There used to be a time in history where people treated shells the way we treat paper money and coins now. Back then, shells represented a bargaining chip in many parts of Africa and the East India Islands. Shells were seen as very valuable. Nowadays we just walk on them whenever we go to the beach.
Somewhere during our history, we decided to transfer the value from one item to the next. Not once but many times. We changed from livestock and grain to shekels, gold, and silver. I really want to paint a picture inside your head about people walking up to you with 10 cows and 1 goat to buy your house. It may seem crazy now but there used to be a time where this was the norm. However, the norms changed as time went on and what once seemed like a good idea has become the joke of the night. To even think we’re at the end of currency changes would be a claim of willful ignorance. There are flaws in every system, that’s why we humans continuously work to improve everything. There’s a flaw in our current system, so humans will improve it.
In my lifetime I was fortunate to experience the introduction of the Euro into the European Union. It consisted of a three-stage preparatory period which spans from 1990 to 1999 before finally being introduced in 2002. The introduction of euro banknotes and coins was the largest-ever currency changeover. That’s a whopping 12 years to change from one set of coins and papers to another. Changing the value of anything takes a lot of time and a lot of preparation.
The integration of the blockchain into our society will take the same route any other major change took, but it will change.
So what is it?
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.” Don & Alex Tapscott, authors Blockchain Revolution (2016)
Well, that’s about it! Get it? Great, let’s move on to the next part…said no one ever.
The blockchain is an expanding list of records, called blocks, which are linked and secured using cryptography.
Cryptography you say? Yes, cryptography.
Cryptography is the magic art of writing or solving codes. It’s a way of storing and transmitting data in a particular form so that only those whom it is intended can read and process it.
You can compare it to sending an envelope inside a box with a lock on it. While your envelope travels from one place to the next you hope that during the journey no one figures out the code. This so only the intended receiver, who does have the code, gets to peek inside. The more difficult the code is, the harder it will be for other people to see what’s inside. It’s no secret that when you’re sending something valuable you want the envelope to be as secure as possible. I wouldn’t want to be the one arguing that it would be better to have an easy code when you’re sending something valuable. Unless of course, you’re tactic is trying to hide something valuable in plain sight. In that case, make the password 12345. No, what we want is something so strong that not even the NSA would know what to do with it.
Each block inside the blockchain usually contains a cryptographic hash of a timestamp, the previous block, and transaction data. To rephrase that in human language, imagine building a large building made out of blocks like the picture below.
The building represents a large ledger (similar to a logbook) of each and every transaction made on the blockchain. The ledger, in this case, is decentralized and distributed. Data is stored across a global network of computers with the intention to dismantle the need for a central authority who owns or controls it.
This is a huge difference between how things are working today. If you want to send money to someone you most likely make use of a third party (central authority) like the bank, Paypal or any other wire transfer service. They verified the person on the other side which means you only need to trust the third party. For this and other elements, you pay them a fee and your money is on its way. This is a beyond simplified explanation but you probably get the gist of it.
With the blockchain, you essentially remove the need for a third party. The trust is built onto the blockchain by it being stored across a global network of computers. The computers solve a very difficult math problem wherein they verify each transaction inside of a block. Once enough computers agree, the block gets created and stored inside the ever-growing blockchain. You trust the code and all the blue builders from the picture above (which are called miners or stakers) to help create and verify each block.
Congratulation! You’ve made it through 600 words and are now a little bit more informed about the blockchain. Time for me to do some more digging for the next part about the blockchain bein open source.