Blockchain Bytes: What is the Blockchain?

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Last year saw the 10th anniversary of the creation of a new technology known as the blockchain. This year sees the 10th anniversary of Bitcoin, the cryptocurrency that was the first application of the blockchain and the anniversary of the first transaction using Bitcoin. (It was a purchase of Pizza in case you're wondering!) As more and more people become aware of the word blockchain, the main question I am still asked is, “what exactly is the blockchain?”

So in this post, I’m going back to basics. It's always easy to complicate things but it takes more effort to simplify.

So this is my attempt to simplify and go back to basics so as many people as possible can understand the impact and opportunities this technology brings.

I believe it’s only when you go back to basics that you are able to develop the foundation needed to understand how this technology works.

So, what is the blockchain?

The blockchain is a new technology that emerged 10 years ago. What makes the blockchain so special is the inherent features it has.

The blockchain is the first example of a peer to peer network that can reach consensus about a series of events on a global scale without the assistance or support of any global intermediary or institution.

So what does that exactly mean?

''The blockchain is the first example of a peer to peer network...''

This means the network allows for 2 parties (i.e individuals, entitles) to directly transact with each other without a central person/entity/ middleman. This is known as peer-to-peer.

''...that can reach consensus about a series of events on a global scale...''

The network is able to reach a consensus. This means the network as a whole is able to confirm transactions. The decision maker is no longer one person or one organisation. The decision to accept or reject validation of a transaction is made by everyone on the network.

''...series of events...’'

Relates to transactions (financial) and decisions made (i.e pay this person x amount for x amount sold being just one example).

''...without the assistance or support of any global intermediary or institution.''

The blockchain does not need a third party to make this transaction. This means you can sell directly to your customers. No middleman is needed anymore. The transaction happens between the two people. No middleman is involved.

The first application of a global consensus is Bitcoin, the first peer to peer electronic cash system. This was the first example showing how digital cash can move from one person to another without the need for a central bank or third party to facilitate the payment.

So what's the big deal about blockchain?

The fact you can transact directly with no middleman is the big deal!

Almost every industry operates with a middleman. Bankers, accountants and lawyers are all middlemen.

Middlemen add an extra layer in the process of transacting. This extra layer decreases efficiencies, makes transactions slower and more importantly, is a layer in the process that costs the customer yet adds no or little value in the transaction.

This technology is particularly disrupting the financial industry where you have billions of dollars moving through many intermediates i.e. banks where huge markups and fees are charged.

All banks already deal with digital cash in the sense that when they move funds, they are just moving a bunch of numbers on the screen. Rarely do they physically shift large volumes of cash physically? So why should this cost so much?

In particular, why do international payments have to cost so much? One of the largest Bitcoin transactions—in terms of BTC—is 500,000 BTC in April 2015. (You can see the transaction yourself here)

The transaction was the equivalent of USD $100 million at the time. How much did it cost to send this transaction? £13!

Moving that amount of cash today via a traditional bank would incur costs of at least £50,000!

So this is what is so exciting about the blockchain and why it's so important everyone learns about the basis of it because this could be the most revolutionary technology to occur in our lifetime since the rise of the internet.

Do you think it’s important to learn about blockchain technology? Leave your comments below.

 

Photo by Hitesh Choudhary on Unsplash

 

Written by Sukhi Jutla

An IBM Blockchain Foundation Developer, she made global headlines in April 2018 when she became the World’s First #1 Bestselling ‘Blockchain’ Author.

She has authored two more books and is the co-founder of MarketOrders, the online B2B marketplace for gold jewelry and diamonds. As a female tech ambassador, Sukhi is a regular keynote speaker and passionate about supporting female entrepreneurship.

She is an IBM Blockchain Foundation Developer and her efforts have been recognized by a number of industry awards including the Asian Women of Achievement Awards, We Are The City Rising Stars Award, Management Today’s “35 Women under 35”; and listed as one of the Top 100 Asians in UK Tech.

In April 2018 Sukhi made global headlines when she became the World’s First #1 Bestselling ‘Blockchain’ Author. Named as one of the 50 most influential people in Blockchain.