Blockchain
A cash book many people keep at once and nobody edits afterwards
What is it?
Picture a cash book of which thousands of people each keep their own copy.
Anyone who wants to add a line calls it out to everyone. Each person checks whether it fits what they already have. If enough of them agree, they all write it down. Anyone who then quietly alters their own copy stands out at once - the other thousand say something different.
From that follows the one property that matters: there is no place that can reverse anything. No central office, no operator, no complaints desk. Not because anyone forgot, but because that is precisely the purpose.
An example
A bank transfer has a middleman: the bank. It keeps the account, it posts the entry, and if something goes wrong it can reverse it. You are not trusting the recipient, you are trusting the bank.
On a blockchain that middleman does not exist. The transfer is in the shared ledger as soon as the participants agree. From that moment it is final - regardless of whether it was correct, intended or obtained by deception.
Where does a risk come from?
Not from the blockchain being insecure. From the fact that it very reliably carries out what you did not want, too.
| No reversal | A mistake, a fraud or an exploited flaw produces an entry that stands. There is no window in which to object. |
|---|---|
| Everything is public | Anyone can see every movement. That makes losses provable - and at the same time shows where there is something to take. |
| Nobody is responsible | There is no operator to turn to. Anyone who suffers a loss has no counterparty. |
Why this matters for cover
The two properties pull in opposite directions, and both matter for a cover.
Irreversibility is the reason cover exists at all. Where a bank can reverse a payment, no cover is needed. Where nobody can reverse it, the only options are to carry the loss or to transfer it.
Openness is the reason it can work. A loss both sides can read in the same ledger does not have to be proven - it is written there.
Where this leads
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How a single entry gets into this ledger.
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A program that sits in the same ledger and moves money by fixed rules.