Blockchain: Your Complete Guide To The Future
Blockchain? Do you mean that Bitcoin thing?
BlockChain is actually capable of so much more than “just crypto”, and is poised to change EVERYTHING from business and money to presidential elections and your very own identity.
But what is it? Where did it come from? And HOW DOES IT EVEN WORK?
This complete guide to blockchain tech explains everything you need to know in plain English. Including:
- What is blockchain?
- How blockchain works (Including real-world, practical examples)
- Real-world applications that will affect your daily life
The future is now!
What is Blockchain and how does it work?
Blockchain at its simplest form is just a chain of data stored in interlinked blocks (Surprise!), each one containing 3 things:
- The data: This depends on the type of blockchain. For example, the blocks in the Bitcoin blockchain contain the buyer, the seller, and the amount being exchanged.
- Hash: This is like the block’s unique fingerprint. It distinguishes it from all the other blocks in the chain.
- The has of the previous block: The new block contains the “fingerprint” of the previous block. This is how the digital chain is formed. For example, in a chain of 5 blocks, “block 5” would have its own hash plus the hash of “block 4”, then “block 4” would have the hash of “block 3” and so on.
You know, like a general financial ledger, one where you keep a running tally of credits, debits, and totals!
Blockchain is actually based on the same concept, just with two massive differences:
- Blockchain is a Distributed Ledger Technology: Unlike ledgers of the past that were stored in one single place, a blockchain is a decentralized network shared – or “copied” – across thousands of computers. Everything is 100% visible to every node, and no changes can be made to the block without being verified by all the nodes. Once a transaction is verified and a new block is added, all of the nodes in the network now share the new, updated chain.
- Blockchain Blocks Are Immutable: Once a block is created, it is extraordinarily difficult to change the information within. A traditional ledger – whether paper or digital – can be easily modified by whoever holds authority over it. With blockchain, you don’t rewrite the existing information. Instead, a new block is created showing that x value changed to y value at a particular time.
OK, this totally all makes sense, right?
Let’s sum up what we’ve got so far…
Blockchain is a shared, immutable record of transactions stored in separate blocks all linked to each other in a chain using cryptographic technology. The data can be anything of value from dollars and Bitcoin to votes in an election or land titles.
This chain has NO CENTRAL AUTHORITY. It’s shared among thousands of nodes, and no changes can be made without the approval of every node in the network.
The Basics of a Blockchain Transaction
Here’s a brief, very simplified version of how blockchain works. Since it’s what everyone’s familiar with, let’s just use Bitcoin (HODL!) :
- A Transaction Occurs: Say your friend has 2 Bitcoins and you have 1 Bitcoin. You purchase 1 from him (Should’ve done that a year ago!). A transaction with these details is created: When the transfer was made, who’s involved, how much was sent, and who has how much after the transaction.
- The Network Verifies The Transaction: Once the transaction occurs, the network ensures your friend actually has enough Bitcoin to send. Then it verifies the new balances and participants.
- The Block is Created: Once the details have been verified, they are stored in a new block.
- The Block is Given a Hash: The hash is the final detail. Remember, this is the “unique fingerprint” of every block. That block is also given the hash of the previous block to link them together. The transaction is now official and the block is added.
Why is Blockchain so Revolutionary?
Blockchain is still only in its infancy, but it is set to change EVERYTHING.
Imagine a fully automated, unhackable, fraud-proof system of record that completely eliminates structural inefficiencies, human error, and intermediary fees. That’s blockchain.
There’s a reason why world governments, the financial industry, and even Facebook are rushing to get ahead of the curve.
Blockchain is superior to ANY system of record or transfer that currently exists.
- Blockchain is a non-destructive way of keeping records: As we mentioned before, when a new block is created, the old block remains unchanged. The new block is only a record of the change and displays the new reality after the change. This creates an infallible public record of transactions, and eliminates human error or tampering. No land disputes, no voter fraud, no nothing.
- Blockchain creates trust in the data: Before a block can be added to the chain, it must be verified by every other node in the network. Remember, blockchain is a distributed ledger, meaning every node has a copy of the record. That means we can trust every block in the chain. Currently we have to trust the entities that create and maintain the data. With blockchain, the network builds trust for us.
