In the last couple of years, the use of cryptocurrency has increased and popularized throughout the world. However, the technologies upon which cryptocurrencies and blockchain work have been around for decades since 1979 when Ralph Merkle created a public key distribution and digital signatures method called “tree authentication.”
Blockchain can be defined as an online public ledger used to verify transactions between users. These transactions are put together to create “Blocks” that are publicly accessible, and then they are connected through “chains” of blocks. The easiest way to understand how blockchain works is by comparing it to a checking account transaction with a physical check (for those who ever used one, since our new generations just know the use of digital money transactions like Zelle, Paypal, and Venmo).
Blockchain as a method of authentication.
When you write a check for $100 to pay for rent and your landlord goes to the bank and presents the check for payment, the bank records the debit on your checking account ledger and debits said amount. Nowadays, these transactions are kept digitally but long before the banks had physical ledgers where they would manually enter the debit in the account and then reflect the payment, these would take even more time if the checks were issued by another bank. If you have seen the movie “Catch Me If You Can” you might remember that the delay resulting from manually reflecting these transactions allowed a person to issue a check without funds since it would take a few days before the Banks would verify the transaction and realize that the check had no funds. (See: https://www.youtube.com/watch?v=bSDg_ua51bI)
We no longer have to be worried about manual records or even writing checks nowadays. However, with the use of cryptocurrencies and its somehow amorphous nature and relatively lack of governmental supervision, Blockchain is what allows the trading of cryptocurrencies by generating a public digital ledger where each transaction is recorded, and then those transactions are established in a block that is then connected to a large chain of blocks.
Blockchain enhances security and allows for the trading of cryptocurrencies and is used for several other purposes. If you have any questions or concerns regarding this post, please do not hesitate to contact our firm to assist you. We handle matters involving corporate law, estate planning, asset protection, probate, litigation, international arbitration, and immigration law.
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