Blockchain Technology and Google Docs? Actually, They’re Not That Much Different.
People tend to shun things that they do not know. It’s pretty understandable. If you told people in the year of Kurt Cobain (1990s) that we could communicate with palm-sized devices or create entire virtual worlds in a wearable headset, they’d ask you share the stuff you’re smoking.
But how about if I told you if you could transfer money securely to a friend without a bank, would you believe me?
Not so hard to believe, right? In the future — say 30 years time — we may not even have third-party centralized entities like banks and financial institutions anymore. It’s been proven that not only are centralized entities like banks are prone to hacking, they are incredibly expensive, costing around $1 million per branch on operational costs alone. They are also labor intensive — requiring manpower to perform transaction verification, payment clearing and Anti-Money Laundering (AML) checks.
Blockchain can allow us to surpass all that. Now the question is, how does it work?
Of Microsoft Words and Google Docs
I’ll explain to you how banks and blockchain work in terms of Microsoft Word and Google Sheets.
Microsoft Word
A traditional bank is like a Microsoft word document. Now imagine doing a group report in the early 2000s. There are four members in your group: Jack, Shelly (leader), Macy, and you. If you wanted to update your side of the report — you would have to write it, transfer it over via email to your leader, Shelly, and then she would have to edit and proofread your work before adding it to the main document. She would also have to do the same for every other group member.
This is a simple analogy of how in traditional banking works. Now, imagine if there were thousands of other members relying on Shelly. Not only would she have to be incredibly efficient, but what would happen if Shelly fell sick (system breakdown)? Or what would happen if a rival group member stole the report document (data breech)? All the group’s efforts would be gone.
Now let’s take the example of Google Docs.
Google Docs
Google Docs is a collaborative tool that allows multiple users to create and edit documents online. Let’s take the example of the group project again.
In Google Docs, all members of the group can contribute simultaneously to the report. The report is viewable to anyone, and everybody can see additions being made in real-time. There is no single point of failure — eg. if Shelly were to fall sick, the other members could carry on working on the document.
The document is completely transparent. People from outside of this group (teachers, fellow students, parents, anyone) could even view and contribute information to this document. However, the group members act as gatekeepers to ensure that all information being recorded on the Google Doc is factually accurate and correct.
This transparency is why some experts have proposed voting to be conducted using blockchain technology — to prevent voter fraud as well as accusations of “stolen elections” by our orange friend. This is also why illegal activities are conducted using blockchain is a myth that has been debunked continuously.
Now while Google Docs and blockchain have many similarities, there are two key differences. In Google Docs, there can only one owner listed. However in blockchain, all group members are owners of this public ledger or Google Doc.
The second difference between blockchains and Google Docs is that blockchains are immutable. Immutability means that once data has been recorded on the Google Doc (or ledger), it is permanent and can NEVER be changed (unless in the case of a 51% attack, but more on that later). This is an important attribute that makes blockchains so secure.
Blockchain/Bitcoin Explanation: The Google Doc represents the public ledger that blockchain uses. When a person makes a transaction online, verification is needed to ensure that transactions are not fraudulent. Digital money is like the “Ctrl+C, Ctrl+V” function on your keyboard — it can be easily duplicated and double spent. There are no serial numbers or signature markings to indicate that a digital currency is unique and is a legal tender.
Presently, we place our trust in banks (a singular entity), to verify online transactions. However, there are many problems with centralization. What if we could place the verification process in the hands of tens of thousands of people? That’s something to think about.
How do we know if the information on the Google Docs is accurate?
We’ll go into slightly advanced terms here. For example, our school assignment is on American History. The group members (Jack, Shelly, Macy, and you) are information gatekeepers of this Google Doc. While the members of the public (teachers, fellow students, parents, etc.) are very helpful in contributing information — bless their hearts — not all of them are factually accurate or correct.
Your group member duty:
Your duty as a group member is to collect all correct information as quickly as possible, package it in a neat boxed writeup, and then present it to the group for fact-checking. Only when the packaged information meets the rule standards then can it only be added to the Google Doc. This is the essence of blockchain.
Remember that once this information is added to Google Doc it is immutable, and will be there forever and ever — unless you can convince more than 50% of the group to change it.
The Reward: Now imagine that you and your group members have a jar in the room filled with 100 limited-edition Avengers lollipops. The rules (or protocol) state that each time each member adds the boxed information to the Google Sheet correctly, he or she can take a lollipop out of the jar. As a result, all group members are incentivized to work harder and complete this public information fact-checking as quickly and accurately as possible.
Blockchain/Bitcoin Explanation: In Bitcoin, the group members represent miners. They have to race to be the first one to collect as much transactions as they can, fit it into a block, and broadcast it to the rest of the miners (network). Once it meets the standards set by the protocol, the block is then added to the public ledger.
What can I do with my lollipops (Bitcoins)?
These lollipops are special edition. There are a limited supply of them. Seeing this, your fellow students are very interested in buying it. They are willing exchange their own pocket money for these lollipops. However, these lollipops are so limited — they keep changing hands, and the price gets higher and higher.
Some students are smarter. They decide to get these lollipops from the source itself. So they decide to join your group. However, there are is a high barrier of entry to joining the group. Soon, the group member pool grows from 4 to 20 students. There are now more people performing work, and through competition and incentivization, the information gets verified with more accuracy.
When more people join the group, it becomes harder for inaccuracies to be published (security is improved). Let’s take for example — group member Macy wants to sabotage the group’s efforts. She bribes Jack and Shelly to confirm the false information that she just presented. Although the information is incorrect, it still gets published on the Google Doc due to the majority confirming it (more than 51%).
However, with an additional 16 people joining the group, her task becomes harder. Macy would have to invest more time and resources to “control” at least 11 people to perform the malicious activity. Now imagine if there were 80,000 members instead. It would be an impossible task for Macy to take down the entire network by herself!
They all have to follow the set of rules created by the group, and carry out the steps as listed in the previous paragraph to continue earning lollipops (bitcoins).
Blockchain/Bitcoin Explanation: It’s not that easy becoming a group member (miner). As a miner, you have to buy a expensive hardware called an ASIC Bitcoin Miner and download a special software to run on it. This consumes a tremendous amount of energy, and your effort might be wasted as only the first person that finds the correct “nonce” to form a digital signature gets awarded the Bitcoin. As a result, most miners join mining pools to combine their computational resources to increase their chances of earning Bitcoins.
The sky-high prices of Bitcoin are driven purely by supply and demand. The mining process takes on average 10 minutes — meaning that 6.25 BTC is created every 10 minutes. Bitcoin has a max supply cap of 21 million, with 18.677 million currently in circulation at this time of writing. In the event where a trickle of Bitcoin enters the market every 10 minutes in the face of a huge demand, the price is bound to increase.
In Bitcoin, there are approximately around 83,000 active Bitcoin core nodes , so the system is incredibly hard to hack into — the malicious entity would need at least control of 42,330 (51%) nodes to alter transactions.
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Read Evan’s article on funding your Binance.Com from Binance.SG here.
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