Cryptocurrency for the Church
Today (June 18, 2019), Mark Zuckerburg announced that Facebook is delving into the world of cryptocurrency—and not only them, they’re also bringing along some major partners like Visa, Mastercard, Uber, Lyft, Paypal, and many more.
What does this have to do with the church? Soon, if not already, the church will be impacted by cryptocurrency.
Why? Because it means the way we handle and view money is changing and its changing fast.
Does your church have a plan in place to handle gifts of cryptocurrency? How can you be prepared?
I wanted to introduce you to a fantastic resource by two of our friends, Nils Smith and Nick Runyon, it’s the book, “Crypto for Good.”
In the book, they discuss the future of crypto and what it means for churches and non-profits. They were nice enough to give Church Communications the first chapter of their book. Below is the first chapter to “Crypto for Good” and you can check it out on Amazon today if you’d like.
Chapter 1 – An Introduction to Blockchain
While watching baseball on TV recently, a commercial for one of the big computer companies came on between innings. It was one of the worst commercials I’ve ever witnessed. Watching it gave me the feeling that I was listening to someone repeat all the buzzwords of the day to convince me that they’re smart, but they don’t really know what they’re talking about. Among this wall of words without context was AI, Blockchain, Cloud and talk of app integration.
The whole world is like this right now. If a company just mentions Blockchain as part of their quarterly plans on a shareholder call, their stock price jumps. Everyone is talking about Bitcoin and Blockchain, but most of us feel completely lost. A lot of people are talking about this stuff. About half know something about it. Very few have a good grasp on the topic.
For those new to the conversation, and looking for a little guidance, we intend to simplify and educate. To start, let’s talk about the technology behind this entire conversation: Blockchain.
What is Blockchain?
Blockchain is basically a database. This is the easiest way to think about it. A database, in the simplest terms, records and stores information. One can also think about a database as a ledger. Like an accounting ledger, blockchain is used to record transactions or changes to the ledger as new entries are made.
The unique thing about the blockchain database is that it is distributed. It doesn’t exist on any one computer, but on many.
When our elementary school class used to visit the library, we learned how to look up books using the library’s database. The central server that housed all the data was called the Master. Various terminals located around the library were Slave computers that could only access the master.
In very simple terms, the Internet works this way. Your personal browser is used to access a server, retrieve files, images and data from various servers, and display a website. If I want to update my website for the world, I only need to login and update my files hosted on the server.
Blockchain technology is different. Rather than a Master – Slave relationship, the database is Master – Master, or rather peer to peer. Blockchain uses multiple computers connected in a peer to peer network. Each computer hosts the entire database. This description is overly simplistic, but the main idea is that the Blockchain is complete distributed. It does not exist in one place, but many places, and all versions are exactly the same.
How can this be? How can a distributed database be kept in sync and up to date? We’ll cover that in a bit. First, let’s talk a bit more about the implications of a distributed database.
Because the Blockchain doesn’t exist in a central location, authority for the database is decentralized. No central authority or governing body controls the blockchain, and this is something that is fundamental to our understanding of Blockchain, cryptocurrencies, smart contracts and all the other concepts that use the blockchain to exist. This technology is both distributed (lives on multiple computers) and decentralized (not controlled).
The blockchain represents the most innovative and significant advance in computer science since the invention and proliferation of the Internet. Like the Internet, it can be used in all sectors of all economy and all industries. Blockchain technology has already been adopted and used by various organizations and companies who want to provide efficient and fast service to their thousands of clients and customers worldwide.
If Blockchain is a database that is both decentralized, and distributed, then we have something that is very unique. Anyone, anywhere is able to view the database at any time. Anyone is also allowed to add to the database at any time. No permissions are needed. But, for this kind of freedom of use, some rules must exist. What’s more, they must be followed and enforced.
This is where the Blockchain is, in our opinion, amazing.
How Does Blockchain Technology Work?
Each new entry to the database is a block. When these blocks are stacked, or “chained” together, we get the Blockchain.
(We’re getting deep into this now…but hang on, we’re almost there!)
For the blockchain technology to be used as a distributed ledger, it must be managed by a P2P (peer to peer) network which adheres to a specific protocol for validation of new blocks and inter-node communications as well. All data recorded on the blockchain cannot be altered without having to alter all subsequent blocks. Ensuring that all subsequent blocks match every time a new transaction is added to the chain is vital. This is accomplished through some complex cryptographic computing using hash functions.
The Bitcoin Wiki describes the process in this way. “Each block contains, among other things, a record of some or all recent transactions, and a reference to the block that came immediately before it. It also contains an answer to a difficult-to-solve mathematical puzzle – the answer to which is unique to each block. New blocks cannot be submitted to the network without the correct answer – the process of “mining” is essentially the process of competing to be the next to find the answer that “solves” the current block. The mathematical problem in each block is extremely difficult to solve, but once a valid solution is found, it is very easy for the rest of the network to confirm that the solution is correct. There are multiple valid solutions for any given block – only one of the solutions needs to be found for the block to be solved.
Locks keep honest people honest. The thieves are going to find a way around the locks sooner or later. But many believe that Blockchain technology solves the problem of security through transparency. If everything is visible and verifiable, the database cannot be hacked.
More than 171 million records were exposed in 2017 through more than 1,100 data breaches. What is really scary is that this is a 475% increase from 2016! We are constantly receiving notifications about our financial, medical and business data that has been compromised.
Thieves aren’t likely to change their behavior anytime soon. And, the world is only becoming more networked and more dependant upon digital technology. The question then becomes, how can true security exist in a world where trust in systems and people is increasingly called into question?
Many believe that for true security to exist, a system needs to:
- Store Records
- Facts can be Verified by Anyone
No one can cheat the system by editing records because everyone would be watching and keeping track of records as they are created and edited. Verification can happen at any time.
Some questions exist about the cryptography and hash functions used to verify the Blockchain. As far as we know, the current hash functions are not able to be manipulated or predicted. We believe that the outputs are always unique and will always be unique, so for now, the Blockchain is unhackable. We’ll discuss more about security in this book when we discuss digital wallets, public and private keys, and individual security.
Read the rest of their book available on Amazon.