No matter the application of blockchain, all chains have one purpose: removing the middleman from transactions.
To understand this, it’s helpful to think of the way traditional money transactions take place.
Lets say you order a pizza.
- Cash
- You Give Cash to the Pizza Driver.
- The Pizza Driver verifies your money is good.
- You get a pizza.
- Credit Card
- You Give the store your card number.
- The credit card company verifies everything between the bank, you, the pizza shop’s bank.
- You get a pizza.
- The pizza shop pays a fee for accepting your card, you don’t pay this fee.
- The pizza shop has a minimum for card purchases to cover the fee.
In blockchain, validation and verification still happen, but instead of a credit card company doing it, you can do it yourself on a distributed network called a blockchain network.
The big takeaway is people can authenticate their own payment methods online, much like Facebook allows you to self publish your whole life. This system is unproven though, and not a store of value. The main benefit is a distributed ledger that is trust-less and secure, not a get rich quick scheme.
Since anyone can make a blockchain, please use caution when dealing with these things. Never pay a data ransomware attack with cryptocurrencies since there’s no guarantee the criminals will honor your payment due to a network error or blockchain processing delay, or the simple fact that they are criminals. Also note that transaction management can be confusing, and most times irreversible.