WTF is the blockchain?
Let’s understand the problem it solves before defining it.
Imagine, Joe is your best friend. He is traveling overseas, and on the fifth day of his vacation, he calls you and says, “Dude, I need some money. I have run out of it.”
You reply, “Sending some right away,” and hung up.
You then call your account manager at your bank and tell him, “Please transfer $1000 from my account to Joe’s account.”
Your account manager replies, “Yes, sir.”
He opens up the register, checks your account balance to see if you have enough balance to transfer $1000 to Joe. Because you’re a rich man, you have plenty; thus, he makes an entry in the register to transfer the amount. You call Joe and tell him, “I’ve transferred the money. Next time, you’d go to your bank, you can withdraw the $1000 that I have just transferred.”
What just happened? You and Joe both trusted the bank to manage your money. There was no real movement of physical bills to transfer the money. All that was needed was an entry in the register. Or more precisely, an entry in the register that neither you nor Joe controls or owns. And that is the problem of the current systems.
For years, we’ve depended on these middlemen to trust each other. You might ask, “what is the problem depending on them?”
The problem is that they are singular in number. If a chaos has to be injected in the society, all it requires is one person/organisation to go corrupt, intentionally or unintentionally.
Could there be a system where we can still transfer money without needing the bank? Is there a way to maintain the register among ourselves instead of someone else doing it for us?
The blockchain is the answer to the profound question. It is a method to maintain that register among ourselves instead of depending on someone else to do it for us. The requirement of this method is that there must be enough people who would like not to depend on a third-party. Only then this group can maintain the register on their own.
“It might make sense just to get some Bitcoin in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy.” — Satoshi Nakamoto in 2009