Written by Quadrum Lee
September 22, 2019
Latest Tech News
Blockchain Explained with Real World Example
Blockchain solves the problem of trust and promises to transform the way we connect storing information and trade. At its heart, Blockchain is easy to understand, how much of the discussion about it is more complex than it needs to be.
Imagine you want to buy a second-hand car and you look online and find the perfect car. The seller of the car tells you that it was purchased 3 years ago and it has been regularly serviced. He’s kept a record book and everything appears to be in order but can you trust him? is a record accurate? or Does it contain false information?
Perhaps there was an accident and the required work was not recorded OR perhaps the car has never been serviced and the seller just faked the records. Ultimately, you need to decide to trust or not trust the seller. You could do the extra work of talking to the mechanic or meeting them in person but they may not tell you the truth. At some point a decision about trust needs to be made.
How can we trust?
The problem of trust is not limited to buying a car. When you order from Amazon, you trust that what you order will arrive. When you use internet banking, you trust that the bank will transfer your money. When you use Uber, you trust that a safe driver will arrive.
How Blockchain Changes the Nature of Trust
Blockchain solves the problem of trust and removes the need for middlemen of trust such as Equifax, JP Morgan, Airbnb, Alibaba, and even eBay.
What is blockchain in simple words?
While it is accurate to describe blockchain as an immutable distributed ledger that is continuously updated, this jargon is not easy to understand. So let’s adjust the language. Rather than ledger, let’s call it a record book and rather than immutable, we will say permanent and rather than distributed, let’s use the word shared.
So blockchain is a permanent record book that is shared. It’s not one centralized copy of the book that is shared, but rather, thousands of copies that are shared on computers all around the world. Each computer has a full and complete copy of all records since the record book was created. As the record book is shared across a network, It is impossible for false entry to the added.
Define Blockchain with the second-hand car
Consider our second-hand car again, If the history of the car was stored on a blockchain, you will have complete confidence in the data. Each record store on the blockchain is stamped by the Trusted third party that wrote that record and is secured with a unique key for that record.
The keys Created using cryptography and are unhackable. New records build on existing records with each new key, not just securing that record but lock in all previous data in a secured chain of data (a blockchain). The use of cryptography is used to create a secure key makes the data totally trustworthy.
Can anyone hack a Blockchain?
To hack a blockchain, an individual would need to hack the key. Not just for one block but for all the blocks on the chain since the shared record book was created. And not just on one computer, but across millions of computers simultaneously. This is infinitely more secure than how none of the blockchain data is currently stored by your government or bank.
What is Smart Contract?
Smart contracts provide even more utility to blockchains. Smart contracts allow you to set parameters to determine when, why and how new line items are added to the record book. Essentially ensuring that each party honors their commitments.
For instance, a smart contract could be set up to pay the driver when you arrive at your destination or only pay a seller after the goods arrive at your home. The genius of this shared record is that it doesn’t require a middleman function.
You do not need place trust in JP Morgan, Amazon, Uber or any middleman. As Everyone has a copy of the record book. It’s not controlled by a single person or company.
Here are 5 real-world examples of how companies are using this Blockchain Technology
01. Civic – Blockchain technology is being used by companies like Civic to create a secure online Digital identity by combining multiple reputable sources. They are able to protect you against identity theft.
Consider fair trade as well. As a Company, let alone a consumer is very hard to have total trust in the authenticity of your supply chain or to say is in another way. How do you know that your Indonesian coffee is really from Indonesia?
02. Providence – Providence is a start-up using blockchain to track the entire supply chain. It’s not just a transfer of goods but also money.
Financial companies charge up to 10% to transfer money internationally and it can take up to a week to arrive.
03. Abra – Abra is a startup that uses blockchain technology to transfer money internationally at a fraction of the time and cost.
04. Uber – Blockchain can also be used to create a decentralized version of peer to peer ride sharing networks like Uber. But without the Uber, Only riders and drivers involved. This reduces the cost of ride-sharing. Startups such as Arcade City have already created this.
05. Storoe – When it comes to cloud storage rather than using Google Amazon or Dropbox to store your data, companies like Storoe uses blockchain technology to create a cloud that is shared by the community. This provides a high level of privacy and reliability at a fraction of the cost.
So blockchain technology solves the problem of trust and allows us the people to connect and trade directly without the use of the middle man. Blockchain provides us with the confidence of knowing who we are dealing with, having total visibility of Transactions and with smart contracts.
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