Blockchain was originally created to be a decentralized ledger of Bitcoin transactions that take place within the Bitcoin network. A decentralized or distributed database/ledger essentially means that the storage devices, where the ledgers are located, are not linked to a common processor. The blockchain contains the ever-growing list of transactions by way of blocks. Each block is time-stamped and then linked to the previous block to become a part of the blockchain.
Before computers, people kept their important documents safe by making lots of copies of them and storing them in impenetrable steel safes, buried treasure chests, or bank vaults. As an added security measure you’d translate each of these documents into a secret language that only you could understand. That way, even if someone managed to break into your bank vault and steal your stuff, they wouldn’t be able to understand your cryptic messages, and you’d still have lots of backups stored in other locations.
Blockchain puts this concept on steroids. Imagine you and a million friends are able to make copies of all your files, encrypt them with special software, and save them in each other’s digital bank vaults (computers) all across the internet. That way even if a hacker breaks into, steals, or destroys your computer, they can’t interpret your data, and your network of friends still have 999,999 backups of your files. That’s blockchain in a nutshell.
Special files, scrambled with encryption software so that only certain people can read them, saved on normal computers, linked together over a network or via the internet. The files are called ledgers – they record your data in a specific way. The computers are called nodes or blocks – personal computers that share their processing power, storage space, and bandwidth with one another. And the network is called a chain – a series of connected blocks that let computers work together to share ledgers from one another (hence the name, blockchain).
The social impact of blockchain technology has already begun to be realized and this may just be the tip of the iceberg. Cryptocurrencies have already provided doubts over financial services through digital wallets, the rollout of ATMs and the provision of loans and payment systems. When considering the fact that there are more than 2 billion people in the world today without a bank account, such shift is certainly a life changer and can only be a positive one.
Perhaps the shift for cryptocurrencies will be easier for developing countries than the process of fiat money and credit cards. In a way, it is similar to the transformation that developing countries had with cellular phones. It was easier to acquire mass amounts of cell phones than to provide a new infrastructure for landlines phones. Decentralizing away from governments and the control over people’s lives will likely be embraced by many and the social implications can be quite significant.
One only needs to consider the spate of identity thefts that have hit the news in recent years. Handing the control of identification to the people would certainly eliminate such events and allow people to reveal information with trust. In addition to giving the underprivileged access to banking services, greater transparency could also raise the profile and effectiveness of charities working in developing countries that fall under corrupt or manipulative governments. An increased level of trust in where the money goes and who benefits would surely lead to increased contributions and support for the needy in parts of the world that are in desperate need of aid. Ironically, and not inline with the public opinion, blockchain can built a financial system that is based on trust.
Taking it one step further, blockchain technology is well placed to remove the possibility of vote rigging and all of the other negatives associated with the current process. Believe it or not, Blockchain can actually solve some of these problems. Of course, with a new technology, there are new obstacles and problems that will come but the cycle goes on and those new problems will be solved with more sophisticated solutions.
A decentralized ledger would provide all of the necessary data to accurately record votes on an anonymous basis, and verify the accuracy and whether there had been any manipulation of the voting process. Intimidation would be non-existent with voters being able to cast their votes in the privacy of their home.
Whether blockchain technology does, in fact, become a part of everyday life remains to be seen. While inflated expectations raised the possibility of an end to central banks and their responsibilities as we know it today, an end to the centralized financial system is perhaps a step too far for now. Time will tell how blockchain evolves, but one thing looks to be certain today. Status quo is no longer an option and change is needed.