What Is A Blockchain? Really!

If you have read my article that introduces Nigeria to Bitcoin, then you have a decent foundation for understanding this article.

So I am continuing in that introductory spirit with this piece on the blockchain, which is a crucial part of the Bitcoin universe.
I will try to keep this article short and reduce the jargon.

What Is The Bitcoin Blockchain?

The Blockchain is a publicly accessible ledger.
Or you might call it a kind of account book.
An account book that is open to anyone anywhere in the world. 

And yet, eventhough it is openly accessible to anyone for scrutiny on the Web, all of the records kept on this particular type of account book (unlike normal account books) do not carry the names or addresses of the account holders displayed within the rows of the ledger.  

The Blockchain merely organizes the accounts with identifiers known as public keys. And since an individual can own as many public keys as they like, this makes it possible for account holders on the Blockchain to be largely anonymous.

Now even though this may sound somewhat "shady" to some people, there are several reasons why anonymity of account holders can be a good thing. 
But I will look into that aspect of the Blockchain in later posts. So if you are more interested in that, then ensure that you let me know in the comments below, or simply follow this blog.►Click Here.

The Good Stuff

So now that you have an overview of the original Blockchain, or the Bitcoin Blockchain, let me give you an idea of the why this particular Blockchain is important, and why you must keep this in mind....

Unlike the other imitation "blockchains"- that I would talk about in a moment, the Bitcoin Blockchain has sparked an unprecedented phase of proliferation of financial literacy and knowledge in online security. A phase that is rapidly becoming an era. A new era of enlightenment that could easily lead to a new age of innovation. 

World famous Bitcoin expert, Andreas Antonopoulos says it this way: 

"We are on the verge of a new transformation of money. The verge of creating the first completely global, completely borderless, completely decentralized and completely open form of money"

The innovation is heading in a direction where we will build applications because this money is programmable. The Bitcoin Blockchain is about the "internet of money". 

Think about this for a minute.

You don't need to ask anyone's permission to launch an application on the internet of money anymore than you need permission to launch an application on the internet.
And this is happening on a global scale. 

Antonopoulos insists that the other blockchains cannot cause this kind of exponential innovation.
I tend to agree with him. 

The Growing Blockchain Brouhaha

Even though there might be many blockchains today, the first ever Blockchain came from Satoshi Nakamoto's Bitcoin whitepaper. 
The ones that I refer to as fake blockchains are those that were launched by and for the benefit of the existing big banks of the developed world. The good news though, is that of recent, they have stopped using the word, "blockchain" for those contraptions of recent. Yet, during those days of the financial sector's frenzy, they made it very clear what they were trying to do. You often heard them say things like, "Bitcoin is dead, the blockchain is the future" or the most popular one, "the true genius of bitcoin is not bitcoin itself - it is the blockchain".

Talk about wishful thinking...

Nakamoto

The Bitcoin inventor did not actually use the term, "blockchain" in his paper, but it is easy to see how it caught on when you read through the 9-page document.

Nakamoto actually uses the words "block" and "chain" separately and frequently as he tries to explain his proposed system of using a highly secure, chronological order of transactions on a global public ledger.
He created this publicly accessible, decentralized global account book to ensure that no government could issue more of the currency or impose restrictions on it. 

I know that may be confusing, but do stay with me, let me simplify it.

It was important to Nakamoto that his new digital cash would not need to go through a financial institution to pass from person to person. He believed it was crucial to develop a system that behaves more or less like physical cash in the sense that it would not require people needing to use a third party (financial institution - who, themselves use another party - Interswitch in Nigeria) to confidently carry out a transaction.

You don't need to trust a complete stranger if he paid you 350,000 Naira for your old and dying Toyota Corolla.
All you need is to count the money and see that the notes are not fake naira notes. Right?

Of course.

But in this case, if the bitcoins come into your public bitcoin address (or account), and then you choose not to deliver his car to him, then that becomes another matter. Just as such a scenario is also possible with real cash. 

The Blockchain And Timestamps

"Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties...What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party"

- Satoshi Nakamoto

But after Nakamoto had successfully created a way that cash value would pass from person to person (peer to peer), he needed to ensure that the money could not be duplicated, or that the already spent money would not be spent again by the payer.

"The problem of course is the payee can't verify that one of the owners did not double-spend the coin...We need a way for the payee to know that the previous owners did not sign any earlier transactions"

"The solution we (Nakamoto) propose begins with a timestamp server. A timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash, such as in a newspaper...The timestamp proves that the data must have existed at the time, obviously, in order to get into the hash. Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it" 

Please, if you don't understand what is meant by "hash", you can ignore that for now. Only keep in mind that by using the highest technology in internet security to ascertain the exact time a transaction was done, they are able to create this innovation known as the Blockchain.

So here is the layman's summary of all of these:

The bitcoins that people will be sending and spending are generated by the Bitcoin software. That software ensures that they had to be timestamped onto the global account book known today as the Blockchain. All of these processes are open to scrutiny by all (auditors, software developers, account holders, and anyone who cares).

