Some of you might have heard of blockchain. It may be a buzzword you caught in the wind of the media through cryptocurrencies like Bitcoin and Ethereum, but it’s so much more than just cryptocurrencies. It’s a whole new way of thinking about money and I would even say personal finance. But first, let’s first understand what blockchain is as a technology.
Put simply, blockchain is a technology that records and shares data over a network, like the internet. Think of blockchain as a network of computers, or in blockchain language, a network of nodes. Each computer in the blockchain network stores an identical copy of the blockchain and these computers communicate with each other to make particular decisions like validating the next new block on the chain. Overall, you can think of blockchain as a bunch of computers that allow users to securely record and access data from anywhere in the network and the world. Each block itself is a ledger of transactions, while the chain is what links these blocks of transactions over time. However, what makes blockchain technology so innovative is its architecture. Blockchain is decentralized. Any user can simultaneously edit the blockchain and every user always has direct access to the blockchain with no central authority monitoring user transactions. User transactions are conducted through the user’s unique account address. At its core, a blockchain account address functions just like your regular bank account. But, unlike your regular bank account, which is held in custody by your personal bank, you are in full control of your assets.
Now, I won’t get into the nitty-gritty of blockchain and its various use cases or its most famous application of cryptocurrencies here. There’s still a whole lot more to blockchain and why it’s shaking up the world of business, technology and finance. What I do want to spotlight is its central and defining feature of decentralization.
For those who are clumsy on the topic of finance and managing their money, the notion of decentralization can play a powerful role in how you think about a financial concept called cashflow. Cashflow is simply the movement of money from point A to point B. For example, your paycheque as an employee is the cashflow from your employer’s bank account, point A, to your bank account, point B. That’s it. This basic cashflow follows a centralized architecture. You rely on your employer to pay you on time as agreed in your employment contract and that when you go to work tomorrow there is a still job for you. If this is your only cashflow, then your employer is the central authority over your financial future. If they pull the rug from under you, then your money tap runs dry and you’re set packing looking for the next tap to pay the bills. Thinking about decentralization and how to diversify your cashflow streams is a powerful way to take control of your financial future.
In case this is all a jumble of concepts, let’s recap the key points to ensure we’re all on the same page. Blockchain is a decentralized network of transaction blocks linked together through time. Cashflow is the movement of money from point A to point B. This movement is a transaction. In blockchain, transactions can occur from any user and they are recorded in sequential order on the blockchain. You could say blockchain cashflow does not have a centralized flow, but rather a decentralized flow. So now you’re wondering, how does this relate to personal finance?
Many of us are employees, some of us are self-employed, investors or business owners. The renowned personal finance guru Robert Kiyosaki explains it most clearly with what he calls the Cashflow Quadrant. Each quadrant represents a cashflow source and arguably an identity. One for employment, self-employment, investments and business ownership. Each source is a possible cashflow stream into your bank account. Each is a source of power over your financial future. Some quadrants are easier to tap than others. If you want to take on more control of your financial wellbeing then you will want to increase your number of cashflow streams. Decentralizing your cashflow streams means centralizing your financial independence. There’s a lot of challenging and even uncomfortable self-development work involved to make this happen. If life is about anything, it’s about growth and reinventing ourselves as we move into the future.
Disclaimer: The author is not a certified financial advisor and this article does not substitute for professional financial advice. Before investing in cryptocurrencies, do your own research and seek advice from a trusted financial advisor who is both knowledgeable and experienced with these technologies. This article is for educational and informative purposes only.
Have questions about this topic?
You can drop them below or connect with Tyeson on LinkedIn here.
Author: Tyeson Demets, Data & Business Analyst
#WeWantMore 