“Fast and furious” blockchain explanation
Following I will explain in a fast & furious way how blockchain could affect to all of us using bitcoin as example (the most known blockchain use case).
- Currencies solve a big human being problem, how to make two persons trust one each other to make an economic transaction.
- To make this transaction they use money, and this money is issue by a bank.
- From this moment, (the bank issue money), the trust is guarantee by the bank, a third party, an intermediate. Today we work in this way, banks manage transactions and money issue.
- Banks works as a “monopolistic” organizations, nobody can use other money than the one issued by banks.
- To trust in banks they do two things: control counterfeit money and store money (treasure)
- We always have needed banks to control all the transactions between people and the above mentioned activities.
- The “technology” used by banks is called ledger
- In some way, banks are like primitive computing centers, they store all the transactions in a large ledger
- Blockchain comes to change this model, going forward from a central ledger to a distributed ledger
- Blockchain network (bitcoin in this explanation) is composed by nodes, these nodes are not a company property, instead are nodes managed by anonymous people.
- Every node in this distributed ledger contains a copy of the ledger, these copies store the same information in the same format; a set of rows with different columns indicating inputs and outputs.
- Blockchain groups rows (transactions) in blocks.
- In order to guarantee the immutability of each block, each one of these blocks is “chained” to the previous one, and all the blocks are hashed using cypher techniques.
- This guarantee if someone wants to change something in the first block, the rest of the blocks will become not valid and nobody in the distributed network would validate the chain of blocks.
- In a blockchain can be a lot of blocks processed by the nodes, the valid and legitimate block must accomplish three rules: must be the one that compose the longer chain of blocks, accomplish the blockchain network rules and it must be validated by 50% plus one nodes of the network.
- Turning back to the first point, blockchain permit two persons to trust one each other to make a transaction without intermediaries (banks).
- Combining all this capabilities, blockchain could disrupt not just only banks but also notaries and other centralized organizations.
- This imply nobody (politicians, banks, lobbies, etc) by coercive ways intermediate between two people doing transactions.