What is blockchain?

 

According to Upfolio, Blockchain is a technology designed to let you safely transfer digital property (like money), without the need for any middlemen (like a bank or your Venmo app). Removing the middlemen in these types of transfers can often make them faster, cheaper and more secure.

 

Blockchain technology can also be used to verify which transfers have taken place. Once information is added to the blockchain, it’s impossible to remove it and no one can change it. In other words, blockchain is a reliable record of exactly what happened.

 

Anybody can access & check the information on the blockchain, which lets strangers agree that a transfer happened, even if they don’t know or trust each other.

 

Since the blockchain and the digital currency Bitcoin were invented together, they are often talked about together, too. But in reality, Bitcoin is only the first of many uses of blockchain technology.

 

Think of it like this: What Bitcoin is to blockchain, email is to the internet. And it’s definitely just one of many ways to use this new technology.

 

How does it work?

 

Picture a ladder you might use to sneak into your childhood bedroom (oh… what that just something I did?) Anyways picture the ladder… and in this case, every rung on the ladder is a chunk of information that contains transaction data — the sender’s information and the receiver’s information . 

 

At the top of the ladder (where your bedroom is) you see what transactions happened today, and as you move down the ladder you see older and older transactions. And if you follow it all the way down to the ground? You’ll have seen every single transaction in the history of that cryptocurrency. 

 

This is what gives the blockchain powerful security advantages: it’s an open, transparent record of a cryptocurrency’s entire history. If anyone tries to fake a transaction or manipulate it in any way it will cause that rung of the ladder to break, and the entire network will see what happened and put a stop to it. 

 

A lot of this can get pretty technical, but that’s basically how the blockchain works.

 

How Blockchain can be used

 

This technology applies to a LOT more than just digital money. Already, there are several thousand applications that use the blockchain system – and that number is growing quickly! Here are some examples and ways to think about the uses of blockchain according to Upfolio…

 

Blockchain Use #1 – Cryptocurrency

 

Cryptocurrency is a new type of currency that’s digital and decentralized (meaning it’s not controlled by a government like traditional money). Cryptocurrencies can be used to buy and sell things. They can also store and grow value, which is why investors have become so interested in these currencies and the way they use blockchain technology. 

 

Blockchain Use #2 – Entertainment

 

By using blockchain technology, art lovers can pay painters directly. Viewers can pay independent filmmakers directly. Listeners can pay musicians directly. Blockchain can also be useful for raising funds! Think of it like a more advanced (and cheaper) Kickstarter or other crowdfunding site. 

 

Blockchain technology can automatically ensure that all parties do what they agreed to and that payments are fair to everybody. Removing the middleman and making entertainment cheaper.

 

Blockchain Use #3 – International Payments

 

Right now if someone is wiring $200/week to their family in another country they could be paying $20+ in fees… over 10% of their money!

 

By using blockchain technology payments can be cheaper, faster, and more secure because it can automatically ensure that money changes hands fairly. It also makes international payments less costly because there’s no one in the middle profiting off of the high transaction fees.

 

Blockchain Use #4 – Voting

 

Blockchain technology can automatically ensure that voters’ identities are verified and that their votes are correctly counted. Removing the middleman here could make voting more direct and reliable. Can you imagine?!

 

Blockchain Use #5 – ID Verification

 

Blockchain technology can automatically ensure that passports, credit cards, social security cards, and ID’s are authentic. 

 

There are TONS of other possible uses like: file storage, the sharing economy, charities, ownership records and more.

 

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The blockchain system is so unique because it allows strangers from anywhere to manage digital property and money — with essentially no trust. It sounds a bit sketchy when you think about a rando being able to manage your money in any way, but the technology behind blockchain is what makes it reliable & trustworthy.

 

Buuuutttttt it’s VERY important to keep in mind that without banks as your custodian, the responsibility is on YOU to monitor and secure your funds.

• Explain it like I’m 5: Cryptocurrency