Blockchain Basics: Sending Money

What magic happens when you send money from one account to the next? You pick up your phone, tap a few buttons. And then what?

This is a useful concept to consider when trying to understand the basics in blockchain. How money is sent conventionally. When I want to pay you because we had lunch together, the following happens:

  • I open up my banking app. In this case, my bank is my trusted third party. I have full confidence in my bank to store my money for me and show me the amount I still have in my account.
  • I fill in your banking details and an amount. Assuming you have a different bank than me, this bank acts as your trusted third party. In this case, you trust your bank enough to handle your money for you.
  • I press send and have sent you the money. The money is taken out of my account, my bank makes sure it arrives at your bank and your bank puts the amount in your account.

In this case, the banks are the ledgers as we have seen in the first post in this series. We can see what is happening in our accounts to believe it to be true, partly also enabled by the trust we have in our bank.