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So the question that pops into our mind is Why we need the blockchain?
To explain the significance of blockchain we will picture a scene that will better explain how it works.Let's suppose 2 friends Tom and Bob and Bob went on a vocation, which he planned for a long time, but during his vacation, he exceeded the budget. Now he needs more money so he calls his friend Tom and asks him to send him 500 Euro so he can enjoy his vacation.
Tom has the money so he responds to him "Sending right away".
Tom then call to his account manager at his bank and tell him, “Please transfer 500 Euro from my account to Bob’s account.”
Your account manager replies, “Yes, sir.”
He opens up the register, checks the account balance to see if Tom has enough balance to transfer 500 Euro to Bob. Because Tom is a rich man, he makes an entry in the register.
Note: We’re not talking about computers only to keep things simple.
Tom call Bob and tell him, “I’ve transferred the money. Next time, you’d go to your bank, you can withdraw the 500 Euro that I have just transferred.”
What just happened? Bob and Tom both trusted the bank to manage their 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 Tom nor Bob controls or owns.
And that is the problem of the current systems.
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To establish trust between ourselves, we depend on individual third-parties.
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/organization to go corrupt, intentionally or unintentionally.
- What if that register in which the transaction was logged gets burnt in a fire?
- What if, by mistake, your account manager had written 5000 Euro instead of 500 Euro?
- What if he did that on purpose?
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For years, we have been putting all our eggs in one basket and that too in someone else’s.
Could there be a system where we can still transfer money without needing the bank?To answer this question, we’ll need to drill down further and ask ourselves a better question (after all, only better questions lead to better answers).
Think about it for a second, what does transferring money means? Just an entry in the register. The better question would then be
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Is there a way to maintain the register among ourselves instead of someone else doing it for us?
Now, that is a question worth exploring. And the answer is what you might have already guessed. 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.
Are you still with me? Good. Because now, when several questions have started popping in your mind, we will learn how this distributed register works.
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