BlockChain might be the most significant innovation over the last 20 years in the Financial Industry. However, understanding what it is and how it differs from existing transaction systems is often quite confusing. Add in the concept of BitCoin, and many folks get lost in the myriad of details and concepts. Today, I am having a little fun and using a Reddit concept called Explain It Like I Am 5. This was by far the most difficult post to produce, as simplifying BlockChain is no easy task! BTW, if you have further questions, feel free to post them in the comments and I will respond.
4 Comments
Jeffrey Rocchio
3/24/2016 02:27:46 pm
Good explanation Jim. Question: how dependent is the blockchain on monetary incentives for the miners? How small in value can entries on the ledger be and still attract a robust pool of miners?
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jim
3/24/2016 02:54:23 pm
Great question. The BlockChain is fully dependent on incentives for the miners. Today, a miner receives 4 BTC for solving the hash. This rate gets cut in half every 4 years (about 100 days remaining until the next time). If you look at rewards for transactions (incentives to process a transaction quickly in addition to the 4 BTC) have begun to increase for larger transactions which encourage the miners to prioritize that transaction in the next block. Since approx 15 million of the total 21 million BTC's have been mined, there will come a time in which incentives will shift from mining the hashes to rewards. But if you do the math at 250,000 transactions a day the amount could be minuscule on a per transaction basis and yet still provide incentive.
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Jeffrey Rocchio
3/24/2016 02:32:02 pm
Another question: could entries on the ledger be encrypted chunks of data? I.e., in effect, a secure messaging system between anonymous users where endpoints could be difficult to impossible to trace?
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jim
3/24/2016 03:05:01 pm
Absolutely! the 'payload' has the ability of being encrypted. There are several initiatives in the space already with XChat and Bitmessage being the leading 2 applications. BTW, Bitmessage uses the concepts of BlockChain but not the application itself. Both would accomplish what you suggested. As an aside, this was a huge topic of conversation at SXSW this year, that is, using BlockChain as the new internet platform. It really helps solve the peer to peer questions. I would expect to see many more solutions in the near future in this space.
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Jim KittridgeInnovator. Technologist. Banker. Author. Speaker. Archives
June 2016
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