In my previous post about what is a blockchain, I explained that a blockchain is actually a special type of ledger where the transaction and recording of the transaction occur at the same time. This makes it extremely accurate, like 100% accurate. In this post I would like to build on the ledger concept further by explaining how this ledger is transparent.
Transparency usually means something you can see through, so in a manner of speaking nothing is hidden.
The way in which a blockchain ledger is transparent is the blockchain explorer.
A blockchain explorer is a software tool which lets you look up transactions by several means, one is a number called a transaction hash, every transaction has one, and anyone can look it up.
You can also look up wallet transactions by wallet addresses.
You can also look up wallet balances and transactions by wallet, or you can view any recent transactions in the list of recent transactions on the blockchain explorer.
This is extremely transparent and those with practice using a blockchain explorer can look up the wallets with the largest amounts of tokens or look up the earliest transactions on the blockchain explorer.
The blockchain ledger records all transactions of what was sent, in the form of the asset abbreviation, where the asset originated and where it went in terms of originating wallet address, destination wallet address, amount of asset, time, and date in numerical format.
Example: If Bob bought food at a store with one Bitcoin, which is abbreviated BTC, and sent it to the store owner, at 7AM on June 1st, 2023, the transaction would have a number: 456789124a123987456b.
And the transaction would record Bobs wallet public address : 456124789a789457123b for the originating wallet, BTC 1.0, and the public address of the stores wallet would listed as the receiving wallet 123789456z789466123y and a date 06/01/2023 and a time 7:am.
That’s called a transaction record.
The blockchain records every transaction which moves Bitcoin on the blockchain on the blockchain ledger.
You may want to read this section twice.
The wallet addresses are pseudo anonymous in that the 23 character public key or better explained as the public address of the two wallets is recorded.
And this transaction is given a number, so that you can find this transaction in the ledger next week, next month and ten years from now. That number is called a transaction hash.
The Transaction Hash is a transaction record.
The blockchain records every transaction which moves Bitcoin on the blockchain on the blockchain ledger.
You can find every transaction using the transaction hash on the blockchain explorer.
In cryptocurrency vocabulary we call this transparency because all transactions are viewable on the blockchain, via the blockchain explorer, you can see it, it is not hidden.
Notice that in the Bob’s Bitcoin wallet public address doesn’t have Bobs name in it, just like your real life street address doesn’t have your name in it.
So some people might say the transaction is anonymous because just looking at the address there is no name to link it to Bob.
In fact the stores public address doesn’t have the name of the store in it.
So it also looks anonymous.
But in real life Bob may have a bank account number attached to the wallet public address.
So Bobs transactions are not really really secret or anonymous.
They look anonymous but there are ways to gather information by looking at account transactions to find some identifying information.
In cryptocurrency vocabulary we call this pseudo-anonymous because the transaction would record Bobs wallet public address, not Bobs name.
So Bob is only identified by his wallet address.
If someone breaks into a project wallet and steals tokens.
On the blockchain explorer you can see the theft occurring and track the tokens to the thief’s wallet.
Now that’s what I call transparent.
If you could combine this knowledge with banking information, thieves would find it very difficult to steal tokens, if you could get a blockchain explorer detective company and global banks to work together.
But one thing this does is reduce privacy.
The blockchain explorer could also reveal all your beer purchases and gambling token purchases.
The blockchain is set up for transparency, and pseudo-anonymity.
But once it interfaces with legacy systems that the government can track your no longer anonymous.
That is where cryptocurrency mixers are important as helping to protect your privacy. The mixers let you track the tokens going into the mixer, but they dont let you track the tokens going out. This is the source of controversey right now because the mixers do something good; give you back your privacy, the same privacy you enjoy with your countries currency or fiat or cash. But just like currency, mixers can be used by criminals to hide their identity or perform crimes. So many governments have made mixer use illegal. This is an important issue and deserves more study.
You may be thinking this concept of transparency and the blockchain explorer are both fantastic and something to be feared.
And you’re right.
This is a fabulous tool.
But it could be used to spy on people and deprive them of their privacy.
The blockchain is amazing, but the more you learn, the more like an onion it becomes.
It is both something that adds flavor to the meal, but it can also make you cry.
