I bought a blanket on Amazon recently for $16.99. The transaction was pretty quick on my end, but it set off a series of events that all ended with my purchase being forever chronicled in a ledger somewhere.
My bank, Wells Fargo, was notified when I clicked the Buy Now button. The bank checked to make sure I had enough money for the purchase, and then it approved the transaction. Wells Fargo added a new line to its ledger with basic information like the date, time, amount of the payment, who it came from and who it went to.
Wells Fargo deducted $16.99 from my account, added it to Amazon’s account and a few days later a brown cardboard box appeared on my doorstep.
The problem with this system, people like Dan Larimer will tell you, is that it relies on one central organization to update the ledger accurately. It’s impossible for me to work directly with Amazon to negotiate and execute the deal.
That’s where bitcoin comes in.
When bitcoin launched in 2009, it took those private ledgers that had been maintained by banks for generations and put them on the internet. Instead of allowing one organization to update the ledger, bitcoin invited the whole world to add lines chronicling every transaction anonymously. It called the lines blocks, and the string of lines that formed the public ledger the blockchain.
If I had bought my blankets with bitcoin (which is not possible right now because Amazon doesn’t accept cryptocurrency), I would have initiated the transaction when I clicked Buy Now.
Instead of notifying my bank, the bitcoin network would have been told about the transaction I was trying to complete. Things get technical here, but essentially every user would double check to make sure the bitcoin transfer was recorded accurately. If approved, the transaction would have been added to the public ledger in a new block. It would have listed the same basic information as before, such as the time, date, payment amount, who it came from and who it went to.
If there was ever a dispute over how many bitcoins I own, I could track each coin down the chain of blocks, from its origin, through each transaction until it got to me.
The end result of my bitcoin transaction would have been the same, except not a single bank would have been involved along the way. Amazon and I could have made a simple exchange online without any third party or government interference.
And currency is just one application of blockchain technology. Theoretically, it could be used to decentralize anything that’s stored in databases.
Public ledgers could track vehicle ownership without the Department of Motor Vehicles, property records without stacks of deed books at the courthouse, votes for public office without the board of elections.
Just like the way I was able to buy blankets without understanding how my bank processed the payment, everyday users would be able to interact with blockchains without needing to worry about the technical side of how it all works.
Larimer, of Christiansburg, is a strong believer that the blockchain revolution is coming.
Instead of building one blockchain that accomplishes one task, Larimer wants to build a sort of operating system that serves as the foundation for all sorts of blockchains.
He calls his company block.one and the software they’re creating EOS.
Much like the way Microsoft’s Windows operating system enabled other entrepreneurs to create applications for personal computers, Larimer hopes EOS will allow other entrepreneurs to more easily create their own blockchains.
He says it doesn’t make sense for every blockchain developer to start from scratch, so block.one’s tools will take care of the basics.
“I believe it [blockchain technology] will be as ubiquitous as electricity and the internet,” Larimer said.