Like most millennials, I like things explained in the simplest way possible — Tweet-length, IG-story format. So the first time I heard the word “blockchain,” I immediately turned to Google for an all-encompassing, one or two-liner about the technology that was supposed to eliminate diseases, overthrow the government, and replace my bike with a lambo all in one fell swoop.
Unfortunately, every article I read was sprinkled with terms I’d never heard of before, like “nodes,” “hashrates,” and “permissionless distributed ledger technology.” Each article and YouTube explainer made me more and more confused.
Is blockchain really THAT complicated? Do you really need to have a masters in computer science from MIT to understand how it works?
The answer, thankfully, is NO. Despite what many people think, blockchain is not a difficult concept to grasp. The problem is actually the way it’s currently being explained. Right now, most of the explainers out there are way too technical, leaving non-techy folks (like me) in the dust.
But you shouldn’t have to be a coder to understand the VALUE a technology can provide.
Take the internet, for example. You can explain it like this:
“The internet is a globally connected network system that uses TCP/IP to transmit data via various types of media. The internet is a network of global exchanges — including private, public, business, academic and government networks — connected by guided, wireless and fiber-optic technologies.”
But most of us would explain it this way:
“The internet is a way for us to send and receive information digitally.”
Or if we’re being honest:
“The internet is a way for us to creep on our ex’s Facebook and binge watch Netflix”
Value understood — check.
So what about blockchain?
My goal is to explain blockchain in a way that even your grandpa who doesn’t trust ATMs can understand.
If you strip blockchain down to its core, you’ll find that it‘s just a record-keeping tool. Today we keep records for all sorts of reasons. Stores keep a record of all its stock and sales to manage inventory. Banks maintain a record of your deposits and withdrawals to keep track of how much money you have. And the bar down the street keeps a record of that tab you never intend to pay.
We’re all very familiar with the record-keeping examples above. But what do they have to do with blockchain?
Let’s take a closer look at the bank example and expand on it a bit. Let’s say your Aunt Carla lives abroad and wants to send you money here in the Philippines.
You and Aunt Carla have bank accounts with the same international bank. Aunt Carla goes to her bank and says, “I want to send 100 USD to my nephew in the Philippines!” The bank first checks to make sure Aunt Carla has enough money and then records the transaction “Aunt Carla: -100 USD, You +100 USD” in its big bank record book.
Kinda old-school. But believe it or not, this was the “best” way to send money across the world…up until now.
The process of sending money through banks poses three major problems:
- We need to trust a middleman (i.e. the bank) to keep track of all our records and to make sure that no one (including bank employees) makes a mistake or messes with the records.
- The bank wants a sizeable cut of the transaction. Let’s say the bank fee is 15% (this is an actual rate some institutions charge!). Instead of getting that 100 USD from Aunt Carla, you’re only going to get 85 USD. The bank takes the remaining 15.
- The transfer takes time, often days, for you to even access the money your aunt sent you.
By the time you get your 85 USD — 5 days later — you’ll probably be thinking:
Blockchain technology can end all that frustration.
Just imagine: Instead of relying on one middleman to keep track of all the records, what if all the records are instead public and can therefore be checked by everyone and anyone?
On the blockchain, that record of -100 USD from Aunt Carla and +100 USD to you is sent to EVERYONE on the network. Because everyone now has a copy of that record, there is no one person who controls it. This means it’s impossible to give yourself extra money or steal from other people.
The process removes bank fees and allows money to be moved instantly because it’s now going directly from Aunt Carla to you. It also prevents any accidental or intentional tampering of records. If your cousin Diane for example tried to fudge the record to give herself a little extra cash — typical Diane — she’d be denied. Why? Because the record she tweaked would not match anyone else’s.
Now the idea that everyone can see how you get or spend your money may make you a bit nervous. You probably don’t want anyone else to know what you’re spending your money on.
That’s okay, because on the blockchain, your identity is completely protected. Instead of your names, you and your Aunt Carla will be identified using a randomly generated string of alphanumeric characters.
Now let that sink in for a second.
With blockchain technology, we now have a foolproof way of storing digital records, that can NEVER be hacked or manipulated, allowing us to send money securely to anyone — instantly and virtually for FREE.
THAT, my friends, is something we have never seen before.
But sending money isn’t the only application of blockchain technology. And here is the Key Takeaway: ANY process that relies on trusting a middleman, regardless of industry, can potentially be improved with blockchain — which is why everyone’s so excited about it!
Here’s a quick list of other ways blockchain can be applied to improve our lives.
Eliminating voter fraud
With blockchain technology we can tie every vote to an actual person while keeping their identity safe, completely eliminating any voter fraud and ensuring the person who gets elected REALLY WAS elected.
Reducing subscription fees
What if you could watch your favorite shows at a cheaper price? Service providers like Netflix are considered middlemen for distributing video content to paying customers. Blockchain can connect users directly to content providers, letting you binge freely on your favorite shows at a fraction of the current cost.
Tracking product quality
The process for shipping produce from farm to table can be a logistical nightmare. Shipments can get misplaced, stolen, or accidentally swapped with lower quality produce. That bag of organic Colombian dark roast you just paid a fortune for at Starbucks may actually contain synthetic beans from elsewhere. Blockchain’s foolproof record system ensures the origin and quality of products, including the beans in your morning coffee.
Now get out there and impress all your friends with your new found blockchain knowledge!