That was my question when we became curious about Bitcoin, which led me down the rabbit trail of a variety of different crypto-currencies (for simplicity I’ll refer to them as altcoins) which are powered by blockchain technology. Hopefully, by the time you finish this you’ll feel as though I’ve answered it, at least in part. I’m excited about the possibilities, and added a couple of them as payment options in here in the shop – all you have to do is select it when you checkout and use your favorite altcoin. I would like to see them get to a point where we can use them regularly for purchases, but that’s another discussion.
My geeky impulse for new technology aside, (and let’s face it – this is a geeky thing), altcoins and blockchain are hitting the mainstream, making more people curious. Blockchain will likely have a huge impact on our daily lives, but to understand the possible impact, you need to have a basic understanding of how it works. This understanding is something I am still working on, because it’s a big idea. If you have something to add to the conversation or questions about it, I want to hear from you – use the comments section below so we can all discuss it.
The idea behind blockchain is that it’s decentralized and publicly maintained, making the risk of hacking significantly lower. If this sounds crazy, don’t worry because I thought so too – but it’s crazy like a fox. All altcoin transactions are recorded in a public ledger, which is maintained by the network. The network is a group of computers (each is called a node) that all run the same software for a given altcoin, and keep a complete copy of the public ledger. When a new transaction happens, it needs to be added to that ledger, but first the network needs to verify it.
Here’s an example:
- Joe wants to send his friend Jane .5 Bitcoin because he’s feeling generous.
- He asks Jane for her Bitcoin address and she provides it either with the long alpha-numeric address or a QR code.
- Joe either scans the code (much easier) or enters the address, the amount and hits “Send.”
- That transaction gets added to the queue of pending transactions, and the network begins to process it.
- Each node on the network needs to verify it – there could be hundreds or even thousands of nodes.
- After 51% of the nodes have confirmed it as a good transaction, it’s added to the ledger as part of a block (a series of blocks forms the blockchain).
- Once a transaction gets added, it is permanent and unchangeable.
The real security is the fact that it’s public and open source – any tampering would be really obvious and require a conspiracy so big it couldn’t stay hidden. A hacker would have to simultaneously hack into 51% of the nodes – that’s a lot of hacking and a lot of computer power. It is completely contrary to the way we have always done security: Centralized with limited access. The reason it’s more secure than centralized security methods, is because in order to tamper with say, a bank’s ledger – you only need to hack into the central repository. The central repository then propagates the information to subsidiaries.
Like I said, it’s crazy like a fox.
Here’s the thing – the transfer of “money” in the form of an altcoin is really just a transfer of control of that area of data. It’s vastly different from how banks “create” and transfer money, which you can learn about in Bitcoin: The End of Money As We Know It, a documentary I found on Amazon. It has a few mistakes, and they skip over the role of the Knights Templar in modern paper money, but there’s a lot of very good information and I’ll never look at money quite the same again.
Blockchain is the future
Blockchain can give both anonymity and transparency. By creating settings that give certain access, restricting others and having each node keep their copy of the ledger containing all that information, getting into confidential files is significantly more difficult because you need to convince 51% of the nodes that you have the right to access that information.
Imagine this technology applied to voting and other hacking-prone things. Maybe we can even apply it to medicine production to prevent tampering, or other industries that require transparency and security. Business Insider did a great piece on possible applications – some are already being explored. There are courses offered on blockchain technology – the demand for people with expertise in the area is growing rapidly. This could be a very lucrative field to look at for kids who love technology and programming – but who knows? Maybe someone will invent something even better. The truth is this: For the foreseeable future, blockchain is here to stay, and it behooves us to understand its ramifications and pay attention to how it’s used. Our kids need to know, they need to understand it because it will permeate their lives.
If I sound like someone who will blindly hop and skip down the path to destruction, think again. I look at things a little differently than some – I don’t run out and get the latest gadget because I must have the latest gadget, and I don’t just jump on board with new tech without really looking at it. I need to see that it has a positive use in my life, that it will free me up in some way to do the things I’m good at even better. I have seen the videos on YouTube that say blockchain and altcoins are the mark of the beast, and I’ve seen those that promote it as the holy grail of everything. I think they’re both wrong. But I am a firm believer in that idea that the only constant in life is change – we can either learn to change intelligently and with wisdom, or be dragged along by inescapable progress. Which will you choose?