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Crypto-currencies, block chain and distributed ledgers.

Nigel Morris-Cotterill

This ultra-simplified explanation clarifies the absolute basics of a subject that has become shrouded in myth and mystery.

The blockchain, crypto-currencies (or cryptocurrencies) like bitcoin, distributed ledgers and smart contracts are, actually, stuff you already know..


Crypotography is another thing that's simple to understand. If you fancy a bit of DIY Crypto, you don't need any technology at all, unless you consider a bit of paper and a pencil to be technology. You just need to know the (Roman) alphabet. A=01, B=02 and so on. a=27, b="28 and so on. A space is 00 and a full stop is, well, think of something but don't use a full stop. If your alphabet doesn't have 26 letters, then you just need your own numbers. For those who use Japanese, Korean or Chinese or any other sort of non-Roman alphabet or writing, sorry: I'd love to help but I'm clueless.

With a cross-referencing table, you can send a message in numbers that your counterpart can read back. It's a very easy code to break. The aim of cryptography is to make the code as difficult as possible to break and to keep developing it so code-breakers can't break it.

Note that the point in distributed ledger is not to prevent access to the data - in fact many "blockchain" applications make the data publicly available. Instead the point is to protect the integrity of the data i.e. to be as certain as possible that the data is correct and has not been changed. It's like putting those clay blocks under armoured glass in a metal case: everyone (at least everyone with the required authority) can see it but no one can touch except the originators.

I can hear you saying "if it's all so basic, why is there so much fuss?" Honestly, it's a fad. Once all the crazy noise dies down, the real benefits will become apparent. For the last few months, there's been, mainly, froth and very little substance. People are trying to use the blockchain and distributed ledger when far cheaper and far simpler (and far less expensive to maintain) systems will do at least as good and possibly a better job. Many projects are going to be expensive failures and many more abandoned at considerable cost.

As John Keogh of Shantalla says, the tech has been around for years: the innovation in Bitcoin was to collect various technologies and make them work together.

The benefits (and bullshit) of the blockchain and distributed ledger go far beyond crypto-currencies.