Blockchain was originally created to be a decentralized book of Bitcoin transactions that take place within the Bitcoin network. A decentralized or distributed database / book essentially means that the storage devices where the books are located are not connected to a common processor. The blockchain contains an ever-growing list of block transactions. Each block has a timestamp and then connects to the previous block to become part of the blockchain.
Before computers, people kept their important documents by making many copies and storing them in impenetrable steel safes, buried treasure chests, or bank vaults. As an added security measure, you would translate each of these documents into a secret language that only you can understand. That way, even if someone managed to break into your bank vault and steal your belongings, they would not be able to understand your cryptic messages, and you would still have a lot of backups stored in other locations.
Blockchain puts this concept on steroids. Imagine being able to make copies of all your files, encrypt them with special software, and save them to each other’s digital bank vaults (computers) across the Internet. That way, even if a hacker breaks into, steals, or destroys your computer, it won’t be able to interpret your information, and your network of friends still has 999,999 backups of your files. It’s a blockchain in a nutshell.
Special files, encrypted with encryption software so that only certain people can read them, stored on normal computers, connected over a network or the Internet. Files are called general ledgers – they record your data in a specific way. Computers are called nodes or blocks – personal computers that share their processing power, storage space and bandwidth with each other. And a network is called a chain – a series of connected blocks that allow computers to work together to share books with each other (hence the name, blockchain).
The social impact of blockchain technology has already begun to be understood and this could only be the tip of the iceberg. Cryptocurrencies have already raised doubts about financial services through digital wallets, the introduction of ATMs and the provision of credit and payment systems. Considering the fact that there are more than 2 billion people in the world today without a bank account, such a shift is certainly a changing life and can only be positive.
The transition to cryptocurrencies may be easier for developing countries than the fiat money and credit card process. In a way, it is similar to the transformation that developing countries have had with mobile phones. It was easier to procure large quantities of mobile phones than to provide new infrastructure for landlines. Many are likely to accept the decentralization of distancing themselves from government and control over people’s lives, and the social implications can be quite significant.
One has only to take into account the series of identity thefts that have appeared in the news in recent years. Leaving control of identification to people would certainly eliminate such events and allow people to reveal information with confidence. In addition to giving access to vulnerable banking services, greater transparency could also raise the profile and efficiency of charities operating in developing countries that fall under corrupt or manipulative governments. An increased level of confidence in where the money goes and who benefits will certainly lead to increased contributions and support to those in need in parts of the world who desperately need help. Ironically, not in line with public opinion, a blockchain can build a financial system based on trust.
If we go a step further, blockchain technology is in a good position to remove the possibility of voice rigging and all the other negative sides associated with the current process. Believe it or not, Blockchain can actually solve some of these problems. Of course, with new technology, there are new obstacles and problems to come, but the cycle continues and these new problems will be solved with more sophisticated solutions.
A decentralized book would provide all the necessary data for accurate recording of votes on an anonymous basis, and confirm the accuracy and whether there was manipulation of the voting process. Intimidation would not exist if voters could cast their ballots in the privacy of their own home.
It remains to be seen whether blockchain technology is really becoming a part of everyday life. While inflated expectations have raised the possibility of abolishing central banks and their responsibilities as we know them today, the end of the centralized financial system is perhaps a step too far for now. Time will tell how the blockchain will evolve, but one thing seems certain today. The status quo is no longer an option and needs to change.