Blockchain Alters Who Controls Our Transactional Society
At the most fundamental level, blockchains are simply ledgers or records of transactions. Unlike centralized databases that are maintained by one entity, blockchains are decentralized, which means the information is stored across a network of computers. Anyone with an Internet connection can use it, but no single entity controls it.
Bitcoin was the first blockchain network, and the price of bitcoin has been on a roller coaster ride ever since. Bitcoin is considered to be a commodity by the Commodity Futures Trading Commission. Each bitcoin was valued at less than $1,000 when 2017 began, rose to nearly $20,000 by December, and has retreated back to roughly $8,000.
Blockchain allows market participants to exchange value without a trusted third party intermediary. This is important because, inter-mediation is everywhere. Outside of cash transactions, you deal with intermediaries every time value changes hands. This includes payments using credit cards, investments like stocks and bonds, and buying and selling real estate like your home. These intermediaries can serve a useful purpose, but they often add cost and latency to the transaction, and they require our trust.
Transactions on blockchains are different because the transactions are disintermediated, which means they are validated by the network rather than by a third party. This is possible because all the transactions are recorded on one master ledger that isn’t under the control of any single actor. Blockchain allows us to trust the contents of the ledger, even if we don’t trust each other. The idea that an army of unrelated actors can maintain a ledger that everyone trusts is a powerful concept, because ledgers record more than just payments.