Blockchain in simple words

By shegcrypto | Cracking | 10 Aug 2019


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When I turned to the future of money in 2017, I didn't have an idea what blockchain was all about. As I progress in my passion for bitcoin, I started stumbling on some great ideology that Bitcoin was built on which is housed by blockchain.

 

What is this Blockchain of a thing?

A blockchain simply means a digital record of transactions. It enables DLT distributed public ledgers that hold immutable data in a secure and encrypted way and ensure that transactions can never be altered. blockchain can be applied to the enhancement of Healthcare system, Real estate, Asset management, Data storage, financial transactions and many more.

What is the benefit of blockchain?

Let's say I want to build the next Kickstarter. I have to set up a web server, database server, and something to take credit card payments, make sure I comply with everybody's terms of service, start a business and pay accountants and lawyers to make sure I won't get in trouble with all this money I'm handling, etc. Then I have to set fees high enough, do a bunch of marketing, watch my cash flow, make sure the servers keep running and probably hire people to help.

Or I can write a couple of pages of code and post it to a blockchain that supports smart contracts. From then on I don't have to touch it. I can market it however much I like, but it's not as stressful because I have no outgoing cashflow. I don't even have to charge fees. I can forget the whole thing and people can keep using it as long as they like.

When you send 100 bucks via Paypal/Venmo to your friend in Ohio, Paypal isn't literally putting a $100 bill on a plane. When you “received the money” it doesn’t mean there’s cash that got out of the plane and was just deposited into a metal box with your name on it.

When somebody “trades stocks” the stock exchange isn't moving paper stock certificates and your bank isn't physically moving paper bills -- all they really are, are giant digital LEDGERS -- moving digital numbers around from one account to the other.

So your money, stocks, even identity are just information in ledgers. Data. Does it really matter if a stock certificate is blue or green or 1 inch larger? The container of the data (colored pieces of paper, certificates. Or stone tablets, papyrus rolls….) doesn’t matter. It’s what’s being contained that matters (value, ownership, identity) and those are things that exist in the mind. And those things are recorded in our record books.

Traditionally, you had to have a central authority preside over a record book. How else would you do it? An accountant cannot give free access to his books. If everyone had full access to it, I’d just add a billion to my balance and retire (although someone else could then take it away from me...).

So we have institutions by necessity. The PayPal ledger lives on a PayPal computer. The bank ledger lives in a bank computer. That ledger is updated, secured and managed centrally. We trust these institutions to keep the integrity of the ledger.

Now, what happens when you have a magic ledger where there’s no central authority, but by some magic (== blockchain) we still know that the transactions have 100% integrity? Nobody can cheat the system.

Somethings to think about in terms of potential. This is all for better or worse.:

  1. Having a trusted party has some implications. When you send a payment today, you’re actually not the one changing the Paypal ledger. You have no power. You’re requesting, Paypal, who has full authority and trust over to change the ledger (add 10 to John Doe and -10 from me). It is the same with your bank. They can change terms, block payments, freeze accounts, or change balances at will (ex: Greece).

  2. with no middle man, there is no one to block payment. You could send a payment to anyone and nobody could block it. But it could also mean freedom for people with restrictive capital controls.

  3. Because there’s no one in the middle it is closer to a physical transaction. Irreversible. When you give cash to someone it is “final”. He has full power over the cash and if you want him to give it back you have to request it from him. But because it is irreversible it is also in many ways simpler. Cheaper. You don’t need to identify yourself and fill out a form when you give a dollar to buy gum. He doesn't need to know who you are. You just give it to him. Because it’s physical, you know money has been fully transferred. For the first time, it is the same in the digital world because of the blockchain.

  4. because of the open nature of it, anyone with an internet connection can connect to it, anywhere.

  5. by anyone, there’s no restriction like a bank. There are no arbitrary rules. It could be on a bank holiday. It could be for .0000318 cents. It could 100 million. For better or worse. it could be a 5-year-old kid. Yes, it could be a terrorist too. But it could be someone without an identity (what’s being called the unbanked of the developing world).

  6. …or it could even be a piece of software. a robot. A fridge can have a bank account (IOT). An autonomous car. For the first time, something that is not alive can “own” money.

  7. because it is an open network it’s like the internet. Some geeky teen in a garage can connect to it, build something on it…play with it. You cannot do that on HSBC’s protocol. It's not so much "money for the internet" but rather the "internet of money".

 

Smart contract

Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.

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Mike opens a fast food shop called "Miky' fast food shop".

He has no idea how taxes and all this adult stuff work so he asks his older brother Kevin (a smart IT guy) to write him a SmartContract that cares about everything. He just needs a buyer to show the QR code Charlie gave him.

Alice comes by to buy some chocolate. She scans the QR code with her phone and sends the amount to the SmartContract Kevin made.

This contract automatically orders new chocolate and pays for it. The chocolate is already on its way to "Mike fast food shop". The taxes are calculated and stored in the SmartContract. This cares about paying the taxes and tells the taxman some other stuff in order to make him happy. The rest gets transferred to Mike's account. This all happens automatically and faster as Mike can say "Thank you".

After the first day, he buys a ticket for the film "Frozen" from the money he just earned. He only has to copy the address code which the cinema has on their website. He sends the amount of money and the name of the film to this address. The magical SmartContract of the cinema sends the ticket back.

The benefits of blockchain have not yet fully matured and the utility will surely touch all areas of life.

 

Thanks for reading through

 

 

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shegcrypto
shegcrypto

Am all about Blockchain, tech and innovation raleted stuffs. Book publisher, music writer, ICT teacher etc.


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