Lately I've been fascinated with blockchain technology and it's potential to change the world. In this short article, I'd like to explain what blockchain is and its importance. I'm going to start with a real-life example.
Imagine that your friend requests 100 L.E. from you. When you send him the requested amount, what happens? Does someone physically take the amount from a metal box with your name on and hand-deliver it to another box with your friend's name? No. Your money is just information maintained in a digital record called a ledger. The information is data.
Does it matter if a PayPal receipt is green or blue? Or if it has your photo on it? It doesn't. What really matters is what it contains. Ownership, identity, and value are all things that are saved in the record books. These record books are maintained by a central authority. The authority, such as an accountant, keeps the records locked away so that folks like us won't "accidentally" add millions to our own accounts.
There are many kinds of institutions that we entrust with ledgers. PayPal has a ledger. Your bank has another ledger. We trust that PayPal and banks will accurately and honestly maintain our records. This is difficult because each authority has their own ledger that has to be kept in sync with the rest. Now imagine that there was a magic ledger that was not controlled by any one authority, could be updated by anyone, and is safe from malicious individuals. This magic ledger is blockchain.
Let's think of all the possibilities that are created by this magic ledger. Nowadays, when you use PayPal or your bank to send money, you're not the only updating ledger. You are requesting that the institution do it for you. This means that the institution has the power to grant or deny your request. The institution can also change terms and conditions, or even freeze your account.
With blockchain, you can send and receive payments to or from anyone without needing the assistance of an authority. You can also avoid the fees that you pay to the authorities. Blockchain makes digital transactions more akin to physical transactions with cash. For example, if you buy some chocolates for 10 L.E., you hand over the money to the shop keeper without him needing to know who you are. Once the shop keeper has the money in his possession, he knows it's his and he can do whatever he wants with it. And he knows that it's real money. This kind of transaction can take place without needing any authority to verify the transaction. In real life, this means that we can eliminate central banks because blockchain ensures that all value transacted is valid.
Blockchain technology is an amazing technology that is quickly emerging. I hope that I've piqued your interest in this technology. Soon our lives will be made easier and more efficient by blockchain.
