What is blockchain technology - A Whatsapp group analogy

image courtesy of uia.no

By Japhet Kapambwe Mesa

I was sitting at my desk preparing a presentation for the upcoming Bitcoin Seminar in Ndola (sign up here) and I came to the part where I was going to explain what blockchain technology is and how it works. At this point my mind was awash with a number of academic definitions but then I realized that most of the definitions would most likely leave my audience with more questions than answers. Then I remembered the presentation that Sonny Zulu from Standard Chartered Bank gave at the recently ended Zambia Ecommerce Expo and Conference (ZEEC) in Lusaka where he broke down the concept of cryptocurrency so much that his four year old son would understand. I will now attempt to explain blockchain technology to Sonny's son. Wish me luck.

Blockchain Technology is an implementation of Distributed Ledger Technology (DLT). Ok, what is DLT and how does it work? Let us picture a whatsapp group. Ah now that's easy right?

This whatsapp group is for a group of individuals who are performing various transactions among themselves. Now, whenever a transaction happens it is announced in the group chat for everyone to see and for those interested to record in their notebooks. The transaction is therefore public and can be verified by every participant. The group will be able to keep track of transactions and will also know every members balances at any given time. In this scenario, the chat history is the ledger which is distributed on every member's phone (node). Each node keeps an exact copy of the chat history (ledger) in such a way that it cannot be lost even if one member (node) left the group or if their phone crashed. In addition, the information in the chat history cannot be easily modified without other members knowing or consenting to the change. This is gives it the property of being immutable and consensus-driven. In simple terms this is what blockchain is and how it works. 

Now, why is blockchain technology seemingly better than traditional methods of data distribution? Without going into the definitions of centralized, decentralized and distributed networks, I shall put forward the following benefits as expanded by the whatsapp group analogy above, as much as possible.

Imagecourtesy of xenonstack.com

1. No single point of failure. For me a very important property. A distributed ledger has no single point of failure. As mentioned above, the chat history in the whatsapp group cannot be lost even if one node left the group.

2. Reduced cost. Group members do not have to send the details of the transactions to multiple people. All interested parties are made aware instantly the moment when the transaction is announced in the group.

3. Trusted transactions. A member does not have to trust any individual member for them to have confidence that the information about transactions is accurate. They trust that the members will act honestly in order to keep ecosystem healthy and functional.

4. Unalterable information. As earlier alluded to, the information in the chat history cannot be easily modified without other members knowing or consenting to the change. To change the information one would have to delete ALL the messages after the point at which they wish to make changes. Imagine the amount of effort that it would take to convince all the other participants to also delete all their messages. The only way to make changes is when the majority of members agree or meet a consensus. Hence blockchain being a consensus driven protocol. 

5. Realtime tracking. Transactions can be tracked as soon as they are announced as long as the node is online. In a similar manner, any changes can be tracked as soon as they are made. This makes the entire system transparent to all participants.

There are many benefits of blockchain technology. Therefore, this article is by no means conclusive. I do hope that this article helps to further the readers understanding of what blockchain is and how it works. I certainly hope that Sonny's son now has as good an understanding of blockchain technology as he has of cryptocurrencies.