- Blockchain has no single point of failure: Centralized systems can be easily compromised. Blockchain is distributed among thousands of nodes, and no transaction can occur unless verified by all the nodes. This drastically reduces the chances of the network being compromised.
- No more intermediaries: Blockchain allows for peer-to-peer transfers without the need for direct intermediaries (Credit card companies, banks, etc.) or peer-to-peer apps/services (EX: Venmo). Without these fees or 3rd parties, transfers will cost far less and take far less time. For example, if you buy a concert ticket, the venue no longer needs a credit card processor to accept your payment. You just send them money directly. Then a record of your purchase is added to the chain. This eliminates fees on both ends and reduces the price of tickets.
Another example could be a land transfer.
With our current systems, you would need a lawyer to verify you are the holder of the title, and this lawyer would verify your information and build trust between you and the buying party.
With blockchain, there would be a clear, immutable, time-stamped record showing you are the owner of the land. You could show this to the buying party and they could 100% trust that it is true because the block was verified by thousands of nodes within the network. Once it entered the chain, there would be no way for you to fake it.
Blockchain in Real Life: How Will it Affect Your Daily Life?
Blockchain is not one single technology – it’s a principle.
The amazing thing is it can be applied everywhere humans exchange value or information.
Facebook has introduced Libra, a global currency with the goal of empowering the entire world in ways never before seen.
IBM is using blockchain to track every scrap of food from farm to table, knowing how it was made, who handled it, and how it got to you.
Brooklyn has already introduced Brooklyn Microgrid, a system that lets local residents exchange solar energy credits.
The possibilities are limitless. Here are a few ways that will directly impact you.
Daily Finance: The End of Bank Accounts
Cryptocurrency will change the banking world in ways we don’t even know yet.
The revolution has already begun.
Cryptocurrency will enable billions of people around the world to obtain loans, make international payments, and lift themselves out of poverty. No fees, no need for bank accounts, no international bureaucracy weighing them down.
On your end, your children may look back on us and wonder why we ever had bank accounts. Direct, peer-to-peer transfers will completely eliminate the need for bank accounts, at least on a small, personal level.
Instead of using your debit card or withdrawing cash from a bank ATM, you’d only need the wallet address of the receiver to send payments. All of your money will be safely stored behind nearly uncrackable encryption.
Smart Contracts: No More Need for Lawyers
A smart contract is a computer protocol or “contract” that facilitates, verifies, or enforces a contract automatically.
Basically, it’s a digital contract that takes the place of a lawyer or agent in terms of enforcing contracts.
Here’s what we mean…
Imagine you’re buying a house. Nowadays, you’d use an agent because the sums of money are huge. You can’t really trust anyone that much.
The agent facilitates the whole process and acts an escrow. In the end, the seller gets the money, you get your house, the agent pockets about 7%, and everyone lives happily ever after.
Introducing: Smart contracts.
With a smart contract, there’s no need for an escrow service or 3rd party. Once you set the terms (If-then terms), the contract will not execute until the terms are fulfilled.
In this case, the contract will not release the funds to the seller until you’re given the deed to the property.
Elections – The End of Voter Fraud
Blockchain is transparent and immutable.
That means it’s impossible for anyone to make changes once a vote has been cast. And it also eliminates human error.
Not only that, but you can vote from anywhere at any time, completely eliminating polling and absentee voting issues.
Real Estate and Land Transfers – The End of Intermediaries
We described this in our above example, but it bears repeating.
Blockchain will create an immutable record of all transactions, and smart contracts will help eradicate fraud and disputes.
IBM “Food Trust” is a tour de force in the logistics revolution.
The goal is a smarter, safer, more sustainable food ecosystem for the world.
That means you can trace your coffee from the moment the beans are picked. Or trace your milk as soon as the farmer…well…you know what they do.
The result? More efficient supply chains, better brand reputation, and, most importantly, safer food products.
Blockchain is much more than “just Bitcoin”. It’s going to revolutionize everything. Facebook, Venezuela, Goldman Sachs, IBM, and Brooklyn are just a few of the early adopters. Pretty soon, it will change everything from how you buy food to how the food arrives at the supermarket. It will even change how you identify yourself to the world.
And it’s only just beginning!
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