The blockchain was originally created as a decentralized book of bitcoin transactions occurring in a bitcoin network. A decentralized or distributed database / book essentially means that the storage devices where the books are located are not connected to a common processor. The blockchain contains an ever-growing list of transactions by blocks. Each block is denoted at times and 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, you would translate each of these documents into a secret language understood only by you. So even if someone manages to break into your bank’s coffers and steal your stuff, they won’t be able to understand your mysterious messages, and you’ll still have a lot of backups stored elsewhere.
Blockchain puts this concept on steroids. Imagine you and a million friends can make copies of all your files, encrypt them with special software and store them in digital bank vaults (computers) all over the Internet. So even if a hacker hacks into your computer, steals or destroys it, it will not be able to interpret your data, and your network of friends still has 999,999 backups of your files. This is a blockchain in a nutshell.
Special files are encrypted with encryption software so that only some people can read them, storing them on regular computers, connecting to each other over a network or over the Internet. Files are called books – they record your data in a certain way. Computers are called nodes or blocks – personal computers that share their computing power, storage space and bandwidth. And the network is called a chain – a series of connected blocks that allow computers to work together to share books with each other (hence the name, blockchain).
The social impact of blockchain technology has already begun to be understood, and this can only be the tip of the iceberg. Cryptocurrencies have already questioned financial services through digital wallets, branching out ATMs and providing loans and payment systems. Given the fact that today there are more than 2 billion people in the world without a bank account, such a shift is definitely life-changing and can only be positive.
Perhaps the transition to cryptocurrencies will be easier for developing countries than the fiat money and credit card process. In a sense, this is similar to the transformation that has taken place in developing countries with mobile phones. It was easier to buy a massive number of cell phones than to provide a new infrastructure for landlines. Decentralization from governments and control over people’s lives is likely to be accepted by many, and the social consequences can be quite significant.
One need only take into account the many thefts of personal data that have hit the news in recent years. Transferring control of identification to people would certainly eliminate such events and allow people with confidence to disclose information. In addition to providing unprivileged access to banking services, greater transparency can also enhance the reputation and effectiveness of charities operating in developing countries that are subject to corruption or government manipulation. Increasing confidence in where money is going and what benefits are likely to increase contributions and support for those in need, in those parts of the world that are in dire need of help. Ironically, but not in line with public opinion, a blockchain can create a financial system based on trust.
By taking this a step further, blockchain technology has well got rid of the possibility of vote rigging and all the other negatives associated with the current process. Believe it or not, Blockchain can really solve some of these problems. Of course, with new technology, new obstacles and problems arise, but the cycle continues and new problems will be solved with more complex solutions.
The decentralized book will provide all the necessary data to accurately record votes on an anonymous basis and verify the accuracy and manipulation of the voting process. Intimidation would be absent if voters could cast their ballots in a private home.
Whether blockchain technology is becoming a part of everyday life remains to be seen. While inflated expectations have raised the possibility of terminating central banks and their responsibilities as we know them today, terminating the centralized financial system at the moment may be too far away. Time will tell how the blockchain evolves, but today one thing looks certain. The status quo is no longer an opportunity and needs change.