Bitcoin simplified: Part II(Decentralization)

In the previous article, I wrote about the flaws in the banking system. We are putting too much trust in a single entity, i.e., the bank. This has been going on for hundreds of years. But we have finally cracked a piece of technology that promises to resolve this issue.

Using Blockchain, we would no longer rely on a central agency to keep track of our monetary resources. We can transact money digitally without the need for a third party to facilitate the transaction.

Let’s first discuss the facilities that a bank grants:

• Ensure no double spending of the money
• Moves the money from one place to another
• Keeps track of all the transactions

Now, let us discuss the cons of the banking system:

• No anonymity for the transaction
• High transaction fees
• Anything can happen to your money without any fault of your own

Decentralization resolves all of these problems. Instead of a single institution keeping track of all the money, all the people using the cryptocurrency will keep track of all the transactions made.

Everyone will have a single ledger to keep track of all the transactions. This ledger will essentially be a chain of blocks(hence the name Blockchain), each block holding a fixed number of transactions.

All transactors have a private and a public key which keeps their identity anonymous. We use these keys to perform the transactions.

The fee for each transaction is a fixed amount compared to a percentage of the transaction that the banks charge.

But how does this technology tackle double spending? How are transactions verified? And if everyone has a shared ledger, then what if someone decides to tamper with it?

I will discuss these questions in the upcoming articles.