Blockchain 101, Part 2

When we last explored the subject of blockchains we focused on the foundational concepts of ledgers. As you may recall from your copious Rational Exuberance notes, a blockchain, in its simplest form, is an online or digital ledger that keeps track of transactions by using the power of modern cryptography. Now, let's go deeper into the proverbial rabbit hole with a look at one of the most important aspects of blockchain technology: decentralization.

Decentralization: A Digital Revolution

There are several reasons why business and tech communities have become so excited about blockchains, but none is more foundational than the notion of decentralization. The internet, banks and other financial institutions, and companies such as Facebook and Netflix keep and store your data, and, most importantly, they do so in a centralized fashion. However, blockchain data does not reside in a single place; it resides in the network—the decentralized network. And, why does this matter? There are four reasons: security, cost, data ownership, and transparency. First off, we all know that computer network security and ransom attacks have been all over the news nowadays and all centralized databases expose all their network data when they are breached. Second, the overall cost of building a centralized network system is massive, given all the digital capacity a company must invest in to ensure everything is in place so that the system runs smoothly. The third reason why the notion of a decentralized network is so revolutionary has to do with the issue of data ownership. Data ownership is arguably one of the most important benefits of a decentralized blockchain because in centralized networks you do not own your own data, and worse still, it's often monetized by the very companies and networks that have access to your data. And, now a random but important Rational Exuberance reminder: if you are not paying for a technology product or service (Google, Facebook, etc.), then YOU are the product. Back to blockchains—the fourth reason that being decentralized matters is transparency. A decentralized blockchain network provides full transparency on how data is used, who uses the data, and when that data is used. At this point, I should probably mention that if you find yourself regretting reading this far, you can blame it on blockchain! Why? Because it was precisely the vast potential of blockchain technologies, not Bitcoin or cryptocurrencies, that first piqued my own personal interest back in 2014, an interest that ultimately led me to co-found Rubicon Crypto.

Today, there is so much hype around blockchain technologies or, dare I say, irrational exuberance. Yet, as we saw today, the ability for blockchains to create decentralized networks that offer new solutions to the issues of security, cost, data ownership, and transparency may be the most revolutionary!

As always, whether or not you are crossing the digital divide with Rubicon Crypto…please remember to do so with common sense and with Rational Exuberance.