Blockchain For The Average Joe

Historically, when people have needed to transact anything of value, they have relied on middlemen (banks, governments, etc) to ensure trust, reliability and security. Intermediaries maintain records and update them to make sure the process is secure.

Intermediaries have been needed greatly when it comes to making a transaction of digital property. Digital property are just files and hence, are incredibly easy to reproduce. This is known as the double spending problem. The double spending problem prevented the transfer of scarce digital assets until 2008.

In 2008, a person by the name of Satoshi Nakamoto built the first blockchain and its first application Bitcoin. Blockchain technology allows you to safely transfer a digital asset without the need for any middlemen or intermediaries. Bitcoin is used to facilitate the transfer of monetary value. You can learn more about Bitcoin here.

How does it work?

A blockchain is a distributed and decentralized ledger that maintains an updated record of ownership. Instead of having middlemen, a blockchain has a network of databases which are synchronized and public.

When a transaction is carried out, it is placed in a block cryptographically protected with other transactions and sent out to the entire network. People called miners who have a high level of computing power now compete to validate the transaction by solving a long math problem. The first person to solve the problem validates the block and receive a reward.

The next block of transactions is now timestamped and added to the previous blocks. The new block is linked to the the older blocks so that a chain is created.

What will be its impact?

Blockchains make the need for intermediaries obsolete. This has the benefit that hacks become much harder to pull off. If a malicious hacker wanted to change a block in a blockchain, they would have to hack that block and all the preceding blocks on the chain.

Blockchain has many applications from finance, the Internet-of-Things, and payment to healthcare, digital identity, and voting. The potential is significant with many platforms and applications not yet been invented!