Blockchain Transactions
What is Blockchain? Transactions are central to why you should be interest in blockchain. I’m showing my age by misquoting Bill Clinton’s famous economic line, but Blockchain is all about rewriting the rules for how we process and manage transactions.
First and foremost, some homework. Go read this excellent article written in plain English. It’s an excerpt from the main Blockchain Transactions book about a day in the life of someone in 2030. Don’t let the fact that “someone” is a cartoon crocodile deter you. It presents numerous ideas that demonstrate how blockchain transactions can alter daily life.
Some Background
What is a transaction?
A transaction is simply the exchange of information. That information could be of direct or indirect value. Almost everything you do is based on a transaction. When you buy a Starbucks, you are clearly engaging in a transaction with your bank and Starbucks (and a bunch of other middlemen like payment gateways). If you check the weather on your way to Starbucks, that is a transaction between your phone and some kind of web service. Did you tell them to have a good day before they left for school? That is a social exchange. The list goes on and on.
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A Blockchain transaction could be any type of transaction in theory. The main distinction is the absence of middlemen. Many of the transactions we encounter on a daily basis necessitate the use of a middleman. This is especially true when it comes to payments.
What is a Blockchain Transaction?
When you make a payment, you set off a frenzy of activity among numerous third parties. These include your credit card’s issuing bank, the merchant’s payment processor, and the merchant’s bank. That’s only the beginning. You have a problem if any of these links in the chain are untrustworthy or simply sloppy. Of course, no one is ever careless with credit card information. Social security numbers, or any other type of sensitive data.
Peer-to-Peer Transactions
Worse, every entity in that chain of transactions has its hand out, grabbing a cut. You will be charge fees and interest on your credit card. The payment processor and the merchant’s bank both take a sizable cut. Are you attempting to complete an international transaction? Increase your fee-paying expectations all around. Do you need a quick international transaction? Bring on the agony.
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Don’t even get me start on special-case transactions, such as purchasing a car or a house. Is 3% of the price you paid for your home really fair to your realtor? Nine times out of ten, the buyer found the home online and the realtor did nothing more than show up. The seller’s realtor may not have done much more work either. Certainly not enough to justify fees in the tens of thousands of dollars. The attorney who drafted the agreement was compensating. The title company was compensating. The mortgage broker was compensate. The mortgage company received payment (on top of what you’ll be paying for the next 30 years). The list goes on and on.
The Blockchain Transactions Between Peers
In a blockchain world, any two parties can securely transact with only minimal fees. They do business with one another directly. In this case, our hero, Crowley, is able to buy a house directly from a seller. The title deed is reassigning to the new owner after both parties use an automated escrow system. The parties pay a small fee for the transaction along the way. very little. For example, the highest Bitcoin transaction fee ever recorded is around $8, which the Bitcoin community considers prohibitively expensive. Alternative to Bitcoin have transaction fees of a few pennies or less (relatively high transaction fees are one of Bitcoin’s flaws).
