A Baby Boomer Explanation of Blockchain
The primary construct of blockchain is not exactly new. In fact, it verges on being ancient. There is a corollary example that everyone from the baby boom generation is familiar with. And I will detail it in this commentary. I feel compelled to do this because I frequently encounter the question, “What exactly is blockchain, and how does it work?”
Even those who may not understand the architecture and structure of blockchain are likely aware that it is the platform, the foundation, that gives all cryptocurrencies and other asset classes authenticity and credibility. But why and how is that so?
The historical example that is functionally closest to today’s blockchain concept is the past practice of pulling a property abstract. You probably can recall the day when within a city block of any county courthouse there three common office groups, for convenience reasons. They consisted of bail bondsmen, law offices, and the Abstract and Title companies. The one I will discuss here is the last one. They were nearly always multigenerational family owned businesses. That was apropos for the nature of their purpose.
When a real estate property was in the process of changing owners and the transaction involved funding with a mortgage, the lender required a title abstract to be prepared for their records. In fact, the industry managed to get laws on the books that required this step in the loan administration process. It was a time consuming and cumbersome process due to the manual nature of the original method.
A member of the title company staff would spend hours at the courthouse researching and copying every transaction document pertaining to the property parcel from the original date that it became a unique land parcel. A record had to be verified and a copy attached for every single instance that property changed owners. The records commonly preceded statehood in many cases. But the date of statehood was usually the starting point. It was vital to make certain that the property could certify a clear and clean title. This meant there were no active or unsettled liens or judgements on the record against that parcel. It had to be indisputable that each owner in the “chain of ownership” was in fact the legal possessor until they transferred ownership through sale, inheritance, barter or any other legally defined ownership change.
This process became necessary because nasty, even lethal disputes could erupt during property transfer events. Someone could come out of nowhere and claim that their grandmother left the property to them in a will, and produce a document attesting to that claim that was difficult to either challenge or verify. It could get very ugly. The property abstracting process generally resolved and settled any possibility for false or previously undisclosed and unrecorded claims of ownership. Because of the extreme amount time and labor required to pull an abstract, the industry eventually created title insurance as a modern alternative. Title insurance in theory proposed to protect the mortgage and lien holder, as well as the warranty deed possessor, from possible fraud or errors in historical documentation of the existence of said property.
A blockchain is an electronic abstract verifying the authenticity and integrity of an object that has recognized value, regardless of the basis, category or specific amount. Just as the property abstract was, it is soundly irrefutable in documenting the existence and ownership chain of the asset. It can be traced back to the original moment of creation, just like the property abstract of old. But the speed of light of an electronic record makes it more functional and feasible compared to spending hours and days in courthouse file rooms.
I hope the reader finds this analogous description of the structure of blockchain helpful and clarifying. I will look forward to your comments in that regard.
