You’ve heard about it, maybe in relation to a digital currency like bitcoin — but what is blockchain and how does it work? On the latest episode of Too Embarrassed to Ask, Circle CEO Jeremy Allaire answered all our questions and yours.
Let’s start with payments: Right now, it’s easy to send people money online, but how we send that money is tied to institutions like credit cards and banks. Circle and its competitors want to use blockchain to offer their users a more open alternative, which wouldn’t tie currency down to anything.
“The payments world today is a lot like where we were 20 years ago with how communications worked on the internet,” Allaire said. “You could get to content online, you could dial up to a service like AOL and there was all this content on there and that felt like a lot of information to people: ‘There’s more information than I’d ever need here!’ And it felt like, I could communicate with someone through an email if they had an AOL account, and so on.”
“The world of money is sort of similar,” he added. “We have all of these closed networks. If you happen to have PayPal, then you can use PayPal. If you happen to be in another country, it might be a completely different system and it might be administered by a government agency or by a consortium of banks.”
He extended the AOL-to-present analogy further by arguing that once we are able to “pay anyone, anywhere with whatever,” we’ll realize currently hidden opportunities for the web.
“I think it was hard for people to imagine free, instant global communications 20 years ago,” Allaire said. “People thought, ‘I don’t really send international letters all that often, that’s fine,’ or, ‘I don’t make a lot of international phone calls or even long-distance phone calls.’ I think there’s latent aspirations; people don’t realize, once they have something that’s a completely frictionless, open, global thing how broadly the utility of that thing increases.”
However, blockchain does not have to be tied to currency. Rather, Allaire said, the technology — which establishes a permanent record of something, maintaining that record via a decentralized network of users — has huge implications for everything we want to keep track of.
“How do I prove that I own a house?” he asked. “Well, I have this piece of paper called a title and that’s a social construct. That title is something that a record-keeping agent keeps. We say, ‘Okay, the city clerk is the record-keeping agent for a title on a house.’”
“The blockchain innovation really allows us to take everything where there’s trust around record-keeping and it allows us to make that digital, immutable, permanent, global and auditable,” Allaire added.
So, one example might be property ownership. But another might be our identities or how we have voted in elections. Allaire said these applications of blockchain would be hacker-proof because no one would be able to change the records without a massive amount of computing power, enough to override all the other people in the network.
“There is no open mechanism for us to control our identity and for trusted third parties to add fragments or attributes to our identity, and for us to then carry that around the world and interact and authenticate with it,” he said. “Voting is just a record-keeping system of choices. It would be great if we had tamper-proof systems, and obviously recent events make that feel more important.”
Have questions about blockchain that we didn’t get to in this episode? Tweet them to @Recode with the hashtag #TooEmbarrassed, or email them to TooEmbarrassed@recode.net.
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This article originally appeared on Recode.net.