A node is simply a point at which information is stored and/or processed. And a node can be anywhere that the internet reaches, directly or indirectly.

Blockchains are not only for currencies.

There is a widespread feeling that blockchains are only useful for currencies like BitCoin. That is not so but because of that misunderstanding, it's easiest to explain blockchain by referencing it to banks.

A bank is, at its most basic, nothing more than a secure warehouse for other people's money and recording the amount stored. The word "deposit" means something left somewhere.

A more complex bank provides a service of transferring amounts from one depositor (A) to another (B) and recording that transfer by adjusting the balances held and keeping a note of where the money came from and went to.

That is pretty much all that electronic payments systems do - everything else is bells and whistles and compliance or risk management.

And, despite what some people say, that's exactly what the bitcoin and other blockchains do, but they do it more like the alcane than like the explosive in the images above. However, the way in which they do it is fundamentally different.

They provide a "distributed" repository of information (often called "data") that is stored on nodes that are attached to the internet. Because the internet is made up of highways and by-ways, the routes to those nodes are many and varied and do not require a hub. Here's the clever part: every node contains every record and, (here's the "how it works" bit you don't need to know) every time there is a transaction, every node is updated.

Tokens, anonymity, blockchain outside currencies and more...

Tokens

Every transaction generates a "token." The token is just like a cheque except that it has a unique serial number. In fact, transactions are more like cheques than like bank-notes because bank notes, while having a serial number, move freely from hand to hand with no record. Blockchain tokens actually generate an audit trail, just like a cheque that is endorsed by one recipient to another.

Anonymity

It follows, then, that contrary to rumour, transactions on a blockchain are not unattributed and nor are balances held. The reason for this is that, for the transaction data to work, every token must be traceable. That is not to say that the use of tokens is not anonymous but the problem that must be solved is the ownership of the accounts which transact, not the tokens or the blockchain itself.

Blockchain outside currencies

Currencies that have no physical representation (and that includes fiat currencies held in banks) are data. It follows, then, that if blockchains can be used to store, access and facilitate the updating of data that the nature of that data is irrelevant.

It follows, then, that any repository of data can be stored in a blockchain.

Is blockchain the same as cloud computing?

Functionally, that is to say from the point of view of users, they should both be completely transparent. Both should, in effect, allow data to be kept in multiple locations and for all those locations to be constantly up to date. Cloud computing is just the name the computer industry gave to an old concept: independent data centres that update the data so that those accessing their nearest data centre have the current information, in a hub and spoke arrangement. It's like when banks used to update customer's balances overnight. As technology improved and became cheaper it became feasible for data centres to be located in multiple locations and to be updated increasingly frequently. Today, because the internet is designed to use multiple routings to prevent data centres becoming isolated and because speeds are so fast that vast amounts of data can be transmitted near instantaneously, data centres can be maintained exactly in sync. to within fractions of a second. It is that which underpins both cloud computing and blockchain.

Blockchain people like to talk about a "distributed ledger" which means, simply, that a full copy of the current database is kept in multiple locations. It's just another bit of jargon intended to make something simple sound complicated and special.

Like all databases, access can be public or private or a combination.

This article is in five parts:
Part 1: https://worldmoneylaunderingreport.com/publications/web/wmlr_articles/s…
Part 2: https://worldmoneylaunderingreport.com/publications/web/wmlr_articles/s…
Part 3: https://worldmoneylaunderingreport.com/publications/web/wmlr_articles/s…
Part 4: https://worldmoneylaunderingreport.com/publications/web/wmlr_articles/s…
Part 5: https://worldmoneylaunderingreport.com/publications/web/wmlr_articles/s…