The Blockchain: A Secure and Trustless Decentralized Database
You could buy or sell a house without an agent; you could merge two companies without attorneys. But you probably wouldn’t want to because you’re not confident in the results, and you don’t trust the other party.
So we have come to automatically rely on intermediaries. We are so immersed in this type of thinking of middlemen that we no longer question their value. (Like fish in water, we no longer notice water. We no longer notice middlemen.)
The job of the middleman is to ensure the legitimacy of the transaction, so ideally both parties are equally represented. However, this is hardly ever the case. (And often, the main interest for the middleman is the middleman.)
Banks, counties, municipalities, judges, escrow, insurance, title companies, and courtrooms have served the purpose of authenticating transactions between parties — who owns what. However, in the age of code, businesses such as Uber, Lyft, Spotify, Venmo, Square, and Airbnb have created platforms to digitize trust between individual parties.
But middlemen themselves aren’t that trustworthy either. This is why we end up with middlemen for middlemen (e.g., insurances). Banks can go bankrupt (which we have seen), companies can lose your money, Uber can sell your customer data (or use it to target you), and even worse, intermediaries can watch and track you (from governments to Google).
We thought the internet would gives us freedom, but it didn’t because the capacity to send data grew faster than our ability to secure it. So we had to rely on digital third-parties. Then an idea to secure the internet was thought up by Satoshi Nakamoto, his idea was the blockchain, a way to bypass traditional central authorities (governments, banks, and corporations).
We rely on central authorities (intermediaries) because we don’t have all the information. Since nothing is transparent, we must do things in good faith, so we trust the central authority to make sure everything is as we think it is. However, if the transaction process is fully transparent, we don’t need intermediaries. This is what the blockchain does. Everyone has access to every transaction. (Imagine if you had access to everything the bank did or the government did?) That’s the blockchain since it’s not a person or group, it has nothing to hide. It has no secrets because it has no self-interest (nor a self). And since we all have access to the blockchain, every user of the blockchain is part of the management. Since it is decentralized and managed by its users, it is nearly incorruptible.
It’s like getting not only an iPhone for free, but also getting the patent and proprietary technology of the iPhone for free. You have trust because you know all about it and you know Apple can’t pull anything on you. And if they tried, you could now go and create your own iPhone.
There are now many crypto-assets that have used the Bitcoin code to create their own blockchains. So why is Bitcoin still the most popular? Because it’s still the best. Since it’s no longer about secrets, preference is now 100% based on performance. Trust is when there’s something to hide and you have to go with your gut. With the blockchain, there’s no need to guess. Here it is, take a look. And when you take a look, Bitcoin has the most robust system with the most developers.
In the blockchain, every transaction is timestamped. When it is verified and agreed upon by the entire network that it is safe and will not corrupt the system, it is legitimized and added to the continuous ledger.
With this level of transparency and open verification, no one can make a change that goes unnoticed. It also doesn’t allow for changes to old entries.
The system never sleeps.
Imagine for a moment a restaurant, where everything is made of glass. You can see everything, how everything is made. Not only that, all their books are open to you, where they get their food, what they paid, etc. There’s also 24 hour video footage showing you everything you missed: the food being delivered, opened, prepared. Normally we take the excellence and cleanliness of a restaurant on reputation, on reviews, government health inspectors, or how nice the decor is. Ultimate we base it on trust. But in a transparent restaurant, you don’t need trust or faith, you just know.
The blockchain doesn’t require trust since no one can control it and its open to everyone — it’s the first trustless system. Rather than confidence (con game), it relies on math and code. It just is what it is. It does nothing in the dark and it hides nothing. It doesn’t need believers, because belief relies on faith of the unknown. With something like Bitcoin, there’s no belief, just knowns.