Intro to Blockchain: Blockchain as Poker
This is the first of a 3 part series explaining blockchain and cryptocurrency for people new to the concept.
So you’ve heard about Bitcoin and blockchain and cryptocurrencies. You saw that they were now worth more than McDonalds or JPMorgan or Facebook, tried to read the wikipedia page, and left really confused. So…
What is this 600 billion dollar lunacy?
Let’s start with poker chips and trust.
The following is a metaphor. I’ll keep it simple, just a paragraph or two and the rest of this TL;DR is a humorous story about puppies.
The Poker Game
You play a weekly poker game with a couple friends, there are 10 of you in total. Every Saturday you go over to Kurt’s basement, put on some music, and sit down to a good old-fashioned round of Texas hold’em.
It’s a cash game, not a tournament, and keeping track of chips becomes a hassle. Bill, who is an accountant, goes out and buys all ten of you an empty 3-ring binder. You put out 1,000 poker chips, and everyone buys in for $100, at $1 a chip. Bill takes out a sheet of paper, writes down everyone’s name and that they each have 100 chips. He makes ten photocopies, and gives a copy of this page to every member of the group. It becomes the first page in everyone’s 3-ring binder.
Next week you play again. People win chips, people lose chips, it’s a good game. It’s getting late and time to go. All ten of you lay out your chips on the table, and count your chips. Everyone looks around and gives a quick thumbs up to establish consensus on how much everyone has. Bill writes down which chips went where (literally every time chips change hands) and updates everyone’s total amount of chips on a new page. Once again, he makes ten photocopies, and everyone in the group puts the new page in their binder. Each week you repeat the process, and eventually each binder has many pages, but all with the same information.
The binder of poker transactions is a shared ledger, and that is the basic concept of blockchain.
The poker chips are a currency, like Bitcoin, that is tracked in the shared ledger. Each page in that binder is a block, and the connection between each person’s binder, and each block in that binder, is the blockchain. Really it’s more of a tree. That binder means that no one can lie in our poker game. Every member of the game knows where all of the chips should be, all the way back to the first chips ever. That binder establishes shared trust as everyone has equal responsibility.
If Bill alone were to keep a single binder, like a central bank keeps records, it would be prone to someone going in and changing the numbers, say to give themselves all the chips. Blockchain is built in such a way that this can’t happen, and that is one of the reasons people are so excited about it.
You remember earlier where I said I’d keep it simple? I lied. And there are no puppies.
If you were looking for a basic understanding, stop here, you’ve got it. If you are fed up with the metaphor, leave now or I promise you will regret it.
