The Blockchain Brief Primer: Blockchain 101 [Post #1]
An attempt at simplifying blockchain concepts, companies, and coins.
I am not going to lie. When I first heard about blockchain and read about it, I had no idea what any of it meant. A bunch of you have been asking for some primer stuff, and by bunch I mean 15 out of the 27 of you guys. Remember, it's okay not to know and to ask questions. This alien tech is really confusing. Hopefully after reading this, you'll have an elementary understanding of the concept and a simple example to share.
Simply put, Blockchain is technology that:
Permanently records transactions
Is an Immutable Ledger
Is a Distributed database
Now, all you have to do is toss around those bold words at your next get together and you’ll be lauded as a Blockchain/Crypto genius. If they start prying for a real world example, appear to ponder deeply, as if you were trying to think of ways to explain such a complex concept to a simpleton (when in reality you also have no idea what is going on) and regurgitate the following. Hopefully the dialogue flows something like this.
You: “The Blockchain is like a giant google doc that everyone in the world has access to and shows exactly who has what (money/assets). When you transfer anything to any one, this ledger updates and everyone can see the change that was made.”
Friends: “But what about cheaters that update the sheet and say they have $1M or if they have $10 in their account, pay someone $10 for goods, get the goods and then update the sheet to make it look like they still have $10. Isn’t double spending a huge problem? That’s why we need banks and 3rd party intermediaries.”
You: “Ah my friend, that is such an old school way of thinking. Do we still barter? Do we still do business with seashells, trade goats and do accounting with abacuses? No. This is the future and next step towards us becoming an intergalactic species. To answer your question, we prevent issues like double spending and bad actors falsifying information through distributed consensus. Here is a great way to better understand distributed consensus and how we are able to remove 3rd party intermediaries like banks.
Imagine doing a transaction with someone in the middle of a football stadium with thousands of people watching. In order for the transaction to be valid, the rules are that you and the other person have to transfer the money and then shake hands. Once the majority of the bystanders witness the transfer of money and the handshake, it is recorded on the ledger.
Now let's translate that to Blockchain talk. In the place of bystanders, you have thousands of computers (distributed decentralized nodes making it trustless) looking for the transaction (money change of hands) and the handshake (protocol rules in order to determine a valid transaction). When the first computer witnesses (mining- we'll talk about this more in a future letter) the above actions, they broadcast it to all of the other computers to validate it. Once the majority of the computers agree, you have consensus and the transaction is then permanently recorded on the Blockchain (permanently recorded on immutable ledger).
This seemingly simple concept has massive implications and we'll pick up where we left off in a later newsletter to answer new questions that I am sure are forming in your head.
In the mean time, I want you to read this quote by Don Tapscott (Author of Blockchain Revolution) to fully grasp this techs potential. Exchange of money is just one area that the Blockchain will disrupt, similar to how the internet disrupted mail with email, but that was just one of the industries forever changed by the internet.
“Blockchain is a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value — money, but also titles, deeds, identities, even votes — can be moved, stored and managed securely and privately. Trust is established through mass collaboration and clever code rather than by powerful intermediaries like governments and banks.”
Let that sink in for a moment. How the world operates today and the intermediaries that we depend on are going to be completely upended. This is just the beginning.
Bitcoin hit $17K today... not sure how I feel. Always knew it would run, but is the current velocity sustainable? I really have no idea. Regardless, with the CME launching BTC futures on the 18th, we are absolutely in for some volatility, hopefully it's up and to the right.
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