the blockchain are linked together. Each new block contains the hash of the previous block which is called the parent block. The block which does not have any parent block is called a genesis block or the first block [etymologically speaking genesis word came from a Greek root genos which means to give birth]
So what can we do with this ledger?
We can use this ledger to write transactions (which is only one of its use cases) but let me specify this, Blockchain is not BITCOIN, blockchain is the technology behind bitcoin, let me take an example to clarify blockchain. Imagine you are in a kitty party you have a bunch of friends, you guys go out once a month have nice drinks and dinner and deposit some money, you draw a chit, in which a name is written from this group. All this money which you people deposit will be given to this friend as there is no ruling party in this scene you all trust each other, in another term, this is called Consensus. You all agreed that you will be giving your money to your friend this month. In the same way, the blockchain operates. When you send money to someone, it is recorded on this ledger, each note which has the ledger agrees that the transaction is correct or not and no one can change this if it is written.
Let me tell you a story to make this concept more concrete, there are 5 people in this story-
Ace who is an owner of a small café.
Alice who runs an online shopping store.
Bob who is a web developer.
Tom who owns a wholesale store for clothes.
Tech who owns a delivery service.
So one day Ace who has a café thought he wants some black t-shirts for his store, went to Alice’s website to buy the t-shirts, he checkout, and paid with bitcoin. Let us assume that Ace has 2 bitcoins in his account. Ace bought 12 t-shirts for 1 bitcoin. By doing that he wrote in the ledger something like this.
Ace paid Alice with 1 bitcoin.
Now Alice has 1 bitcoins in her account assuming that she had non-before this transaction. A transaction is another data structure (a way of representing data) which has some fields INPUTS and OUTPUTS
A bitcoin transaction Inputs is where the money came from and output is where the money is going. In the above diagram, we see something confusing why is Ace paying himself 1 bitcoin? answer to that is, bitcoins are like gold bars, if you have a gold bar of 10 grams and you have to give someone 5 grams of it you will go to a store give the goldsmith a 10 gm gold bar and tell him to forge 2 five grams bars, one you will give to other guy and you will keep one for yourself. Similarly, bitcoin works like that, Ace broke 2 bitcoins into two parts one he paid to Alice and one he kept for himself.
Back to our story as our website owner Alice has an order for 12 t-shirts and has received her payment almost instantly note that no one owns bitcoin blockchain. Unlike other banking services, this public ledger is not owned by anyone so there is no middleman who takes chargers. After receiving the order Alice goes to Tom’s shop(Tom is an owner of wholesale cloth shop) orders t-shirts which cost her 0.5 bitcoins she again breaks her 1 bitcoin into 2 parts of 0.5–0.5 one she sends to Tom and one she keeps for herself. For security purposes every transaction which takes place on a ledger is signed by the sender, in this case, Alice will sign this transaction(remember transaction is a data structure) with her signature which proves that really Alice has inserted this transaction on the ledger. If there was no signature anyone can create something malicious/fraud statement on the ledger under someone’s else name. This signature is like the signature we do on our bank checks, only the owner or the account can sign it and everyone else verifies if that statement is correct or not. In technical terms, this is called a Digital Signature.
Ace paid Alice with 1 bitcoin and 1 to himself. (digitally signed by ace)
Alice paid Bob with 0.5 bitcoin and 0.5 to herself. (digitally signed by Alice)
So Alice digitally signs her transaction sends money to Bob, Bob gives Alice her goods. Easy right?
Now Alice wants to get her goods delivered to Ace she calls Tech(the delivery person) and talks to him apparently tech only takes cash. Alice goes to an online website where she can find people who are trading bitcoin for fiat currency. Alice finds a match his name is Bob(who is a web developer) Alice find the rate of the bitcoin say 1 bitcoin = 1000$(currently it is over 6k) Alice sends Bob 0.2 bitcoin and Bob send 200$ in Alice’s bank account.
Ace paid Alice with 1 bitcoin and 1 to himself. (digitally signed by ace)
Alice paid Tom with 0.5 bitcoin and 0.5 to herself. (digitally signed by Alice).
Alice paid bob with 0.2 bitcoin and 0.3 to herself. (digitally signed by Alice).
Note that Alice has a bitcoin worth 0.5 she broke that bitcoin into 2 parts of cost 0.2 and 0.3. As Alice now has 200$ hard cash she sends 20$ and t-shirts to Teach for delivery. Teach delivers the goods back to Ace and everyone is happy.
So why is this concept of the public ledger better than the traditional banking systems?
Well for starters we will not have to rely on any third party to transfer money from one country to another which is a cumbersome process.
As there is no middle man there are no huge transaction fees for sending funds
what more can we do with this ledger apart from money transfer?
- we can create a ledger to run code (Ethereum blockchain) in this ledger instead of a transaction we insert code!! Cool right?
- a ledger for authentic gemstones
- a ledger for trading electricity
The blockchain is going the change this world like the internet in these 20 years. People get scared from the cryptocurrencies and blockchain concepts because these things are new to them same like internet many countries banned it. But as we can see now the Internet has completely changed the world, we are so dependent on the internet that it is so hard to live without it. In my view, the blockchain will be doing the same. There is still a lot in blockchain which I will be describing in the future posts.