Tuesday, May 4 2021

A SHORT Introduction To Blockchain - For Normal People

Crypto-what?
If you've attemptedto dive into this mysterious thing called blockchain, you would be forgiven for recoiling in horror at the sheer opaqueness of the technical jargon that's often used to frame it. So before we get into what a crytpocurrency is and how blockchain technology might change the world, let's discuss what blockchain actually is.

In the simplest terms, a blockchain is a digital ledger of transactions, not unlike the ledgers we have been using since way back when to record sales and purchases. The event of the digital ledger is, in fact, pretty much identical to a normal ledger in that it records debits and credits between people. That is the core concept behind blockchain; the difference is who holds the ledger and who verifies the transactions.

With traditional transactions, a payment in one person to another involves some kind of intermediary to facilitate the transaction. Suppose Rob really wants to transfer �20 to Melanie. He is able to either give her profit the proper execution of a �20 note, or he is able to use some kind of banking app to transfer the amount of money directly to her bank account. In both cases, a bank is the intermediary verifying the transaction: Rob's funds are verified when he takes the money out of a cash machine, or they are verified by the app when he makes the digital transfer. The bank decides if the transaction should go ahead. The lender also holds the record of all transactions made by Rob, and is solely in charge of updating it whenever Rob pays someone or receives money into his account. Put simply, the bank holds and controls the ledger, and everything flows through the bank.

That's a lot of responsibility, so it is important that Rob feels he is able to trust his bank otherwise he would not risk his money using them. He needs to feel confident that the lender will not defraud him, won't lose his money, will never be robbed, and will not disappear overnight. This need for trust has underpinned pretty much every major behaviour and element of the monolithic finance industry, to the extent that even when it was found that banks were being irresponsible with our money during the financial crisis of 2008, the federal government (another intermediary) chose to bail them out instead of risk destroying the final fragments of trust by letting them collapse.

Blockchains operate differently in a single key respect: they are entirely decentralised. There is Best Ethereum Wallet like a bank, and there is no central ledger held by one entity. Instead, the ledger is distributed across a massive network of computers, called nodes, all of which holds a copy of the complete ledger on their respective hard drives. These nodes are connected to one another via a software application called a peer-to-peer (P2P) client, which synchronises data over the network of nodes and makes sure that everybody gets the same version of the ledger at any given point in time