While many business professionals think of blockchain as a complex technology, it is actually just a newer form of a centuries-old, basic business system known as a distributed ledger. The simplest way to understand blockchain and the distributed ledger system is to look back two thousand years ago to the Pacific island of Yap.
The Island of Yap
In a remote part of the South Pacific there is an island called Yap. Randomly placed around the island are thousands of large limestone and aragonite disks1. These disks can be up to 12 feet high and weigh over five hundred pounds2. Yet, neither limestone nor aragonite is native to Yap and the next closest island is 250 miles away3. So how did these disks get to the island? Why were they taken there? What were they used for?
Two thousand years ago, the first Yapese (as they are known) needed to create a system of commerce4. Because there was no gold or silver on the island, they needed to find some other material that would serve as currency5. To solve this problem, the people of Yap came up with a creative solution. The strongest Yapese sailed to the closest Island some 250 miles away and brought back thousands of large granite boulders which they carved into disks. Because of their size, spending these disks like modern money would have been impossible. Instead, the disks were placed in public locations all around the island and never moved. In the early days of the Yap system, everyone had to remember who owned each stone. As it became more complex the people of Yap used books, known as ledgers, to record who owned each stone. When the Yapese wanted to spend their stones, they would announce the change in ownership to the entire community and everyone would update their ledgers. In this way, the Yapese could spend their stones without ever having to move them.
The First Distributed Ledger
The Yapese were using what today is called a distributed ledger system. A ledger is a record of transactions that is continuously updated whenever a new transaction occurs. A distributed ledger system is one in which everyone transacting in it maintains and updates a copy of the ledger.
While it may seem simpler just to have one person or a small group of people maintain the ledger, the Yapese knew that giving one or a few people record keeping power could end poorly. Those individuals could act unfairly toward others or change the record to benefit themselves.
Fortunately, their distributed system allowed the Yapese to make transactions without having to trust any one person or small group to maintain the ledger. The Yap system also prevented anyone from trying to claim ownership of a stone that did not belong to them. If one person claimed another’s stone, the community would come together and compare ledgers and the community would take a vote. Each ledger would count as one vote and the majority of ledgers that matched each other would win.
By having ledgers spread across the island and continuously updating them, the Yapese created a system that was more secure than a single, centralized ledger system.
From Yap to Blockchain
Understanding the Yap system provides a foundation for understanding how a blockchain works. Just like the process the Yapese created, blockchains are a distributed ledger system. Instead of transactions being kept in a single, physical ledger, blockchain ledgers are digital and stored on users’ computers. Instead of tracking stones, these ledgers track crypto currencies, stocks, virtual representations of physical objects and other digital assets.
Blockchain can be utilized by any person with an internet connection and a downloaded copy of the ledger. Communication between blockchain users is done through their computers rather than face to face. Every few seconds, the computers conducting transactions will let all the other computers on the blockchain know what transactions have occurred. When a transaction is received, the rest of the computers update their ledgers. If there are any disagreements about a transaction’s authenticity or what the correct copy of the ledger is, a vote is taken and majority wins. This system allows people all over the world to transact securely without the need for a third party. Just as the Yapese did thousands of years ago.
[1] Gillilland, Cora Lee C. (1975). The Stone Money of Yap. A Numismatic Survey. (Smithsonian Studies in History and Technology 23). Washington, DC: Smithsonian Institution Press. p. 75.
[2] Gillilland, Cora Lee C. (1975). The Stone Money of Yap. A Numismatic Survey. (Smithsonian Studies in History and Technology 23). Washington, DC: Smithsonian Institution Press. p. 75.
[3] Fitzpatrick, S. (2004). Banking on Stone Money. Retrieved August 13, 2020, from https://archive.archaeology.org/0403/abstracts/yap.html
[4] "Rai of Yap – the stone money". Wondermondo.
[5] Goldstein, J., & Kestenbaum, D. (2010, December 10). The Island Of Stone Money. Retrieved, from https://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money
