Blockchain

Blockchain Explained In Six Words

By November 23, 2017 No Comments
We're on a mission to bust blockchain confusion. Tired of listening dumbfounded while your techie friends talk hashrate & hard forks? Speak up! All you need is these six words.

We're on a mission to bust blockchain confusion. Tired of listening dumbfounded while your techie friends talk hashrate & hard forks? Speak up! All you need is these six words.

Disclaimer:  The information in this blog represents the opinions of its author and is for educational purposes only.  It is not intended as investment advice.  Cryptocurrency markets are extremely risky so you should only invest money you are willing to lose.

Can Six Words Change The World?

You've heard it's the technology of the future, a world-changing revolution, the hottest thing since the internet, even "the most important invention in human history" and you're dying to invest in it.  But what exactly is it?  Ask three people what blockchain is and you'll probably get seven different answers.  So let us break it down for you.  All you need is six words.

Self-verifying data; self-enforcing contracts.

Self-Verifying Data

How on earth can data verify itself?  By using a mathematical trick.

Cryptography is a special kind of math with built-in asymmetry that makes it really really hard to solve but ridiculously easy to verify a solution. Blockchain technology exploits this asymmetry to the max by building an entire database that is sealed and locked into a precise order by the solutions to cryptographic math puzzles.

What if a transaction could verify itself?  in order to secure a spot in the blockchain, a valid transaction has to contain the solution to a particularly hard math puzzle that only a network of computers can solve.  Once locked in place in the chain, that transaction can be verified by any computer anywhere using only math.

What if a transaction could verify itself? in order to secure a spot in the blockchain, a valid transaction has to contain the solution to a particularly hard math puzzle that only a network of computers can solve. Once locked in place, the transaction containing that solution can be easily verified by any computer anywhere using only math.

Cooperative Math Race

These puzzles are so difficult that it would take a single computer decades to solve a single one.  But a network of thousands of computers can work together in a kind of cooperative mathematical race to solve a puzzle in a few minutes.  

Sealed And Locked

Once a solution is achieved, all the computers can agree on it because it's so easy to verify mathematically, and that solution is used to seal a block of transactions and lock them in place into a chain.

Cryptographically Linked

The puzzle solution locking that block into place is cryptographically linked to all the previous puzzle solutions in the chain, making it almost impossible to manipulate, counterfeit, hack, or corrupt the chain or any part of it.

Smart contracts are like robot lawyers - they can execute complex agreements when specific conditions are met.

Smart contracts. like robot lawyers, can execute complex agreements when specific conditions are met.  They could obviate the need for many third parties, even judges 

The Truth In The Math

Since the entire data chain can be verified mathematically by any computer in a few seconds, there is no need for a trusted 3rd party to serve as the enforcer or keeper of truth.  The truth is right there in the math and no hacker or computer can change mathematical truth.

The technology is world-changing because it eliminates the need for central authorities and databases. Any kind of information can now be safely and securely spread out over an entire network and verified anywhere, making loss of data, crashes or hacks almost impossible.

Like Robot Lawyers

The really cool thing about blockchain is that the same decentralized database technology can be used to facilitate the creation of smart contracts which, like robot lawyers, can automatically execute the terms of complex agreements when specific conditions are met.

Smart contracts are like robot lawyers - they can execute complex agreements when specific conditions are met.

Could your lawyer be replaced by a robot?

Imagine a simple rental agreement.  A blockchain based application could execute and verify all the terms of such an agreement, from holding a deposit in escrow to collecting rent to giving a tenant access to an apartment with a smart lock that works only when the rent has been paid.

Self-Enforcing Contracts

The need for third parties, in some cases even lawyers and judges, could be eliminated with smart contracts.  Almost any type of financial transaction, from the quotidian to the complex, from buying a latte to the most deeply involved multi-party timed derivatives swap, can be facilitated by blockchain's smart contract technology.

Blockchain's highest value uses haven't even been imagined yet, but understanding blockchain requires just six words: self-verifying data; self-enforcing contracts.

Blockchain's highest value applications probably haven't even been imagined yet, but understanding blockchain requires just six words: self-verifying data; self-enforcing contracts.

From Driverless Cars To Missions To Mars

Just how much can blockchain do?  How far can it go?  Revolutionizing financial services is just the beginning.  All kinds of companies, from Toyota to Tesla, are making huge investments in blockchain technology, whose most valuable use cases probably haven't even been dreamt of yet.

So next time you hear people talking about the latest investment craze, the revolutionary new technology of blockchain, you'll know exactly what they're talking about.

Just Six Words

Self-verifying data; self-enforcing contracts.

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