BlockChain: How to Avoid Intermediaries, Shopping Experiment
Our economic relationships go back about 10,000 years, starting with human agriculture, when humans began to exchange stocks. The relatively slow technological progress started rapidly accelerating 200 years ago with the Industrial Revolution. But only 20 years ago another revolution got underway — the internet. Let’s say that we are in the middle of the latest revolution right now, namely BlockChain.
The BlockChain idea is based on cryptocurrency technology. It couldn’t be a more fantastic idea and it is forcing everything else on edge. That is why most of us are very sure that this really is a revolution (from the Latin revolutio, “a turnaround”) or a paradigm shift.
Let me explain as simple as possible for those who are not yet in this business. BlockChain, as the name implies, is a chain of blocks with encrypted records. This constantly growing list of records, called blocks, is linked along. Each block typically contains a hash pointer as a link to a previous block, a timestamp, and transaction data. By design, blockchains are inherently resistant to data modification data. A blockchain can serve as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks, which requires the cooperation of the network majority (Ref).
Miners here put all the blocks together for a small fee, but this is not so important for the purposes of this article. Information in the chain is always right, current, and relevant, and it is encrypted and visible to everyone. The chain is a sequence of records of information.
The system works according to the principle of Pirate Bay technology. If we take the cryptocurrency Ether as an example, the entire Ethereum network is a giant mass of computers (nodes) connected to one another as the Ethereum Virtual Machine. All transactions in this network are automatically updated and recorded in an open and distributed ledger (Ref).
I have no intention to explain the whole story about Bitcoin or Ether but about the methodology of how to transfer the blockchain model from cryptocurrency to our real world.
Why is this so important? Because there comes a moment in our 10,000-year old human history where we no longer need any intermediaries. And this is because we have technology at a level where we can afford all of this. As we can see and hear there are many advocates of blockchain. On the other hand we can see countless entrepreneurs on LinkedIn, as well as students and job seekers, who write in their profile words such as a “blockchain enthusiast” etc. This means only one thing, and that is that the revolution is about to begin.
The main idea of this model is direct communication between two people (peer-to-peer), or two objects, or two processes, etc. The traditional relationship between two people is, for example, that between a seller and buyer. But here there is a problem because the buyer needs to go to the trusted third party, the so-called bank, and take out money to pay to the buyer. Furthermore all those involved need to show their names, tax numbers, and more if they want to do their business. This is unnecessary in the world of cryptocurrencies.
The question is how to map this model to our everyday life.
Let’s take a look at this in a simple example. Let’s suppose we want to buy a book. The seller will tell us that we must sign up for a so-called “smart contract”. This is a bunch of codes written in a computer language. After we sign up, algorithms will take few Bitcoins or Ethers from our wallet and send a record about this to an available blockchain. The smart contract says that if the seller doesn’t send us the book, then our wallet will get our money back. This will definitely happen because miners see the same record and they compete to be the first to push our money back into our wallet after the timer expires. The first one to do so will get a small fee in his wallet.
The more powerful the computers, the higher salaries their miners can get. This is why computer farms are growing.
If we get our book on time, our funds will be released to the seller.
What does this proposed model mean for global society? It means totally new approaches to IT, lower costs, and much smaller fees. I have no intention to discuss what this means for tax policy, but as we can see our society will change itself from the top to the bottom.
In this proposed model all trading platforms will drop off. We can get rid of 20% and more of Amazon’s fee, annual Alibaba memberships, PayPal fees, and ironically even cloud databases, apps, and practically all massive platforms that exist now in order to share our economy. Of course, maybe I’m wrong.
Image source: Matjaz Marussig
Author Matjaz Marussig
Originally published here.
References
Icahn G. (2017). Blockchain: The Complete Guide To Understanding Blockchain Technology. [Kindle DX version]. Retrieved from Amazon.com
Reed J. (2017). Blockchain: The Essential Guide to Understanding the Blockchain Revolution. [Kindle DX version]. Retrieved from Amazon.com
Gates M. (2017). Blockchain: Ultimate guide to understanding blockchain, bitcoin, cryptocurrencies, smart contracts and the future of money. [Kindle DX version]. Retrieved from Amazon.com
What exactly is BLOCKCHAIN?, Stephen O’Donnell, Available at: https://www.linkedin.com/pulse/what-exactly-blockchain-stephen-o-donnell/ [Accessed 25 Nov. 2017].
Wikipedia. (2017). Blockchain, Available at: https://en.wikipedia.org/wiki/Blockchain[Accessed 25 Nov. 2017].
What is An Ethereum Token: The Ultimate Beginner’s Guide. (2017). Available at: https://blockgeeks.com/guides/ethereum-token/ [Accessed 25 Nov. 2017].
How does blockchain really work? I built an app to show you. (2017). Available at: https://medium.freecodecamp.org/how-does-blockchain-really-work-i-built-an-app-to-show-you-6b70cd4caf7d [Accessed 25 Nov. 2017].
The real value of bitcoin and crypto currency technology — The Blockchain explained. (2017). Video. Available at: https://www.youtube.com/watch?time_continue=1&v=YIVAluSL9SU [Accessed 25 Nov. 2017].
What is Blockchain. (2017). Video. Available at: https://www.youtube.com/watch?v=93E_GzvpMA0&t=2s [Accessed 25 Nov. 2017].
The Microsoft vision for Blockchain — BRK2177. (2017). Video. Available at: https://www.youtube.com/watch?time_continue=172&v=-dJS6hc29vg [Accessed 25 Nov. 2017].
What is Blockchain Technology? A Step-by-Step Guide For Beginners. (2017). Video. Available at: https://blockgeeks.com/guides/what-is-blockchain-technology/ [Accessed 25 Nov. 2017].
10 ways Blockchain Technology can be used in Businesses, Mehdi Harti. (2017). Available at: https://blog.passkit.com/10-ways-blockchain-technology-can-be-used-in-businesses/ [Accessed 25 Nov. 2017].
THE BLOCKCHAIN RESEARCH INSTITUTE. (2017). Available at: https://www.blockchainresearchinstitute.org/ [Accessed 25 Nov. 2017].