The Bitcoin software, with help from the its network of users (or nodes), manages the Blockchain and ensures the integrity of the bitcoins on it.   


So bitcoins need the Blockchain, and the Blockchain needs bitcoin. This is an important statement to keep in mind going forward, as you come across other blogs and articles that will want to teach you about "blockchains". Of which many of them will try to first dazzle you with eloquent speech and bragging of years of experience in international banks mixed with PhDs in computer science and all that.

The truth is, regardless of their qualifications, these big tlkers cannot build an aircraft using concrete as a primary component and then expect it to compare with one that was well thought through from the start.

Nakamoto was motivated to invent Bitcoin's Blockchain to solve a problem. These other so-called blockchains are coming from those who created that problem to start with.

I took this rant a bit further in my LinkedIn Post. See it here ► My LinkedIn Rant

A Nigerian Introduction To Bitcoin

If you are reading this article, it means you are probably interested in learning more about Bitcoin or its Blockchain.
And if you are a Nigerian, or any English speaking African for that matter, then you have come to the right place.

Here, I will be crunching all of the technical jargon and explaining the plain facts about Bitcoin in layman's English.
Much later on, I will go slightly deeper in explaining the Blockchain. (That article is now available by the way - click here)

Meanwhile, beyond that, I will be exposing how Bitcoin relates to the other transformative digital technologies that I have been following (including the Semantic Web, Internet of Things, Artificial Intelligence, Big Data Analytics, etc).

But for now, let us talk about Bitcoin....

What Is Bitcoin?

First of all it is not a coin.

It is a cryptocurrency. It is also a kind of software with its own game changing platform.
It is really important you understand that second part if you want to benefit as a young African entrepreneur or computer programmer.

Here is a funny way to look at it:

STOP WATCHING THE $$$ PRICE OF BITCOIN!

I am sure you all know how incredibly beautiful Hausa girls are, right? Okay, I am not saying that Ibo or Yoruba are ugly - only that I went  to secondary school in Zaria, and anyway, you get the picture.
So now, imagine you meet a very beautiful Hausa girl. Then imagine that, for whatever reason, you never tried to get to know her.

So now you are chatting with your friends about this lovely girl you just saw, and you are only talking about her incredible eyes and the way she looked at you with them.
You mention how you could easily tell what her lovely dark skin would feel like. You also had to mention her great round.......okay this is not that kind of story.

My point is that because you did not take the time to dig deeper, you missed out on the fact that this chick has a Masters Degree in Plant Breeding and Genetics, she owns a 1,000 hectare farm in Kaduna where she employs 500 young farmers, and she feeds hundreds of kids everyday; for free, while providing computers and smart phones for them to get an education. 

This is what is happening with Bitcoin today. 
VERY FEW PEOPLE ARE DIGGING DEEPER!
And that, my brethren, is an OPPORTUNITY for YOU!

Most people constantly debate and postulate about what the  value of the currency is, or should be, or whether or not is has any intrinsic value.
This is so foolish! 
Very few people actually pay attention to what is happening underneath...... 
And what is hapening underneath is what is so huge about Bitcoin!

So stick with me, by following my blog.   Click here to ► Follow DigAfrica

But for now, let me just give you a few ideas: 

Bitcoin : Cash & More, Much More

Started in 2009, Bitcoin was meant to bring to the world, an anonymous, person to person transfer of money on the internet. It was designed to behave very similar to the way actual cash behaves. 
It is also meant to do this while bearing very low transaction costs for the sender, in comparison to current online banking transactions.

They call it the Money Transfer Protocol of the internet.

But before I come to explain the meaning of cryptocurrency, let me first of all mention that there are two distinct ways to look at Bitcoin:

There is bitcoin the currency (spelled with a small 'b').

And there is Bitcoin the software and protocol. 
So kindly take note of the difference in the usage of either small or capital letter 'B'.

The Bitcoin Software

The Bitcoin software was originally designed by a computer developer known as Satoshi Nakamoto. He designed it to manage a very high security peer to peer network using a technique known as public key cryptography. 

It is this cryptographic technique employed by the Bitcoin software that gives the bitcoin currency a very high level of security from hacking or theft as it is transferred from person to person throughout the internet. This cryptographic technique usage is the reason why it is called a cryptocurrency.

What Is a Cryptocurrency?

It is a kind of virtual currency that mostly tries to behave like cash, but with other programmable functions. On the internet, bitcoins can be sent or transferred from person to person like cash moves from hand to hand, without the need of a bank or  any other middle-man. 

Everyone understands how cash works: We see our naira notes, South African rand and US dollars as currency.
They are legal tender each within their respective countries.
You can confidently hand over the keys and the documents of your old car to someone if they give you raw cash.

As long as we can tell that the cash notes are not fake, we readily accept them as payment for anything.

