Blockchain What Is It?
From today, at the time of 4:45 PM the current value of one Bitcoin is at: $11,301 back when it was released and the network was launched in January of 2009 a bitcoin was virtually worthless, what happened?
Blockchain is the name given to a digital ledger, this represents a paradigm shift in the entire concept of money, value and the exchange of trust.
We need to look at the whole concept of ‘value’ here and investigate just what is ‘Money’ in the first place in order to understand this amazing development of Blockchain, it seems much of this comes down to trust, and being able to securely assure memberships that certain things actually take place!
That might seem to be a simplification, but the essential qualities of currency are all based on a ‘promise to pay’, bank notes have no intrinsic worth, if you look at any ‘paper money’ note it always has a message of assurance of payment; bank notes are essentially a negotiable instrument, a promissory note.
On British based currencies, Canadian, Australian, British, New Zealand, Zambia there is always this message from the Queen: I promise to pay the bearer the sum of ‘X’ pounds/dollars, which has its origin in the old ‘gold Standard’ days, each note represents a specific number of gold coins; the currency is no longer based on gold, so you cannot exchange your notes for gold sovereigns any longer!
Just what is behind bank notes, and coins these days nobody seems to clearly understand, and with the development of digital networks, and the digital world currency has become increasingly abstract and ethereal! Accounts seem to be simply a numerical placeholder, a certain quantity of ‘credits’ is given and these numbers are moved around.
You might have heard of the term: Fractional Reserve Banking and wondered what it means: the full definition is abstruse, but the essential details are that only a fraction of account deposits are backed with ‘hard currency’, only a portion of the money you hold is actually ‘real money’ and can be withdrawn in full, the bank is able lend out the bulk of your deposit, only being compelled to hold 10% or so as a reserve; this is to free up cash deposits for the money market, thus ensuring that money is available for lending out, to fund projects and businesses.
Trying to find an absolute explanation for the value of money is very difficult. If you do a search on ‘what gives money its value’ you will find ‘demand for it’ as the answer, but if we do a general analysis we can see that money always has a ‘symbolic’ function, money represents items, goods, services, energy, potential outcomes, in fact the sum total of all human activity! Money it seems stands for what people produce.
Currency has zero intrinsic value, when you delve into the world of high finance, and the big money markets you can see very plainly that all money is about speculation, gambling, borrowing and paying back!
Money is at the very core of human society, but nobody really knows what money actually is.
So, it is in this sense that Blockchain has come to ‘disrupt’ the abstract world of finance, the Blockchain is basically a network of computers where each node, or server has a full copy of a ledger; we know that ‘ledgers’ are critical to financial processes, because a record must be kept to assure people that transactions take place, we have to keep a record of Incoming/Outgoing money.
The Ledger is a very powerful part of the financial world, if you have seen the film ‘Schindler’s List‘ you will recall that the character who looks after the books for Schindler is a very important fellow, the entire operation for the factory, and therefore the wealth and prestige of Schindler himself depends on the book keeping skills of Itzhak Stern.
Keeping the books has always been the central mystery of business, the ledger enables business operators to manage their funds, to easily see where their money is going, and to understand if they are making a decent profit from their work!
Blockchain is simply a digital way to keep the books.
The blocks of data are moved along the chain of databases, the central power of Blockchain is security, and assurance.
We should never underestimate the value of assurance, this Blockchain technology gave rise to the very first digital currency: Bitcoin
In very simple terms Bitcoin is mathematics, it is computer calculation, but the Blockchain is able to record these calculations and prove they took place, there is so much assurance possible for these calculations that people are able to assign a value to them. Now the point of difference with Blockchain ledger is the decentralised nature of it, multiple computers hold an exact copy of the ledger so that each transaction is recognised and transmitted to each computer, thus proving that the transaction is true.
The analog ledger, the way we have been doing the books for centuries, was all about one central authority, which gave the financial position of the ‘ledger keeper’ an absolute authority; consider the political power of owning this ledger.
Blockchain has been labelled the ‘Truth Machine’ by financial and social pundits, the implications of Blockchain are that the central authority of ledgers has now been removed; this is a new era. People talk about ‘paradigm shifts’ all the time, however Blockchain just like the WWW is a true paradigm change!
We can understand Blockchain by considering it as being a computer version of ledger keeping, using a distributed network of computers to verify each transaction, and update the stored ledger among all of these computers, it is ‘hack proof’ because every change made to the preceding ‘block’ has to be verified in accordance with the original conditions, an attempt to infiltrate the core process would be immediately obvious, moreover the algorithms (computer steps, and processes) are encrypted, so the champions of blockchain maintain it is hacker proof!
This is of course debatable, we have seen theft among the cryptocurrencies, but this tends to be more about deceptive scams, rather than direct attacks on the core blockchain process itself. It seems the ancient vulnerabilities apply to even the most advanced technology, the weak-link is people themselves; the recent Twitter scam where well known accounts were hacked and offers of 1-1 Bitcoin exchanges made, it was surprising that so many seemingly intelligent people were taken in by this! But this is not Bitcoin being dubious, it is the lack of ethics among people.
I was looking at a recent development from a farmer in America by the name of James Headrick, he claims to have applied an old concept to a new technology and he calls this the ‘Freedom Box’, he claims that people can make one these freedom boxes from parts commonly found around the home, and this is attached to your electricity supply, it ‘mines bitcoins’ and pays your bill! I have no idea if what James claims is 100% true, but he seems to be a credible man and this idea is not expensive to investigate. I have been seeing a few of these emerge over the past year or so, the tyranny of energy companies is well known, so anything that can save you some money is a good thing in my view!
According to James the Bitcoin miners which were initially setup, using video card RAM in series were rapidly displaced by large ‘mining factories’ set up to take advantage of the blockchain process, he has found a way to install a newly improved version of Bitcoin mining in your house, and get yourself some of this ‘new money’. Like I say, I am not absolutely convinced about this, but James is offering his plans and instructions, together with technical help for you if you are not completely ‘tech savvy’! Worth a look.
Future Possibilities And Blockchain
In today’s uncertain conditions we are searching for certainty, and ways to survive, our society has never navigated these waters before, even during the dark days of WWII we all knew what we were fighting for, and who the enemies were; today the enemies seem to be within!
Credit, and the financial world seem to be more about holding people down, than assisting us to rise and the common man seems to be an object of contempt to our political leaders. Something is not right, ordinary folks who wish to attend church, or to hold down a job are being prevented from doing so! Small business owners are prevented from operating, while mass rioting and looting is encouraged and called ‘peaceful protesting’ by the media, and local governments. Blockchain offers us a future where central banking is not calling the tune, and for this reason doubt and propaganda is rife concerning Bitcoin, and other crypto currencies.
An average person who seeks to repair their credit rating is often confronted by obstacles, and is made to feel like an outcast, perhaps with Bitcoin, and Blockchain we can once again restore the balance, and gain some measure of control over our lives.
Because Blockchain can provide trust, and assurance, new modes of business become possible.
I have made a small venture into the world of cryptocurrency, and so far I am ahead, it is impressive how even a modest investment can give you a handsome return. I am not going to suggest this is a utopia, or the ultimate solution for finance, but Blockchain is a very interesting development which you and I can participate with, without putting our savings into peril.
I will be writing further on this topic, because something tells me this is only the beginning, we will be seeing amazing new opportunities opening up for people, new ways of securing our funds, and very different styles of authority!
As always, be careful in your dealings, and as the Desiderata says: Exercise caution in business affairs for the world is full of trickery, but let this not blind you to what virtue there is; many persons strive for high ideals and life is filled with heroism.