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Blockchain: Revolutionizing The Trust of Our Generation

Let we have a glance at the ground of the internet. It was just a couple of computers and connected by buses and capable of carrying little bits and bytes between them. And today, here we are, reading this article even in the toilet without a wire connected to the device on which you are reading this article. With the help of the latest innovation in technology and tech influencers including Elon Musk, Jack Dorsey, Mark etc., the world has now extensively changed. These innovations in technology have filled various aspects of distance in human life.

Printing Press, one of the biggest innovations in 1400’s had filled “Knowledge” gap. Earlier, someone from the governance of king was providing knowledge under the name of that king. And, the printing press was invented and completely closed this knowledge gap. If we look at the innovation of engine, it has filled “Power” gap that we used to generate using manpower, slavery for manufacturing. And the internet, the most favorite innovation of today has filled the “Distance” gap completely. Today you can transact and connect with anyone, everywhere and anytime on this planet. But that’s not the end where the unconscious human mind should stop, right? Therefore today, we are going discuss the most undervalued and unconsidered gap that currently exists which can be filled by ingenious innovation which is known as “Blockchain” with a motto:

If you can not explain it simply, you don’t understand well enough. – Albert Einstein

The blockchain is going to change the way we “Trust”. I think you are having confusion that we trust each other, we trust banks, we trust society then which trust we are talking about, isn’t it? We are talking about the trust that is core factor of business, which is a fundamental currency of commerce. We, probably 7.6 billion people are making around 100 trillion transactions based on this manufactured trust though that is easily breakable.

We have invented “Ledger” that is a fundamental way of storing transactions made today. It is similar to the library where all human being’s history has been stored. While constructing and modifying a brand-new house, all expenditures are stored on this ledger. But, while buying from a seller, he might have changed one of those records within ledger as it can be edited, who knows! Meaning this ledger cannot be trusted, one can add while one can remove records too. And that’s where intermediaries brought in place. These intermediaries which are responsible for keeping a centralized copy of ledgers in all of the commerce and they facilitate the brokering of the relationship between those who are looking to trust and those who are looking to be trusted such as banks, payment gateway agencies etc. Now you are losing your trust in whom you had trust. In this scenario, blockchain comes into the picture.

WTF is Blockchain?

The blockchain is technology that enables transferring digital assets like bitcoin, ethereum, litecoin etc. from an individual to another anywhere on this planet at any instant of time with the help of distributed ledger in secured manner. Do remember, bitcoin is not blockchain.

Blockchain does not solve only the problem of intermediaries for money transfer like Visa, Master Card but it solves every problem that exists in various aspects of life which needs intermediaries. The easiest explanation is described below.

For example, Harvey in New York wants to send $50 to Mike residing in India. This is typically done by using third parties which receive a request from Harvey and identify Mike’s account in India. After identification, it will move Harvey’s $50 which will effectively be $40 after taking the fees for their service. Additionally, it can take up to 3 or 4 days too. But what blockchain is attempting to solve is,

  1. Elimination of intermediaries
  2. Faster and instant fund transfer
  3. Reduce the transaction costs
  4. Transparency
  5. Drawbacks of centralization

How does Blockchain work?

Concept of the Open Ledger

Blockchain Open Ledger |

To understand the concept of the open ledger and how it is being implemented on the blockchain, let’s assume that we have a network of four people namely Harvey, Donna, Mike, and Racheal. At the moment of inception of the network, Harvey has $100 from the beginning and which has been recorded on the network. Now, Harvey makes a transaction of 50$ to Donna[H=>D{$50}] and this transaction is now going to link with the already existing transaction.(H=$100). Similarly, when Donna makes a transfer of $30 to Mike[D=>M{$30}], it will add to already happened two transactions. At last, Mike adds a record of $10 to Racheal[M=>R{$30}] to existing three transections. And thus, the open ledger is a chain of transactions which is viewable to everyone in the network. If now Harvey attempts to send $120, everyone in the network can see this not a valid transaction because Harvey had started with $100 and now he has $50 and this invalid transaction won’t get added to the ledger so it will not be part of the chain.

Concept of Distributed Ledger

In distributed ledger, blockchain is going to trade centralized and to distribute across the nodes into the network. Meaning, Racheal can have the copy of open ledger and can hold it. In fact, anyone one participating in the ledger can hold the chain of events(ledger) that happens. Eventually, we have eliminated the need for third parties. But using blockchain technology, we need to make sure that all participants in network see the same copy of ledger. Let’s understand how these nodes are synchronized with each other.

Blockchain Distributed Ledger |

In a network shown above containing distributed ledger, suppose Donna sends $15 to Racheal. Now node D will publish and broadcast this intended transaction to the network. This is yet invalidated transaction and everyone within the network can see it. In order to get this transaction validated in the ledger, the concept of miners come into the picture. Minors are special nodes which can hold the ledger. Let we take H, D, M, and R are minors and the first minor who validates the transaction and add to ledger will get a financial reward. Validating transaction is a process of,

  1. Validating transactions to calculate whether D has enough funds to send to R.
  2. Finding a special key that will enable to take previous transaction and locks with new transaction.

The first step easy to do. But for the second, minors need the computational power for searching special key that matches/solves the complex problem of adding a new transaction. As these keys are random it will take time and the first one who finds this key will get a financial reward. This minor will publish this transaction with the found key in public ledger to broadcast newly created transaction. Now all minors can see this transaction is validated and the key has already been found, they will add this transaction to their ledgers as there is no meaning of finding the key which has been already found to get a reward. On the occurrence of every transaction, these minors solve complex mathematical problems and add transactions to public ledger.

These types of chains can be created in the different area of interest such as health chain, real estate chain, financial chain etc. If one temper with particular records, it will be replaced by a copy of that record because entire industry will be operating within the same chain.

Why we need Blockchain?

The conventional trust gap that we just discussed is actually increasing nowadays. Today we are not transacting with only human being but we transact with smart devices and that’s the increasing trust gap we were talking about. As per one prediction, we will have 7 times more smart devices than the human being by 2020 in the world and we will have to trust them. Another manufacturing of trust by people that includes quarter million rides that’s happening between Uber and Lyft, hundred thousand online transactions occurring per day on Alibaba, Etsy, Amazon etc., hundred fifty thousand room that is rented per night on Airbnb and we are putting our lives at risk every day.

The blockchain is not only about eliminating intermediaries but it is also about establishing trust companies that will replace every other company in the world. For example, we buy tangerines from a store based on logo/trust provided by some standard reputational and authorized companies. What if one stick that logo on those downloaded from the internet! But what we do is just trust that logo in spite of having an actual idea of where it comes from and make ourselves unhealthy. But imagine a tangerine company comes with blockchain implementation by providing QR code and when I scan that QR code it reveals all of the transactions that happen in that tangerine farm including all the chemicals that were applied to it and running on blockchain so that I know that I can trust it. Now, which tangerines will you buy?

That is the power of blockchain.

That is the power of distributed ledger in which you know that someone did not temper without having to have an intermediary. With the future of blockchain, every company in the world will be having competition with blockchain version of themselves!

This is the difference between how we exist today as commerce how we will exist tomorrow.

Blockchain Infographics:




Richie Etwaru, QuintilesIMS

Shai Rubin, Citi Innovation Lab



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