What is Blockchain and why was it created?

The financial crisis of 2008 which I’m sure we’re all familiar with ultimately left people with a pretty sour taste in their mouth when it came to the global banking sector, but ultimately for the first time the public really lost trust in the banks and the banking system. Now without going into too much technical detail about the fractional reserve banking system and moving away from the gold standard there are lots of really interesting things that became pertinent to the average person’s mind around that time. But the bottom line was that a lot of people now understood that the banks had pulled a lot of bad stunts and we lost a lot of faith in them and ultimately people wanted to try and do things without them.

People thought why do we need these banks, these third parties to regulate and mandate our funds? Surely if we’ve seen that they’re lying and cheating and doing things they shouldn’t have been doing, how do we avoid using them at all?

That really was the brainchild behind where we now. 10 years ago a group of people/person under the pseudonym of Satoshi Nakamoto ended up creating a new type of digital cash (Bitcoin).

Up until that point in 2009 if you wanted to pay a friend, it was impossible to do so unless you were physically next to them, so if you were stood next to me I could give you some cash and that would be a form of payment and that doesn’t really involve anyone else.

But let’s say for example you’re now sat behind your computer screen reading this and I want to pay you, we obviously need to use a third party payment processor whether it’s PayPal, Amazon pay or a bank or a credit union or some type of company which sits in the middle of between me and you.

Ultimately once the money’s left my account and gone to yours I have no control over it and you have no control over it up until the people in the middle work that out and it gets to you. So this is the system that people wanted to remove because the banks had made all these mistakes in the past and that’s fundamentally what Bitcoin was created for.

Bitcoin was the first digital cash that removed the need for any type of third party. I could pay you as a peer-to-peer transaction without any bank any government or any external regulator to be able to make that happen. Nothing could stop that payment moving through and it was a ground-breaking way to be able to move money around the world.

Fundamentally what this did was in order to replace the third party which was the mediation of trust. The banks were trusted to transfer the money in a classical payment. So in order to stop people just making Bitcoin out of thin air, there needed to be some type of authority in order to be able to make that a legitimate system.

The system which was put in place to verify transactions of Bitcoin became known as the Blockchain. If you think of the Blockchain like a really posh spreadsheet in which all the information of transactions are kept. Then in order for one coin to move from one wallet to another, that would be stamped as an official transaction. But critically, rather than one entity being able to see that transaction, the Blockchain of Bitcoin is to this day, entirely public, so that meant anyone could go onto a Blockchain explorer and check that a legitimate transaction had taken place from one wallet to another. So rather than having to rely on the banks to process and verify transactions, the Blockchain was now the system which could do that. But it was systematically programmed, and completely transparent for the public to view.

In a working example if I sent some Bitcoin from my address to your address, you would never be able to say I didn’t send you the money because everyone would be able to see that it left my wallet and went to yours.

At its core, Blockchain is a new type of data transfer technology that means we have been able to digitise human trust. This is a really big deal for business and data transfers, and that’s fundamentally why the technology now has moved away from a digital payment in terms of Bitcoin. Now we have hundreds of different types of companies using that same technology for a whole myriad of different business use cases.

These range from insurance protocols to supply chain stock and delivery systems. The Blockchain requires every single transactional record can be entered into this system so that nobody can ever say something didn’t happen. So ultimately the basic premise is don’t trust the humans, trust the machines. As it stands the Bitcoin Blockchain has never had a false transaction and hasn’t had any kind of hacks or codes contrary to popular belief. The Blockchain itself is forming one of the world’s most secure data networks and that’s ultimately one of the reasons why it came about in order to be able to remove the need for third parties which for businesses is of course faster, cheaper and more economical.