Property, Security and Decentralized Consensus
WHY should you care about Blockchain? Many reasons, but consider this for now. You care about your property, and you care that if someone pays you, it’s legit. You also don’t want anyone to steal your property.
Blockchain is a shared record book with line items, known as blocks. A block contains some information related to the transactions that take place. The record book is considered the “official” spot to store transactions between peers. Notice I said “peers”, in essence removing the middle-man, allowing for more efficient ways of doing business, without requiring permission from someone else.
Now, there happens to be thousands of copies of this ‘record book’ all around the world — and that’s why it’s known as a DISTRIBUTED LEDGER. Let’s stop for a moment and realize the number one problem solved by Blockchain — and that is DECENTRALIZED CONSENSUS, a unanimous agreement over the network about what is true or false.
That means you do not have to trust a central authority in order to get stuff done. This has the potential to impact EVERY industry that relies on third parties to act as a central authority. Although thousands of copies of the record book exist, it takes more than just “a check in a box” to validate a transaction. It’s VERY important to understand that all transactions are IRREVERSIBLE and recorded securely and transparently on the chain.
So, we better make sure the transaction is VALID before adding it to the blockchain, especially when ownership of property is at stake. For instance, if Bob sends 5 bitcoin, Bob must have sole ownership of 5 unspent bitcoin available in his account. We must also have a way to verify that it TRULY was BOB that authorized the payment. Blockchain verification solves that problem with the indisputable laws of mathematics. We’re not going into how that works just yet.
To understand why blockchain verification is so powerful, let’s compare it with something you hear about every day, and forms of payment you’re already familiar with. CASH can easily be stolen when physically robbed. In the form of check, Bob’s signature could be forged. These days we also hear of skimming debit cards at ATMs and gas stations, where information about the card is copied and becomes readily available for someone else to use, instantly robbing him of his hard earned cash. What if Bob tried to use counterfeit cash? What if Bob paid for an item he walked out of the store with by signing a bad check? In any of these situations, someone is getting screwed.
In Blockchain, transactions must be DIGITALLY signed using 256-bit encryption with a private key owned by the user of the value associated with the transaction. A transaction contains a message signature that could only have been created by the owner of that key and account address. We’ve covered a lot here. In future episodes, we will further explain how Blockchain achieves DECENTRALIZED CONSENSUS, ensuring the source of funds are available to spend, and the transaction was correctly signed, making it valid and added PERMANENTLY to this shared record book known as Blockchain.
Please Subscribe, Like, and Share.
Dan Emmons is owner of Emmonspired LLC, a Certified Bitcoin Professional, Certified Ethereum Developer, Full Stack Developer and Advisor on Cryptocurrency projects. He is also the creator of a Youtube Channel and iTunes Podcast called #ByteSizeBlockchain.