The rise and rise of Bitcoin is undoubtedly the focal point of the Blockchain revolution. Naturally, this only gained widespread media coverage after the Bitcoin price exploded this year, from under $1,000 at the end of March to almost $7,500 this month. But the obsession has turned into a heated pursuit of the Bitcoin price, as ‘investors’ try to make quick and big profits. Many have not even heard of ‘Blockchain’, the underlying technology; don’t know that Bitcoin is in fact a ‘cryptocurrency’, whose existence is supported by ‘mining’; or that you can buy, sell and trade these cryptocurrencies on ‘Digital Currency Exchanges’ (DCEs).
So do you need to know all of this?
Well, it depends. One of the biggest problems in trying to gain widespread acceptance of cryptocurrencies, like anything complicated, is that people are afraid of what they do not understand. Yet, people do not understand how mobile phones work, and still we use them thoughtlessly and non-stop. And that’s the main point - that people use them. They use them because they are useful, and so we don’t question them.
We are not quite at this stage with Blockchain. So far it is early uptakers who are accepting Blockchain technologies, mainly visionaries and programmers who know its potential. These are the people who are busy developing it rather than trying to persuade everyone in its value. Better to show than tell, they believe.
When people saw the first trains, they were terrified. Also, suspicious. This suspicion caused doubt. This is the same kind of doubt surrounding Blockchain. And current mainstream influencers, with a major stake in the old system, will capitalise on this feeling to cause some problems of their own for Blockchain.
But while the rest of the world comes round to the idea of Blockchain, and how it will change everything, you could spend your time getting your head around the benefits of such a technology, and at least the basics of how it works.
As builders of a free and fair global online media, PUBLIQ is giving you a series of blog posts on some of the main aspects of Blockchain: how it works and why we need it.
Where better to start than Blockchain itself? This might seem obvious, but many Bitcoin investors, who are interested in selling after a boom to make a big profit, have not even reached this step.
To make it more confusing than it should be, the word ‘Blockchain’ itself is not that useful at this stage. So, forget about that for now. Much better is to think of a large group of people who all live together, like a hippie commune.
Let’s presume this commune has their own currency, called HUGS. This is like any other currency, apart from the fact that every transaction between any two hippies must be witnessed by the whole group. In reality, let’s say that this has to be ninety out of the total 100, just in case some of the hippies are ill or on holiday.
What you get is a system of perfect trust. If hippie Alexa, for example, pays hippy Blondie 3 HUGS, then the whole group remembers it and knows the ‘balance’ of Alexa and Blondie. This is also works since hippies are pretty honest people, so there would not be any need to suspect that mass fraud was going on in this commune.
Now, Blockchain is a little bit more technical, but not that much more complicated in its general concept. Let’s swap hippies for networks and computers and see what we get.
The hippies are now spread across the whole world, spreading the hippy way. Each is their own ‘node’ of a Blockchain network. Instead of trusting each other face-to-face, they now have to put their faith in a metal box.
Blondie now want to pay Charlene 5 HUGS. So she sends the payment via a Blockchain cryptocurrency program, which works almost exactly like when the hippies exchanged HUGS back in the commune.
Each hippy receives a notification of this transaction onto their ‘public distributed ledger’, which keeps a digital record of all transactions within the group. It also saves the hippies quite a bit of effort since they do not have to personally approve all the transactions. They cannot make a payment if they do not have enough HUGS. Whenever they want, they can look at the public ledger, knowing that all the other hippies have exactly the same one. So the hippies can be as relaxed, as they should be, in any remote corner of the globe as if they were still in their original commune.
We will resist the temptation to go into more detail here. This is the minimum conceptual knowledge needed to know how Blockchain works. Here we looked at Blockchain through the fictional HUGS cryptocurrency. For them, it works because it does what it is supposed to do: it creates the same trust as reality, perhaps even more.