What is Blockchain Technology ? and how does it work ?

Economists have been exploring people’s behavior for hundreds of years:

How we make decisions, how we act individually in groups, how we exchange value. They’ve studied the institutions that facilitate our trade, like legal systems, corporations, marketplaces. But there is a new, technological institution that will fundamentally change how we exchange value, and it’s called BLOCKCHAIN.

Blockchain technology is relatively new, it’s also a continuation of a very human story and the story is this. As humans, we find ways, to lower uncertainty about one another so that we can exchange value.

Now, one of the first people to really explore the idea of institutions as a tool in economics to lower our uncertainties about one another and to be able to be trade was the Nobel economist Douglass North.

As Douglass North saw it, institutions are a tool to lower uncertainty so that we can connect and exchange all kinds of value in society. And I believe we are now entering a further and radical evolution of how we interact and trade, because for the first time, we can lower uncertainty not just with political and economic institutions, like our banks, our corporations, our governments, but we can do it with technology alone.

SO WHAT IS THE BLOCKCHAIN?

Blockchain technology is a decentralized database that stores a registry of assets and transactions across a peer-to-peer network.

It’s basically a public registry of who owns what and who transacts what. The transactions are secured through cryptography, and over time, that transaction history gets locked in blocks of data that are the cryptographically linked together and secured.  This creates an immutable, unforgeable record of all the transactions across this network. This record is replicated on every computer that uses the network.

It’s not an app. It’s not a company. If we talk about Wikipedia, it’s the closest description given on Wikipedia. We can see everything on Wikipedia. The data on Wikipedia keeps on changing time to time and gets updated. But whereas in blockchain, you can think of it as an open infrastructure that can store many kinds of assets. It can store the history of custodianship, ownership and location for assets like the digital currency Bitcoin, other digital assets like title of ownership of IP.

Blockchains allow us to create an open global platform on which to store any attestation about any individual from any source. This allows us to create user-controlled portable identity.

Using blockchain, we can create a shared reality across nontrusting entities. This means, all of these nodes in the network do not need to know each other or trust each other, because they each have the ability to monitor and validate the chain for themselves.

For example, take the case of Wikipedia, it has a shared database, it has multiple writers as well as readers at the same time, but it has one single truth. So we can create that using blockchains. We can create a decentralized database that has the same efficiency of a monopoly without actually creating that central authority. So that all of these vendors and companies can interact using the same database without trusting one another. Which means consumers will have more transparency. This is how blockchain can be used to lower the rate of uncertainties.