The early internet dealt with intangibles. You sent or received emails, corresponded on forums, read and distributed articles. This modern internet deals with assets, your most valuable immediate items that you can touch and want to protect. These assets are stored in encoded form on a network-to-network chain called the blockchain or ledger, where each participant sees who you do business with. This not only protects your business dealings and prevents theft, but, also, simplifies your affairs, quickens the process, reduces errors, and saves you from hiring a third party.
This decentralized blockchain system is going to change your life from the way you transact business or manage assets, to the way you use your machines, vote, rent a car, and even prove who you are. Along the way, it will transform banks and other financial institutions, hospitals, companies, and governments among others.
At its simplest, cryptocurrencies, or digital coins, are coins that are passed through an electronic network. You can make transactions by check, wiring, or cash. You can also use a type of virtual currency, most famously Bitcoin (BTC) but also Litecoin, Peercoin, or Dogecoin, among others, where you use an electronic coded address to make the transaction.
The more valuable the transaction, the more you want to protect it. Traditional systems hire a mediator, such as a banker or a remittance company to ensure trust. Islanders of Yap had a different solution. They kept a mental record of who owned what and referred to this distributed community record when disputes arose. The blockchain is this community record on a wider, digital scale. It extends across the globe, with computer users from Yemen, Rome, Vermont and so forth where each node in the network records and verifies the data of each transaction that occurs within the network. Records are permanent, comprehensive and public – which is why users love the blockchain for finagling questionable or risky transactions.
How it works
Each transaction is a digital ‘block’ that needs to be verified before it’s allowed to enter the system.
- Is the money there?
- Are sender and receiver reputable?
- Is the request legitimate? And so forth.
Each computer on the network competes on unscrambling the answers, and the winning computer adds this ‘block’ to the ‘blockchain’ in the order that the ‘block’ arrived. The winner broadcasts his proof to the rest of the network, which checks that proof and verifies it before queuing the ‘block’ to complete the transaction. Parties involved are assured that participants have screened and okayed the transaction.
The process not only cuts down on fraud, such as double spending or spams, but also transfers funds simply, safely, and fast.