The tech world swears by it, but most of us find ourselves politely nodding in confusion whenever the blockchain comes up in conversation. But this technology could very well dictate the future of monetary exchange and render obsolete the power of states and banks over financial transactions. No joke. So if a revolution is really underway, we’d better know the ins and outs of this phenomenon. Here, at last, we’ll explain what the blockchain actually is.
The blockchain is a solution to a complex computer problem
It all began with an abstract computer problem devised in 1982 by researchers at the Stanford Research Institute. The solution to the following problem would allow them to guarantee the security of exchanges within a computer system.
Byzantine army divisions are posted outside an enemy city. Each division is commanded by its own general. The generals can only communicate with each other using messenger boys. After having watched the enemy, they must coordinate their moves to win the battle. However, a few of the messenger boys could be traitors trying to stop the generals from agreeing on a course of action. So the generals’ problem is twofold. They need an algorithm that ensures that loyal generals will all agree on the same plan of action, and also that the treasonous messenger boys won’t succeed in derailing the plan. This problem was written about in a complicated but fascinating study.
It’s an unsolvable puzzle, until the Blockchain gets involved.
It eliminates the need for an intermediary within a transaction
The Blockchain solves this problem on a digital and economic level, by eliminating the need for an intermediary within a transaction. It appeared with the invention of bitcoin, the booming cryptocurrency created in January 2009. At the heart of bitcoin is a tamper-proof, open access computer file that compiles all the transactions bitcoins make. That’s the blockchain. Just like a giant book of accounts belonging to everyone, hundreds of copies of the blockchain are held by users around the world. They are updated simultaneously in real time, making the blockchain virtually indestructible, barring the end of the world. It’s reportedly the safest technology to use in financial exchanges, even though recent cyber attacks have led the Financial Times to cast some doubt on its safety.
Its creator remains shrouded in mystery
The person or people who invented bitcoin and the blockchain are hidden behind the pseudonym “Nakamoto.” Though his, her or their identity remains shrouded in mystery, there are several theories as to who they may be. Some say Nakamoto was a Japanese computer engineer in his late 30s, but no one can prove it. In 2011, journalist Joshua Davis wrote an investigative piece for the New Yorker claiming that Nakamoto was either a cryptographer from Dublin named Michael Clear, or a Finnish sociologist and economist by the name of Vila Lehdonvirta. Both interested parties denied the link. One Australian developer, Craig Steven Wright, claims to be Nakamoto but hasn’t produced a shred of convincing evidence. The real Nakamoto currently has about a million bitcoins, or nearly a billion euros. Whoever Nakamoto is, he or she explains everything about the creation of bitcoin and the blockchain in this study.
The blockchain guarantees a secure and anonymous network
So what’s so revolutionary about this invention? Issues of data protection and identity are at the center of most concerns in the digital age. A network guaranteeing both is seductive to users, especially those who engage in commercial exchanges online. Sending and receiving money directly between two parties, without having to use services like banks or PayPal, is an undeniable advantage. Don Tapscott, an expert on economics and the social impact of technology, discusses how the blockchain will “change the world” in his new book. Here’s an excerpt published by Fortune.
Big names in Silicon Valley are already on board
For digital entrepreneurs, secure and instant transactions that don’t require expensive middlemen are a boon. Investor Marc Andreesen hasn’t concealed his admiration for the blockchain, calling it “all the Internet ever needed.” Virgin founder Sir Richard Branson is also convinced the technology can change the world. He’s assembled experts from all walks of life on his island in the Caribbean to prepare for his revolution.