Blockchain main features
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-growing list of transactions across blocks. Each block is timestamped and is 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 things, they wouldn’t 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 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 backup copies of your files. That is blockchain in a nutshell.
Special files, encoded with encryption software so that only certain people can read them, saved on normal computers, linked to each other over a network or over the Internet. The files are called 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 the network is called a chain – a series of connected blocks that allow computers to work together to share ledgers with each other (hence the name, blockchain).
The social impact of blockchain technology has already started to take hold and this may just be the tip of the iceberg. Cryptocurrencies have already raised doubts about financial services through digital wallets, the deployment of ATMs, and the provision of loans and payment systems. Considering the fact that there are more than 2 billion people in the world today without a bank account, that change is certainly life-changing and can only be positive.
Perhaps the shift to 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 underwent with cell phones. It was easier to purchase large numbers of mobile phones than to provide a new infrastructure for landlines. Decentralization away from governments and control over people’s lives will likely be embraced by many and the social implications can be quite significant.
Just consider the avalanche of identity theft that has made the news in recent years. Certainly, handing over control of identification to individuals would eliminate such events and allow individuals to confidently reveal information. In addition to giving the disadvantaged access to banking services, greater transparency could also raise the profile and effectiveness of charities working in developing countries that are 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 not in line with public opinion, blockchain can build a financial system that is built on trust.
Going one step further, blockchain technology is well placed to eliminate the possibility of voting manipulation and all the other negatives associated with the current process. Believe it or not, Blockchain can solve some of these problems. Of course, with a new technology, there are new obstacles and problems that will come, but the cycle continues and those new problems will be solved with more sophisticated solutions.
A decentralized ledger would provide all the data necessary to accurately record the votes anonymously and verify the accuracy and if there was any manipulation of the voting process. Intimidation would be non-existent and voters would be able to cast their vote in the privacy of their home.
It remains to be seen if blockchain technology does, in fact, become part of everyday life. While inflated expectations raised the possibility of an end to 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 blockchain evolves, but one thing seems certain today. The status quo is no longer an option and a change is needed.