Blockchain and cryptocurrency have gotten everybody’s attention in recent times. But what exactly is blockchain? How does it work? You search on Google and it will show you multiple definitions and explanations. But still the idea of the technology behind Bitcoin and other cryptocurrencies is hazy for most people.
Putting it as simply as possible, Jaspreet Bindra, founder of Digital Matters, India, Tech Whisperer, UK and an expert in blockchain and digital transformation says, “Blockchain is like a kitty party.” Both work on the same fundamental design. Bindra was speaking at a webinar, ‘Blockchain Technology -- Unblocked’, presented by State Bank Institute of Leadership, Kolkata.
Let’s take a deep dive into this kitty party then.
The kitty party usually comprises a group of women who contribute a sum of money, assumingly Rs 1,000, every month in a pool. There is a lucky draw every month. And, the woman in a group of say 10, who wins the draw, takes home Rs 10,000 that month. So, they put in Rs 1,000 each again next month, and the lucky draw picks another winner. However, the women who won in the earlier months are not eligible to participate in the draw this month. So, someone else wins.
So, an interesting question that arises is who takes care of the money in the ‘kitty’ or the ‘pool’? Well, there is no single, central ‘trusted authority’, said Jaspreet Bindra. He explained to the audience that each lady is trusting the group, knowing that the entire group, or a majority, of the ladies need to be compromised or ‘hacked’ to commit any kind of fraud. Thus, there is the ‘distributed trust’.
“Just like a kitty party, blockchain breaks centralisation,” Bindra added. So, blockchain precisely works on two fundamental mantras -- decentralisation and distributed trust. Traders of investors in Bitcoin are trusting each other.
Blockchain technology is still in its nascent stage. We have often heard that blockchain today is where the internet was in the 1990s. Bindra made it easier to understand with another analogy, “Could you imagine watching Netflix on the internet in the 1990s, when an email used to take a few hours to reach the destination?” Likewise, blockchain has problems. The biggest one being the problem of scale. But as the internet improved over time, the tech behind cryptocurrencies will get better too, said Bindra.
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