Traditionally, there have been middlemen who have been controlling the data. For instance, Facebook is the middleman between users and advertisers. Banks are middlemen between borrowers and lenders.
The issue here is that the data is controlled by a central authority – Facebook and banks. They, therefore, control the prices and also technically own the data. In this scenario, all the power lies with a middleman and users have to trust them to remain ethical and continue to think about user interest. Blockchain was invented to make the data decentralized and trust minimized with any centralized party.
In order to understand it better, let us talk about torrents. In torrents, no file is owned by a single person. It is a kind of “peer-to-peer” architecture where multiple copies of the file are present at multiple workstations/users. Therefore, no single person controls that file. This kind of architecture is highly scalable and fault-tolerant since there is no single point of failure.
Blockchain essentially borrows the same idea: what if databases could be decentralized. This solves a lot of issues:
- You can directly connect to a borrower without a middleman like a bank. You will get more profits.
- You can connect directly to advertisers to tell them the kind of ads that you like, without going through Facebook.
One of the well-known use cases of Blockchain is that of cryptocurrency which is a digital currency that isn’t controlled by any central authority. Similarly, we can use Blockchain for smart digital contracts where no middleman is verifying the contract.