Nudge Post: Blockchain explained
The purpose of this paper is to explain Blockchain in simple terms because it is commonly difficult to understand and considered a complex technology. Unfortunately, most people have never been able to understand Blockchain or fully grasp the extent of its potential. Its technology enables a more private, equal, legitimate and convenient way to integrate many existing technologies and many facets of society. I will do my best to explain the power of Blockchain in the most simple terms possible.
So what exactly is a Blockchain? How do they work? What problems do they solve?
The way Blockchain stores data is revolutionary. Batches of Blocks are linked together chronologically to form a continuous line, hence “chain”. If change is made within a Blockchain, instead of editing already existing blocks, change is made within an new block, stating that X changed to Y at a particular time. This is a non-destructive way to track data changes over time with full transparency. There is always a record of everything that changed.
Let’s imagine there was a dispute between brother’s Jack and Andrew over who owns a piece of family land. They can look at traditional ledger data from the town council to trace back ownership evidence. However, on a single traditional system it is possible that information may have been manipulated or changed. With Blockchain technology, this type of fraud is practically impossible.
The key is that Blockchain technology is decentralized. Because the Blockchain data is distributed amongst a large network of computers, the ability for data tampering is nearly impossible. Before a new block can be added to an existing chain, a computer needs to solve a puzzle so that it can accurately fit amongst the previous blocks within its sequence. So if some form of data, like a land ownership transaction needs to be updated, a puzzle must be solved to ensure that it corresponds with the previous data pertaining to this piece of land. The solved puzzle is shared with the rest of computers on the entire network and is checked by all of them for accurateness. This unique process is known as “proof-of-work”. The block is only added to the chain once all computers on the network verify and approve the legitimacy of the solved puzzle. Therefore, the entire network of participants ensure that the data is trustworthy.
Besides legitimacy and safety, perhaps the most revolutionary aspect of Blockchain is the absence of intermediaries. Traditionally, society has relied on banks, lawyers and other institutions to keep records of our important information. Third parties were often those who actually made transactions trustworthy and legitimate. However, Blockchain technology eliminates the need for third parties, eliminating potential fraud, technical issues, hackers, transfer limits, transaction costs and more headaches. Each change to a Blockchain network has been approved by all members and there is a consensus that everything is legitimate. So, Jack and Andrew would simply need to look at the records of their property on a website backed by Blockchain, and they could agree that the data is accurate. Eliminating intermediaries with this peer-to-peer verification process will revolutionize the legitimacy of our societies.
Another important takeaway is that Blockchain is not just a single network but a type of technology that can be used for many things. They can be completely public, or private and closed to a select group of authorized users. They can also be hybrid where those with public access can see all data, and those with private access are the only ones able to make changes to the data. Governments and large organizations could benefit immensely from hybrid Blockchain systems where they can decide which data is publicly available while keeping other data safe and secure. For example, they could allow people to see the official ownership of properties, while keeping all other private information about that property secure. The opportunities for Blockchain are truly endless.
To conclude, it is important to understand that Blockchain’s arrival is simply the natural evolution of technology and will soon become very widespread throughout society. The power of its technology is incredibly useful for legitimacy purposes and has the potential to eliminate fraud and make the world a better place. It is important that society become aware of the extensiveness of its capabilities because it will become a part of our lives in the near future.