Blockchain was originally created as a decentralized account of bitcoin transactions that took place within the Bitcoin network. A decentralized or distributed database / register means that the storage devices, where the lasers are located, are not connected to a common processor. Blockchain has a growing list of transactions through blocks. Each block is time-stamped and then linked to the previous block to become a part of the blockchain.
Before computers, people made large copies of their important documents and stored them in impenetrable steel safes, buried treasure chests or bank vaults. As an added security measure, you will translate each of these documents into a secret language that only you can understand. That way, even if someone were able to break into your bank vault and steal your belongings, they wouldn’t be able to understand your confidential messages and you would still have plenty of backups stored in other locations.
Blockchain puts this idea on steroids. Imagine that you and a million friends are able to make copies of all your files, encrypt them with special software, and store them in each other’s digital bank vaults (computers) across the Internet. That way, even if a hacker breaks into your computer, steals or destroys it, they can’t interpret your data, and your friends network still has 999,999 backups of your files. This is blockchain for short.
Special files are scrambled with encryption software so that only certain people can read them, stored on a common computer, connected together via a network or the Internet. Files are called lasers – 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 lasers from each other (hence the name, blockchain).
The social impact of blockchain technology is already beginning to be realized and this may just be the tip of the iceberg. Cryptocurrencies have already expressed skepticism about financial services through digital wallets, the rollout of ATMs and the arrangement of loans and payments. Considering that there are currently more than 2 billion people in the world without a bank account, such a change can certainly be a life-changing one and only a positive one.
Perhaps the change in cryptocurrency will be easier for developing countries than the process of fiat money and credit cards. Similarly, it is similar to the transition of developing countries with cellular phones. It was easier to get a lot of cell phones than to provide a new infrastructure for landline phones. Decentralization away from government and control over people’s lives will probably be taken up by many and the social impacts can be quite significant.
One only has to consider the prevalence of identity theft hitting the news in recent years. Handing over control of identification to the public must eliminate such incidents and allow people to disclose information with confidence. In addition to giving disadvantaged people access to banking services, greater transparency can increase the profile and effectiveness 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 assistance for the poor in some parts of the world who desperately need help. Ironically, and not inline with public opinion, blockchain can create a financial system based on trust.
Taking it one step further, blockchain technology has been well established to eliminate the possibility of vote rigging and other negative aspects associated with the current process. Believe it or not, blockchain can actually solve some of these problems. Of course, with a new technology, new obstacles and problems will come but the cycle continues and those new problems will be solved with more sophisticated solutions.
A decentralized register will provide all the data needed to accurately record the vote on an anonymous basis and verify the accuracy and whether there has been any manipulation of the voting process. Fear will be non-existent if voters are able to cast their ballots in the privacy of their homes.
It remains to be seen whether blockchain technology will become a part of everyday life. Although inflated expectations have raised the possibility of termination of the central bank and their responsibilities as we know it today, the end of the centralized financial system is probably a long way off. Time will tell how the blockchain evolved, but one thing seems certain today. Stability is no longer an option and change is needed.