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So, what's this blockchain thingy? - a World Money Laundering Report exclusive (part 1)

In this exclusive multi-part analysis, World Money Laundering Report looks at blockchains from a layman's perspective, demystifies the topic using plain language and often humour and explains some of the risks that it creates for regulators, investigators, providers of financial services and the public at large.

Note: there is nothing technical here. It's intended to be simple, bordering on the simplistic from a techy standpoint, for non technical people.

Have you ever watched ants scurrying around? When one is attacked, the others all scatter and, when they think they are far enough away from danger, regroup and race back to their nest. Did you wonder how they know, how they communicate, how do they work out what to do? Is there some kind of communal consciousness that operates independently of a central authority?

That's the blockchain. Kind of. Most importantly, while the vast majority of us need to know what it does, equally we don't need to know how it does it. Here's the least technical guide to "The Blockchain," starting with why that title is wrong.

We can talk about "blockchain" with no definite article and no capital letter but the only time it's correct to say "The Blockchain" is when we are talking about the structure of a particular chain which, for the sake of simplicity, we'll call a "product."

Look at this image:

This is how information flows start in the real world. There is a central point and information flows out from and back to that hub. This is how, for example, traditional banking works. Even though payments e.g. cheques, can be passed around between the nodes, they cannot be settled unless they return to the centre. Theoretically, that's the case with cash which is, at least notionally, an IOU that allows a person to transfer interest in a specific holding (originally of gold) at a Central Bank.

This, by the way, is the chemical structure of trinitroaniline and it goes bang.

Now consider this:

This is dimethyl butane n eohexane alkane and it's really nasty stuff to which exposure requires a full-face respirator and lots of other safety equipment.

For our purposes, as a graphic, it shows that information flows to, is stored in and can be accessed at multiple nodes that do not require a common hub but they do require a core transmission path.

Now we have to become a little more conceptual. Think of a rural road system and think of villages as nodes. Imagine that there is a highway running between but not through several villages. To pass from one village to another you can drive to the highway, along it, then leave it and use a local road to the next village. Or you could use one or a combination of more than one local roads to go from one village to another, never touching the highway.

That's how the internet works. It's also how blockchains work.

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part 1:
https://www.pleasebeinformed.c...

Part 2:
https://www.pleasebeinformed.c...

Part 3:
https://www.pleasebeinformed.c...

Part 4:
https://www.pleasebeinformed.c...

Part 5:
https://www.pleasebeinformed.c...

Part 6:
https://www.pleasebeinformed.c...

part 7:
https://www.pleasebeinformed.c...

Part 8:
https://www.pleasebeinformed.c...

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Author: 
World Money Lau...