What the Hell Is Blockchain?

A beginner's guide to understanding Blockchain.

Unless you've been living in Leavey Library's basement for the past three years, chances are you've heard of the term Blockchain. Your first instinct may have been to google the word. To your surprise, this was the definition you found:

A blockchain is a decentralized digital ledger that is used to record transactions across nodes so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network (Sidebench). 

If that made little to no sense to you, you're at the right place. This blog post is here to help. I will introduce blockchain - what it is, how it works, and why it's taking the world by storm - all in plain English.

Why Should You Know About Blockchain?

Before I dive into what blockchain is and how it works, let me first explain why it's relevant to you. Historically, we have depended on intermediaries like banks and governments while making transactions. These middlemen have played an important role in authenticating and record keeping, that has helped build trust in the buying and selling process (Thompson). Yet, there is a problem with the status quo.

Imagine this. It's Friday night. You step out to your favorite bar to snag a couple of cold brews. Before you know it, the clock hits one. Its time pay the tab. You put down your handy dandy Credit Union card and wait for the payment to go through. But, it never does…

In this scenario, the bank enters the transaction in their own records; and that's the problem. What if the bartender adds a zero after your tip? What if the bank manager forges the transaction in favor of the bar? What if someone else steals the records altogether? This is why the ledger that records the transaction must be secure, consistent and available to each person involved at all times (Mamoria). 

To see the magic of blockchain, skip the next section. To learn how the magic works, read on.

How Does It Work?

Like the World Wide Web, blockchain is not an easy concept to grasp. I've found it simpler to understand one of its applications than digging into the nitty-gritty. As promised, I will stick to the basics - Bitcoin.

Bitcoin is the most popular application of blockchain, yet it's only one of the seven hundred. It has enabled the peer-to-peer transfer of digital currency (Tapscott). Essentially, you can now send money online without relying on an intermediary to verify your transaction.

"[Blockchain] is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications. Currency is just one (Davies)."

Simply put, a blockchain is a type of record that is continuously updated, shared and controlled by its users (Bajpai). The ledger that stores the transaction operates without central administrators like banks and governments. Transactions that occur within ten minutes get pooled together and placed inside a block - like a treasure chest. A few volunteers known as miners, confirm the block by calculating the nonce (solution to a complex math problem). Finding the nonce is like finding the key to the chest - it unleashes the transactions. Once the miners concur that the block is valid, the transactions are added to a chronological chain.

This chain is known as the blockchain (Thompson). The authority of this ledger moves from a central figure to the millions of people who run the software. What's even groovier is that the blockchain shows the complete history of transactions - no need to keep the receipts for Uncle Sam, they're all online. The ability to check who's paid whom and how much provides the ultimate transparency.

Blockchain's automated verification process enables us to trust each other. The need for intermediaries like banks become obsolete. It also provides unmatched security benefits due to its unbreakable computational power. To fake just one transaction, a hacker would have to not only break into the block that stores the transaction, but also every preceding block going back to the entire history of the blockchain (Thompson). What really takes it to the next level is that the person would also have to hack every single computer connected to the blockchain network - simultaneously. Now that's one system even the Russians can't meddle with! 

What Are Its Benefits?

By now you must be wondering "So What?" What makes the technology so disruptive? What makes people refer to it as the new internet (Cretin)? What inspired me to write about blockchain in the first place? 

The fundamental way in which the internet changed how businesses interacted with customers (B2C) in the 90's; Blockchain will usher in a new way for customers to interact with businesses (C2B) in the 20's. Allow me to share some its applications in the real world through its three primary benefits:

• No Middlemen. By automating the payment process, blockchain will allow people to trust each other online. Think of a shared economy in which people don't have to rely on Airbnb to rent out apartments, or Spotify to distribute music, or Uber to connect drivers with passengers. Once someone provides a service, money will move directly from the buyer to the seller - without any intermediary.
• Complete Transparency. Governments will incorporate blockchain to make information publicly available (Newman). No longer will you have to worry about where your taxpayer dollars go - Mr. President might actually have to declare tax expenditures and sacrifice his golf getaways.
• System of Record. Because blockchain provides a secure way to store information, universities will use it to record student diplomas. MIT has already launched a pilot program to test the idea, in which potential employers can verify a student's diploma by viewing it on the blockchain (Durant). 

Summary: Blockchain will transform the fundamental way in which people store and distribute information. Transactions that will occur on its network will not rely on intermediaries, like banks and governments, but on the billions of people that use it. It just happens to provide unparalleled security, transparency and permanency in the information it stores. 

Works Cited

Bajpai, Prableen. "Blockchain." Investopedia, Investopedia, 29 Jan. 2018,                                                  www.investopedia.com/terms/b/blockchain.asp.

Cretin, Andrew. “It's 2018 - Blockchain Is on Its Way to Become the New Internet.” Medium,     Medium, 4 Jan. 2018, medium.com/@andrewcretin/its-2018-blockchain-is-on-it-s-way-     to-become-the-new-internet-7055ed6851ec.

Davies, Sally. "How Bitcoin and Its Blockchain Work." Financial Times, Financial Times, 3                    Feb. 2015, www.ft.com/video/2be94381-66dc-3320-a292-6a1cde0a3d5f.

Durant, http://news.mit.edu/2017/mit-debuts-secure-digital-diploma-using-bitcoin-blockchain-      technology-1017. “Digital Diploma Debuts at MIT.” MIT News, MIT, 17 Oct. 2017,          news.mit.edu/2017/mit-debuts-secure-digital-diploma-using-bitcoin-blockchain-     technology-1017.

Mamoria, Mohit. "What Is Blockchain?" Creative Bloq, Creative Bloq, 16 Jan. 2018,                    www.creativebloq.com/advice/what-is-blockchain.

Newman, Daniel. "Blockchain 101: How This Next Big Service Will Change The Future."                       Forbes, Forbes Magazine, 13 Apr. 2017,                         www.forbes.com/sites/danielnewman/2017/04/13/blockchain-101-how-this-next-big-         service-will-change-the-future/.          

Sidebench. "Blockchain: The Immutable Ledger of Transparency in Healthcare Technology."      Medium, Medium, 23 Aug. 2017, medium.com/@sidebench/blockchain-the-immutable-           ledger-of-transparency-in-healthcare-technology-a4a64b1d5594.

Tapscott, Don. "How the Blockchain Is Changing Money and Business." TED: Ideas Worth         Spreading, TED, 1 June 2016,             www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_money_and_busines             s/transcript?language=en.

Thompson, Collin. "How Does the Blockchain Work? (Part 1) – The Blockchain Review –          Medium." Medium, The Blockchain Review, 2 Oct. 2016, medium.com/blockchain-   review/how-does-the-blockchain-work-for-dummies-explained-simply-9f94d386e093.