So, tell me how do you buy something today?

By money. lol. Simple.

In India we use rupee, similarly, there is dollar, yen etc. These are the currencies that we use in our daily lives to function in the world. To use the rupee, we need what? We need a bank. Whenever we give or take a rupee, the bank is involved as it facilitates the transaction, records it and does a bunch of other things. Similarly, if instead of a rupee, let’s say we have a digital currency. Think of bitcoin. It is digital money. In case you make transactions with digital currency, how will the transactions be recorded? Who will do the work that the bank was doing with the Rupee?

A guy called technology will do it.

This guy’s real name is Blockchain. It enables the transactions; basically, makes it possible for the world to work with digital currencies like bitcoin. See we don’t need to get into a lot of details about blockchain as the aim is not to become a blockchain developer but to understand blockchain to an extent that it becomes comparatively easy to visualize. Because in case you buy a candy not by paying rupee to the shopkeeper but by paying bitcoin, you will know how that worked.

Think of blockchain as a computer. What does a computer do? To keep it sweet and short, a computer stores and processes information. It is a database. Similarly, blockchain is a database. It can store transactions, process them meaning approve them and verify them. Right?

To understand it better, let us see how it enables bitcoin transactions? Blockchain computer has a bunch of nodes which run the protocol of a particular currency. For example, in the case of bitcoin, they run the bitcoin protocol on a blockchain computer.

Wait, wait, what are nodes and Sejal you did not even explain what the heck bitcoin protocol is?

K, fine.

Think of nodes as a bunch of anonymous physical computers, not related to each other. They are not run by the same person or same organisation and are not located at the same location.

Bitcoin protocol? It is a set of rules. You can call them bitcoin rules. Think of it like bitcoin has stated a few things about himself(bitcoin is a bit of a my-life-my-rules kinda guy) –

• I have fixed units which means fixed supply,

• I should not get double-spent and

• this is how I can be used to make transactions etc.

So, these are the rules that get written in code on the blockchain and then the blockchain runs it. That’s what they mean when they say Blockchain running bitcoin protocol.

Now the interesting question is why the fuck will these distributed random computers run this? Are they relatives of Bitcoin or what? And let’s not forget that it takes up time, and energy and nothing in the world come without a cost so there must be a cost associated with running this, right? (Keep saying yes even though I can’t see you). So, to get this distributed system (a bunch of unrelated random computers) run the bitcoin protocol and also very important – to make them run it with honesty(because remember they are not related to each other and hence can lie).

Bitcoin said -- OKAY guys. I am gonna be a nice man. You run this and I will reward you. I will give you my units if you help me make a transaction on the network. Woah. Now this was something!! What happens next? Of course they all agreed. After all who doesn’t want to get paid for being honest? And now these nodes are incentivised to ensure that the application is running as per the rules defined and they collectively verify the transactions in the order of transactions. This way all the transactions get recorded on blockchain and cannot be removed. You can literally check all the transactions made with bitcoin till today.

Isn’t that beautiful? I have always believed in the power of technology but never really appreciated its beauty. This personally makes we wanna do cool shit.

P.S. It is not over here. This is a very high-level view of the underlying technology that powers digital money. I will write more such pieces to explore different dimensions of this beautiful, promising and gives-me-so-much-hope technology.

P.P.S. I am currently a part of the Web3 fellowship powered by Network Capital and Mudrex. This blog also tries to capture my learnings from it.

K, bye.