Blockchain was originally created to be a decentralized ledger of Bitcoin transactions that take place within the Bitcoin network. A decentralized or distributed ledger/database essentially means that the storage devices, where the ledgers are located, are not tied to a common processor. The blockchain contains the ever-increasing list of transactions via blocks. Each block is time stamped and then linked to the previous block to become part of the blockchain.
Before computers, people kept their important documents safe by making many copies of them and storing them in impenetrable steel safes, buried treasure chests, or bank vaults. As an added security measure, I would translate each of these documents into a secret language that only you could understand. That way, even if someone managed to break into your bank vault and steal your stuff, they wouldn’t be able to understand your cryptic messages and you’d still have plenty of backups stored in other locations.
Blockchain puts this concept on steroids. Imagine that you and a million friends can make copies of all your files, encrypt them with special software, and store them in each other’s digital bank vaults (computers) over the Internet. That way, even if a hacker breaks into, steals, or destroys your computer, they can’t interpret your data, and your network of friends still has 999,999 backups of your files. That is blockchain in a nutshell.
Special files, encoded with encryption software so that only certain people can read them, stored on normal computers, connected to each other through a network or through the Internet. The files are called ledgers: they record your data in a specific way. The computers are called nodes or blocks: personal computers that share their processing power, storage space, and bandwidth with each other. And the network is called a chain: a series of connected blocks that allow computers to work together to share records with each other (hence the name, blockchain).
The social impact of blockchain technology has already started to be felt and this may just be the tip of the iceberg. Cryptocurrencies have already raised questions about financial services through digital wallets, the deployment of ATMs, and the provision of loans and payment systems. Considering the fact that there are over 2 billion people in the world today without a bank account, such a change is certainly life changing and can only be positive.
Perhaps the exchange for cryptocurrencies is easier for developing countries than the process of fiat money and credit cards. In a way, it is similar to the transformation that developing countries had with cell phones. It was easier to purchase mass quantities of cell phones than it was to provide a new infrastructure for landlines. Many are likely to embrace decentralization away from governments and the control over people’s lives and the social implications can be quite significant.
Just consider the spate of identity thefts that have been in the news in recent years. Handing over control of identification to individuals would certainly eliminate such events and allow individuals to reveal information with confidence. As well as giving the poor access to banking services, greater transparency could also raise the profile and effectiveness of charities working in developing countries under corrupt or manipulative governments. A higher level of trust in where the money goes and who benefits would surely lead to greater contributions and support for those in need in parts of the world that desperately need help. Ironically, and contrary to public opinion, blockchain can build a financial system based on trust.
Going one step further, blockchain technology is well positioned to eliminate the possibility of vote rigging and all other negatives associated with the current process. Believe it or not, Blockchain can solve some of these problems. Of course, with a new technology, new obstacles and problems will arise, but the cycle continues and those new problems will be solved with more sophisticated solutions.
A decentralized ledger would provide all the data needed to accurately record votes anonymously and verify the accuracy and if there was any tampering of the voting process. Intimidation would be non-existent and voters would be able to cast their ballots in the privacy of their homes.
Whether blockchain technology does, in fact, become a part of everyday life remains to be seen. While inflated expectations raised the prospect of ending central banks and their responsibilities as we know them today, ending the centralized financial system is perhaps a step too far for now. Time will tell how blockchain evolves, but one thing seems certain today. The status quo is no longer an option and change is needed.
