The Next Generation of Money - Bitcoin ?
Most of the time, sending
money is risky. If you want to pay your rent or invest in the stock market or
even send somebody Rs.710 for pizza in a phone app, there isn't a lot to stop a
hacker from taking that money for himself. Every transaction must run through a
central institution, and all it takes is a weak link in that institution's
security to leave your finances and personal information up for grabs. But with
the advent of blockchain technology, financial transactions are becoming fast,
secure, and difficult to hack.
Is Bitcoin a Blockchain
?
Part of the reason blockchain
works is because it's democratic: anyone can pitch in to ensure the network's
security — and get some money for the effort. If you don't believe us, check
out the video below about a Bitcoin mine in China
The difference between
traditional finance transactions and blockchain exchanges is sort of like the
difference between a Microsoft Excel spreadsheet and a Google Sheets
spreadsheet. You can send an Excel spreadsheet to a friend to make changes, but
you have to wait until they save their work and send it back before you can
make any more changes yourself. That's how banks move money right now: one
bank locks access to the balance being transferred until the recipient bank
confirms they've received it. All that coordination and synchronization takes a
lot of time and effort.
On the contrary, if you want
to edit a shared Google Sheets spreadsheet, both people have access at the same
time and can always see the changes being made. Now just multiply
that to many thousands of home computers, and you start to get a
sense of what's known as the blockchain ledger. It's an open, distributed
network of individual computers, or "nodes," that each hold bundles
of records known as "blocks." Those blocks are visible everywhere on
the network, but they're kept safe using a kind of math called cryptography.
When someone requests a transaction, it's sent over the network where it's
visible to all of the computers, which run a series of algorithms to
"vote" on the authenticity of the transaction. Once it's confirmed,
that transaction is combined with other transactions to create a new block for
the ledger, making it permanent and unalterable. The fact that it's visible to
every node makes it virtually impossible to cheat, too.
Bitcoin’s Elder Daughter
!
There's one more important
part to the blockchain: mining. It takes a lot of computing power to verify a
transaction, so nodes in the network have to have an incentive to help out.
Verifying a transaction involves shuffling through many blocks in the chain,
which requires racing with other nodes to solve difficult computing problems.
When one node beats the others to the solution, it's rewarded with digital
coins. The owners of those nodes can use those coins in their own transactions,
thereby putting more digital currency into circulation. As the value of Bitcoin
and other cryptocurrencies continues to skyrocket, more and more entrepreneurs
are opening "mines" like the one in the video below.
You can even "mine"
the currency yourself. If you wanted to start collecting the currency called
Ethereum, you could even build a rig and leave it in your garage to go to work.
(Instructions in the video below.)
The Future Is Already
Distributed
Blockchain is especially a
boon to people in less developed areas, where big banks are hard to come by.
But the distributed network model isn't just good for passing money around. It
can also be used to secure contracts, patents, file storage, Internet of Things
devices, and even elections. With trust baked into the transaction instead of
coming from a middleman, virtually everything could be fairer and more secure.
The technology is still new, but proponents say that its widespread adoption is
all but inevitable.
"Blockchain is
essentially a technology promise, but like any promise, it needs time to
materialize, and it requires us to understand it, in simple, yet compelling
terms," writes William Mougayar, author of "The Business
Blockchain: Promise, Practice, and Application of the Next Internet Technology." "Today,
no one forces you to use the Web, but can you afford not to? The blockchain
will face a similar fate on its journey to becoming the best new tool of this
decade."
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