Block chain Changes The World

Many of you have heard about bitcoin. It is digital currency but not many people are familiar with the underlying technology: block chain. Theoretically, it is just a special distributed database. But what it can bring to us is far from storing the information. Many experts predict this technology will be the next generation of internet. Before knowing the greatness of block chain, we need understand what Internet looks like today.

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“Piggy Bank” via flickr user 401(K) 2012

When we do some peer-to-peer activities online, we always need the support from third party. Like we need bank to transfer money, need eBay to purchase stuff. But why we want this middlemen? For example, when I send $100 to my friend bob, it’s quite important that I will not have this money anymore meanwhile Bob’s balance will increase $100. Of course if we both are honest and trust each other, we can do this by ourselves. However, in most cases, this kind of asset transmission is between two unfamiliar people, so we need the third man who we both trust to do this thing for us.

Overall most middlemen do great job, but there are growing problem. First middleman can be hacked. Too much information is centralized in there. Second they exclude billions of people from the global economy, for example people who don’t have enough money to have bank account. Thirdly, money transmission across the city in banking system is time consuming.

Block chain solves these problems perfectly. It provides decentralized peer-to-peer model where trust doesn’t come from the institution but by collaboration, by cryptography and by some clever code.

So, how does it remove the middlemen? The idea is simple, in block chain, if I want to do something, I have to broadcast this information. Everyone will know what I have done, and everyone will be the supervisor. In addition, each person will have their own ledger to record all activities. And the person who complete this will be rewarded. Hence there is a group of people who are focused on doing this. They are called “miners”. Not everyone can be the “miner” unless you have a powerful computer.

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“Chain of Bitcoin keychains, symbolizing the Bitcoin Blockchain.” via Flickr user BTC Keychain

The whole procedure will be like this. When the first activity starts, a clock starts counting down. Every ten minutes, a block has been created that has all the activities from the previous 10 minutes. Then the miners get to work, trying to solve some tough problems. Once the first miner finds the truth and validates the block, the rest people will record this block in their own ledger. In the same way, the second, third block will be created. Each block will link to the previous one thus making a chain. This is exactly where the security come from.  If you want to hack a certain block, you have to hack that block plus all the preceding blocks until the entire history of commerce on that block chain. That means you should hack millions of computers, simultaneously.

Think about what the internet will be looking like. We don’t need eBay, we don’t need bank, no middleman will exist anymore. Everything online is peer-to-peer. It is will be definitely a revolution of internet.