Blockchain is a new technology for enabling anonymous transactions (that aren’t recorded in a central registry). It can be used for financial transactions, digital currencies (like bitcoin) and banking.
What dogs and bitcoin have in common.
To understand the idea behind blockchain, consider how humans and dogs identify each other.
Humans must use a central directory like Google or Facebook or LinkedIn, whenever they want to identify another person.
Dogs however never need a central database; they just smell the other dog and it tells them everything they need to know. We’ll call this ability their ‘dogchain.’
With blockchain – as with dogchain – the descriptive information is built into the network itself, not stored in a central database. Every dog is part of dogchain, and every dog contains all the information needed to identify that dog to any other dog.
This is how blockchain-based assets work too. If you have a bitcoin, nobody needs to know you have it, but anyone can see that it’s valid just by looking at it.
By contrast, most financial assets today (stocks, bonds, cash) are centrally tracked by financial institutions, and most trades are recorded by them. These central records determine ownership of assets, which helps resolve disputes, and also enables governments to monitor transactions for tax and legal purposes.
Blockchain developers are hoping to eliminate these Wall Street ‘gatekeepers,’ who they believe have too much power and charge too many fees.
Nobody knows whether blockchain will eventually come to dominate the world’s financial system.
But for dogs at least, dogchain is already working quite well.