In the past few months, I’ve really become absorbed in the world of #FinTech, #RegTech, #AI, #Blockchain. I follow many FinTech influencers and read voraciously on the subject. But that doesn’t mean that everybody else does. When I worked at Mastercard, I organised a Blockchain workshop with our Head of Payment Innovation, Justin Pinkham. He walked the UK&I office through what blockchain is and how Mastercard is leveraging the technology. I’m going to be honest with you — I’m fairly certain 75% of the audience left feeling more confused and dazed about blockchain, like walking into some sort of tech-induced fog. The only reason I could keep up is because I had already finished reading Blockchain Revolution, a book written by Alex and Don Tapscott. I had the pleasure of meeting Alex Tapscott at a Wall Street Journal event on blockchain, where he walked us through the book and invited guests to speak on the topic. He made the new technology seem accessible to everyone, or at the very least, to me. On the most recent podcast of FinTech Insiders, the 11:FS staff and guests discussed “Finding Blockchain’s Feet.” They discussed everything from using blockchain in RegTech (Regulation Technology), to using blockchain to improve KYC (Know Your Customer) processes, ending with an interesting discussion on ICO (Initial Coin Offerings). It was funny because they started the podcast by saying that they assumed by now that everyone knew what blockchain was. I chuckled, because I knew this not to be true. It wasn’t until this podcast though, that I realised how few “normal,” average Joe people know what blockchain is. So I thought I would explain in the simplest terms possible for anyone who doesn’t read about the daily goings-on in the tech world, or for someone who is curious but just doesn’t really care all that much.
I got the idea when I was babysitting one day and I was watching the two girls I babysit play with some blocks. Blockchain with Legos, blockchain for toddlers. So often I had seen articles and blog posts about blockchain with images of Legos, but never have I read an article with the metaphor. So here it is.
Imagine you’re a parent (for me that is difficult, but bear with me). You have two children. Let’s call them Gina and Justin. Remember this- we’ll come back to it.
Building A Lego Tower
Think of blockchain as a string of Legos, or a tower of Legos- one built on top of another. Each Lego tower must have a base. Every time you want to build on the blockchain, you add another block — or Lego, in this case. But these are special Legos. These Legos have glue on them. Once another Lego is added to the original tower, it cannot be removed or replaced. It is there — stuck for eternity — with the strongest super glue you can imagine.
In order to change the pattern of the tower or to correct a previous mistake, another Lego must be added on top to correct any mistake or discrepancies. Now — imagine that this Lego tower is placed in the living room for everyone in the family to see. You, your partner, and the kids can see it at all times, every day. That Blockchain Lego Tower is glued to the coffee table and cannot be removed in the dark of night or under any circumstances. It is open and transparent, and anyone — including neighbors, aunts, uncles, dogs, cats, and more — can come and look at the tower. This, very simply put, is the technology called Blockchain.
Let’s put it into practice with our kids, Gina and Justin. For Christmas, Gina receives a new bike. It’s a beautiful mountain bike and she loves it dearly. But Justin is jealous and he wants one too, he was gifted a lame Razor scooter and desperately wants a bike like his sister’s. The blockchain has already begun. It didn’t even really begin when Gina is gifted the bicycle. Theoretically, one could argue that the blockchain began even when the bicycle was designed, but let’s not get too complicated here. Let’s say the blockchain began the day that Gina’s parents (that’s us) bought the bike. We brought it home, and thus the base of the Lego tower was set. When we gifted it to Gina, we added another Lego to the Lego tower. Perhaps for clarity’s sake, we’ll say we even wrote on it with Sharpie, “Gifted to Gina on December 25, 2016.”
Perhaps Gina is a kind-hearted girl and lets her friends borrow her bicycle sometimes. She lends it to her friend Allison. Another Lego is added, “Lent to Allison [date].” Then Allison returns it, but one of the spokes is missing. Another Lego — “Returned from Allison, spoke missing [date].” Perhaps Gina rides the bicycle without training wheels for the first time. Another Lego- “Rode without training wheels [date].”Or maybe she rides the bicycle to school for the first time. Another Lego — “Rode to school [date].” Perhaps at this point, Gina’s younger brother Justin begins to feel a bit jealous and decides he wants to take the bicycle for himself. So late one night when everyone is sleeping, he goes into the living room and tries to knock down the tower. But the tower stays exactly where it is (remember the super glue?). He tries to erase the Sharpie on the second block that says the bicycle was gifted to Gina to change it to say it was gifted to Justin. No luck! He tries to break the tower apart but he can’t.
His only option is to try and find another Lego and write on it in Sharpie, “Gifted to Justin from Gina [date].” But in the morning, everyone wakes up and sees this new Lego. Remember, the tower is in plain sight for all to see on the living room coffee table. This is where arguably the most important part of blockchain comes to play, and that is consensus. Gina walks in bleary-eyed having just woken up and sees the new block. We, her parents, assume that she has gifted the bicycle to Justin. Gina, insists she has not. Instantly, consensus has been broken and the most recent Lego that Justin placed on the tower is deemed to be fraudulent, so to speak.
Does this make sense yet? Perhaps not, but it’s well worth trying to understand. If you are curious about what blockchain is beyond the fact that it has been a buzzword in the tech community for some time now, I urge you to read up on the subject. Blockchain is the technology behind Bitcoin and similar cryptocurrencies. Ethereum is another blockchain to look out for that many applications are being built on and features a decentralised platform to run smart contracts.
Beyond just financial services though, it’s important to know that blockchain is being used in everything from land deeds and water rights to the music rights (Imogen Heap is a huge champion of this) and even being used in the medical community to document medical history of patients. There are even start ups that are securing diamonds with blockchain. It’s a technology that simply will not go away any time soon. So even if you can’t be bothered to learn how to build a blockchain, it doesn’t hurt to know what it is! I would love to hear your thoughts and I always love to be educated so please share any interesting articles/ ideas you’ve come across! It’s all very, very… awesome.