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Blockchain 101: From Whiteboard Theory to Real-Life Applications

One of the most important lessons I’ve learned while investing in cryptocurrency assets is the importance of understanding how this technology works and how it can be leveraged.

I’ll borrow some knowledge from the awesome Bitcoin Developer Jimmy Song, who in my view explains these differences brilliantly.

“The main thing distinguishing a blockchain from a normal database is that there are specific rules about how to put data into the database. That is, it cannot conflict with some other data that’s already in the database (consistent), it’s append-only (immutable), and the data itself is locked to an owner (ownable), it’s replicable and available. Finally, everyone agrees on what the states of things in the database are (canonical) without a central party (decentralized).”

We start with Bitcoin, by far the most successful implementation on top of the blockchain, which will always be required to make sure it remains decentralized. However, if we consider a mixture of public and private ledgers accessing information via interoperable systems, we could imagine different levels of trust being created between participating agents. That is, we could have a public blockchain serving as an immutable record for some type of businesses transactions, such as tax payments, loans, and settlements, while a private ledger keeps some of the data private, within the organization’s nodes, only accessible by authorized agents (like company employees). 

The core reason why blockchain matters, in the end, is to increase trust between parties through decentralized systems. Blockchain can help humanity by creating more transparent ecosystems, easily auditable by anyone, where the standard rules apply to everyone equally.

 

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