Blockchain for Dummies, Manav Gupta

IN THIS CHAPTER
» Exploring the roots of the shared ledger 
system
» Appreciating blockchain’s business 
potential

Chapter 1

Grasping Blockchain 
Fundamentals

Blockchain is a shared, immutable ledger that facilitates the 
process of recording transactions and tracking assets in a 
business network. An asset can be tangible (a house, a car, 
cash, land) or intangible (intellectual property, patents, copy

rights, branding). Virtually anything of value can be tracked and 
traded on a blockchain network, reducing risk and cutting costs 
for all involved.
That’s the elevator speech for blockchain. In the rest of this chap-

ter, you review additional details to help you more fully appre-

ciate this technology and its potential for streamlining business 
operations.
Tracing Blockchain’s Origin
You can gain a deeper understanding of blockchain by exploring 
the context in which it was developed: the need for an efficient, 
cost-effective, reliable, and secure system for conducting and 
recording financial transactions. In this section, I provide that 
context and describe the characteristics of blockchain that make 
it such a suitable solution.

The shortcomings of current 
transaction systems
Throughout history, instruments of trust, such as minted coins, 
paper money, letters of credit, and banking systems, have 
emerged to facilitate the exchange of value and protect buyers 
and sellers. Important innovations (for example, telephone lines, 
credit card systems, the Internet, and mobile technologies) have 
improved the convenience, speed, and efficiency of transactions 
while shrinking  — and sometimes virtually eliminating  — the 
distance between buyers and sellers.
In spite of this, many business transactions remain ineffi-

cient, expensive, and vulnerable, suffering from the following 
limitations:
» Cash is useful only in local transactions and in relatively small 
amounts.
» The time between transaction and settlement can be long.
» Duplication of effort and the need for third-party validation 
and/or the presence of intermediaries add to inefficiencies.
» Fraud, cyberattacks, and even simple mistakes add to the 
cost and complexity of doing business, exposing all partici-

pants in the network to risk if a central system — such as a 
bank — is compromised.
» Credit card organizations are walled gardens with a high 
price of entry. Merchants must pay the high costs of 
onboarding, which often involves considerable paperwork 
and a time-consuming vetting process.
» Half of the world’s people don’t have access to bank 
accounts, requiring them to develop parallel payment 
systems to conduct transactions.
» Limited transparency and inconsistent information hinder 
the efficient movement of goods in the shipping industry.
Transaction volumes worldwide are growing exponentially and 
will surely magnify the complexities, vulnerabilities, inefficien-

cies, and costs of current transaction systems. The growth of 
ecommerce, online banking, and in-app purchases, coupled with 
the increasing mobility of people around the world, have fueled

Blockchain for Dummies Manav Gupta