How to understand blockchain? Compare it with Google Docs and you will understand it

In this article, author William Mougayar explains how blockchain technology can be easily understood if users compare its functionality to popular document creation and collaboration tools.

The more people understand blockchain, the more useful blockchain use cases will proliferate.

Just like any other technology, the people who invented blockchain technology didn’t necessarily think of all the applications for it, which is why I think that while there is a growing number of entrepreneurs and subject matter experts with deep expertise in a particular field entering the space, the best use cases for blockchain have yet to emerge.

The first step to getting into blockchain, though, is to have a basic understanding of how it differs from what we do today.

Almost everything in life is done by taking incremental steps.

Even the smartest startups need to understand the psychology of their users’ behavioral conversions (Facebook, for example, understood the concept of ‘sharing’), while large enterprises need to be prepared to tackle the ambitious management challenges that will drive blockchain projects forward.

‘A new type of database’

Blockchain is another kind of database. This is a very popular metaphor and is frequently used. In fact, blockchain does not subvert the concept of database, but this technology subverts how databases are synchronized.

Imagine two banks that need to update the account balances of two users because one customer transferred funds to another customer. The banks need to spend a lot of time and energy to coordinate, synchronize and pass information and checks to ensure that each transaction is carried out exactly as it should be.

Typically, the funds are held by the originator until it is confirmed that the recipient has received the funds.

Using a blockchain, having a single ledger of transaction entries that all parties can access simplifies collaboration and verification because there is only one version of the record rather than two separate databases.

Let's take this metaphor a step further into the realm of shared documents and think about what happens when we share a file and two or more users need to make changes to the file.

Google Docs

Traditionally, document sharing through collaboration involves sending a Microsoft Word document to another recipient and asking him or her to make changes to the document.

The problem with this is that you need to wait for the recipient to send back a reply version of the document before you can see the changes they made and then make other changes yourself, because you cannot make changes until the other person has completed their changes.

This is how databases work today. Two owners cannot update a record at the same time. This is how banks maintain balances and transfer funds; when a bank makes a transfer, they lock access (or reduce the balance), then make an update on the other side, then re-enable access (or make the update again).

If through Google Docs (or Google Sheets), all parties can access the same document at the same time, and only one version of the document is always visible to them. This is like a shared ledger, but it is replaced by a shared document. When sharing involves many people, decentralization comes into play.

You can imagine how many legal documents need to be used in this way.

Instead of passing documents back and forth to each party and losing track of them, why can't all business documents become shared, instead of being passed back and forth? So many types of legal contracts would be perfect for this kind of workflow.

We don’t need a blockchain to share documents. But the metaphor of sharing documents is very relevant.