This piece is one of many intended to break down the educational hurdle for those looking to understand more about Blockchain technology. As a result, I focus on the core underpinning to Blockchain technology, i.e., Blockchain’s ability to provide a trustless Internet. My next article will be explaining how cryptocurrencies work, and an in-depth look at their relationship to Blockchain.
At its core, Blockchain technology encourages and facilitates open-sourced information sharing. Blockchain is “trustless,” in that no user is required to trust another user in order for information transfer to occur. This transfer of information can come in many forms, e.g., currency, contracts, data, and much more. For example, a user can send a digital currency, e.g., Bitcoin, to any other user, anywhere in the world within minutes…sometimes seconds. This trustless feature is drastically different from traditional societal frameworks such as financial institutions that require another individual or entity, i.e., a central authority, to oversee, execute, and verify the information transfer process.
For example, prior to Blockchain, any entity needing to transfer currency, even in the digital context, needed a trusted third-party to keep a ledger of who owned how much, how much was transferred, and where it was being sent. The most prominent examples of these trusted third-parties in the financial context are MasterCard, VISA, Paypal. and any banking institution. A person-to-person (“p2p”) system did not exist, and the money transfer system required a trusted third-party to facilitate the transaction, updating their privately owned ledger with each new transaction. The issue is the user has little to no control while having to implicitly trust the third party to not change, manipulate, or destroy the private ledger. In fact, these private ledgers have been and still are virtually unaccessible to the general public. There are security justifications for this, but there are intrinsic issues with a blind trust based system that capitalizes on user information without user control. This is where Blockchain provides a solution.
Over the last forty years, the Internet spawned e-mail, dot-coms, internet on the go, social media, big data, the cloud, and much more. Throughout this process traditional information silos existing before the Internet were slowly deconstructed to allow the ease of information creation, distribution, and discovery. Indeed, information access barriers have somewhat dissolved, and the Internet has created a more “connected” environment for those who can access it. However, in a similar vein, over the last twenty years, third party intermediaries who’ve built entire industries out of services or information access via the Internet have unequivocally dictated how the information is accessed.
From governments to large corporations, many entities have taken personal date for financial gain. As a result, these entities have rebuilt the information barriers that the Internet sought to eliminate. The intrinsic trust in a web based platform that facilitates interactions, whether financial, personal, or commercial, has been replaced by third parties dictating information flow. From your internet connection to your social media platform…these private entities control more information than anyone in the world.
Blockchain is the solution to this problem. This nascent technology creates an information sharing platform without a need for a trusted third party intermediary. Instead of human verification, Blockchain uses complex mathematical algorithms to verify transactions, which once completed, are logged into a public ledger that anyone in the world can access, e.g., the Bitcoin public ledger. In other words, math makes the decision…not the entity.
A large problem internet users have lies in their ability to verify who they can or cannot trust. While protections third party companies provide are without a doubt required, the question becomes to what extent should users sacrifice privacy and control in order to benefit form third party protection. The answer, from the perspective of a Blockchain advocate, is that creating a trustless protocol does not fully eliminate third party intermediaries, but it does mitigate the stranglehold those third parties have over personal and private information. Additionally, it affords users the ability to profit if they chose to share their information, creating more control for the user and ultimately enriching the information shared.
Indeed, Blockchain makes it so trust is not needed. Math replaces the need for third party verification, and as a result, the protocols within Blockchain create a governance of trust that cannot be manipulated. Of course, there are significant shortcomings, and the scalability and functionality of currency Blockchains in existence are in their nascent stages, but once more adoption occurs, many will see the value in user control, rather than third party intermediary control.