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.