Learning about blockchain is not easy. It may come naturally for people who studied some form of finance, or accounting. It may be easier to grasp for people with math skills and people who are proficient with numbers. Unfortunately, I fall into none of the above categories. I am just a doctor who knows a little about the human body.
But they say that if you keep pouring water on a rock, one day you would be able to split it in half. So, the plan is to keep pushing and looking to understand blockchain. I understand that it has become an important part of our financial system, but I am still struggling to understand what it is.
Why Blockchain Technology?
The world went into massive chaos as a result of the financial melt down of 2008. People lost their livelihoods in seconds. Banks closed, businesses went bankrupt. Some say that it was because of this crises that a lot of people were able to find out how leaving control of money to a select set of people called the government is a bad idea. Someone decided to hand over control to the masses.
This is how blockchain technology was born. The purpose of blockchain is to prevent a central means of control for money. Here is why…
Money, or fiat currency today as we know it is controlled by a central entity called the government. They are in charge of regulating the money, how much is in circulation, what the interest rates are, etc. They are what you would call the big brother of fiat money… watching over your money and my money.
This means that big brother can wake up one day when he is not feeling the mood and decide to print more money, or call all the money in circulation back to himself. This means that the longer big brother holds on to control, the more money he can print for himself not minding the consequences. In some cases, big brother is really clueless when it comes to money.
Hence, blockchain technology.
What is Blockchain Technology?
To understand blockchain technology, it is important to understand what money is. Money isn't just your account balance, or a piece of paper, it is an agreed measure of value. Here is what that means…
Do you consider your television as valuable? If your answer is yes, then the next question would be how much value do you think your television has? How would you measure that value for your television? If you say that your television costs 500 dollars, then you have said that the value of your TV is 500 dollars.
So, you can either have your TV, or 500 dollars. Money is simply how you exchange that value.
Today, big brother prints money that you can exchange for value.
What if you could exchange that value without big brother getting in the way, with some extra perks.
Blockchain is the technology that helps you transfer value to another person in a secure way. It keeps record of that transaction in an open way known as a distributed ledger system. This means that any transaction/value or data on the blockchain is shared across multiple sites.
Instead of having a centralized monetary system, blockchain makes the monetary system dependent on thousands/millions of people all over the world to verify the authenticity of any transaction.
If everyone on the network is able to see each transaction, then it makes it even harder for anyone to alter it.
— Blockchain is a record of transactions that is validated and maintained by a network of computers around the world.
There is no central bank, no big brother. Just individuals communicating and sharing value. No one person has control over the blockchain and no one can change or erase it.
Blockchain allows anyone anywhere with an internet connection to access every other person’s transaction on the network. Whenever 1 person does a transaction, it goes to the network which verifies the transaction and links it to the previous transaction in the network, forming a chain of transactions that are linked.
The transactions are called blocks, when linked together, they are called blockchain.
This means that changing one transaction in the chain would mean all the transaction that follow that transaction would be rendered invalid. This makes it extremely difficult for people to commit fraudulent activities on the blockchain and more importantly, it eliminates big brother.
I know…. it is still complex. But someone told me it gets better the more I keep learning, and that is what I intend to do.
I am learning about the history of blockchain technology next.
