The Blockchain Explained in Plain English

The financial community regards "the" blockchain as a heaven-sent miracle. All the venture capitalists are funding blockchain startups.

Mike Crawford

Mike Crawford
Consulting Software Engineer

The Long Island Iced Tea company really does make iced tea. But when they changed their name to "Long Blockchain" their stock price doubled in just one day.

All a blockchain is, is a recording medium that cannot be tampered with once an entry is written to it. In the case of cryptocurrencies such as BitCoin the blockchain is a tamper-proof ledger.

Your checkbook is a kind of ledger.

The primary function of cryptocurrency blockchains is to prevent the same currency from being spent two or more times.

However there is a well-known vulnerability in that cooperation by the majority of the "hash rate" - loosely speaking, the majority of the people who operate the mining rigs that create BitCoins - can tamper with the almost-but-not-quite tamper-proof record. That's a real concern because most of today's hash rate is under the control of just a few people in China.

The LiteCoin mining rig I just received will produce only a microscopic speck of hash rate compared to the Chinese folks.

Satoshi Nakamoto, the creator of BitCoin intended for it to be a vehicle for online payments that don't require such third parties as banks or card payment services. To the extent it can really be used for peer-to-peer payments BitCoin is a threat to Visa, MasterCard and the like.

But it turns out that BitCoin is woefully inadequate for payments because the transactions take quite a long time to settle - sometimes hours. These days it is only used for truly risky speculation. The economists don't regard it as a form of currency because BitCoin's wild volatility makes it a very poor store of value.

All the finance companies have announced some manner of blockchain initiative, but it is unclear to me that blockchains will really do them any good. Doubtlessly their enthusiasm is the result of poor understanding of what blockchains really do.

One Must Not Trifle With Wizards For It Makes Us Soggy And Hard To Light