However, whenever we have gathered lots of this cash, we no longer trust ourselves enough to keep all of it safe. Therefore we take most of it to the bank (a middle-man).
This is because we trust those banks, and we trust our government's central bank to protect the value of our money.

Trusted Third Parties 

Nevertheless, some people have argued that all the trust we place in these third parties (like banks) is a little too much, and therefore easily abused. Bitcoin was invented to remove this need to trust any human being or organization with our money.

This is why bitcoins acceptance is growing around the world at an increasing rate, and its value is increasing along with it. Many bitcoin users around the world no longer trust their government or their banks. Instead they trust the Bitcoin software because of its cutting-edge security and faith that its global value will continue growing in future. 

Meanwhile cryptocurrencies have much more functionality than normal money. For example, bitcoins are designed to be spent anywhere in the world. This is because it is completely decentralized and has no ties to any one country's central bank. 

As emails are to letters, so are bitcoins to cash

We know that emails do exactly what posted letters do, but also that emails can do a lot more than paper letters.

Apart from the speed of an email and the fact that you can send the same email to many people at the same time, emails can also have attachments in them, which can be videos or other digital media. 

Letters cannot do anything like this. 

So also cryptocurrencies have several functionalities that paper cash does not have. And I will look into these in a future post. But for now, some of those include assigning additional values to your money, ensuring the money behaves in a specific way, creating and enforcing legally binding contracts without the high cost of lawyers, etc. 

Not A Ponzi Scheme

Now, for those who are asking whether Bitcoin is a ponzi scheme, some zealous websites out there are selling ponzi schemes while using the word 'bitcoin' to draw attention to themselves.
It is very important to note that Bitcoin has nothing to do with these ponzi schemes or any other kind of network marketing schemes. 

Ponzi schemes are fraudulent businesses that use multi-level marketing (MLM) strategies that give the early investors a hope of getting rich quickly by inviting other investors (or down-lines). Ultimately, the business isn't selling any product of actual value, and at the end of the day, only the earliest investors earn any profit.  

Investing in bitcoins on the other hand, means that you are simply collecting virtual currency that has been increasing in real monetary value (it started as $0 in 2009; now worth $624 as of today), and allows you to spend and receive money from across international borders without needing a bank, or Western Union, and their typically exorbitant transaction fees.

This can be very good for Africa.
But also take note that I am not saying that Bitcoin is perfect, or that you should go and invest everything you have in it.
No. Certainly not. Please always be careful with how you digest information. 
What I am really saying here is that I think it is quite important to, at least, pay close attention to it, as Bitcoin looks like a world changing technology in the making. 

Bitcoin And The Blockchain

Now, Bitcoin is primarily a software that secures the bitcoin currency. It also sets it immutability.

By this I mean that once a bitcoin has been spent online or transferred, it cannot be reversed. 

The only way you can get a bitcoin back after sending it to someone is if that person agrees to send it back to you in another transaction.

The Bitcoin software governs this highly controlled and secure behavior of bitcoins thanks to the blockchain. 

The blockchain is a kind of database or ledger that records and stored all bitcoin transactions and is protected by cryptography, and is publicly and transparently maintained by the entire growing Bitcoin network of users.

I will write more about this blockchain and other blockchains in the future. I will try to explain some of its technical aspects in simple terms and also show examples of where the technology is already being used. This is because I believe that Africa needs an early invitation to come and learn one of the likely leading technologies of the next digital revolution and fourth industrial revolution. Blockchain technology is in my opinion, perhaps even more important than the Internet of Things, than Smart Cities, or than the Semantic Web.

What's Next With Bitcoin?

A lot!
As though the future wasn't already promising a lot of major digital technological wonders, Bitcoin has come and added a new dimension.

The recent success of Bitcoin across continents has not only raised the value of the currency and its usage and acceptance, it has also sparked off the development of other cryptocurrencies, each with their own blockchains. 
And of course, you can expect that I would be following these trends. 

Some have argued that the value of one Bitcoin could eventually reach $ 1 million by 2025. But such speculations are not my concern. I focus on understanding and analyzing the technology and especially how it can be useful to Africans and to Nigeria. 

Again, I will encourage you to follow this blog if you wish to learn more about the future of money. Or you can also find my other articles in newspapers by searching on Google for "Rotimi Orimoloye Bitcoin News" or "Rotimi Orimoloye Digital Africa". 
if you are interested in other digital technologies and how such information and knowledge can improve the quality of life of Africans.

So what are you waiting for? Go and start getting your bitcoins!
And if you don't have enough money to buy the minimum of $10 worth of coins, the good news is that there are a few websites that give out free bitcoins. Not much, but enough to get you started with Bitcoin and to transfer small change among your friends, just to know how Bitcoin works. Here is one of such websites. 

If you have any questions about this topic or anything to add to this article, please feel free to use the comments below. 
I am always happy to engage in the conversations that can more Africans forward. 

If you liked this, kindly re-share on social media so that other Africans will get a headsup.

Thank you so much.