You can't call yourself a crypto investor if you don't know about this by now: Blockchain technology for all (overview)
Crypto industry is revolutionizing the actual financial system whatever you want to believe it or not. It is a fact that sooner than later every payment you’ll make is going to be with a cryptocurrency. We are not sure yet if it will be Bitcoin which will conquer the world or Ethereum or another currency that just waits for the proper moment to rise and shine. But all these have something in common, something big, strong, with history and continuing evolution, something indestructible.
The trick here is that nothing would’ve been ever possible without a base (this ‘something’ mentioned before), namely Blockchain Technology.
No worries if you’ve already invested in crypto and have no clue about what this blockchain may be or if you want to expand your knowledge about it, here you have the general view of blockchain. There is time to improve your crypto investments and this presentation is enough for every crypto investor.
Let’s take a look, shall we?
1. What is blockchain?
Blockchain is a transparentimmutable distributed LEDGER technology. Let break down this buzz words one by one.
Technology: you just need an connection to use blockchain network
: it stores date and records transactions
Distributedno single administrator controls the blockchain network. Any participant with the right hardware can help to run it
Immutable: each piece of data remains forever on the blockchain. It can’t be changed, modified or deleted.
Transparent: all the info stored on the blockchain can be seen by anyone, using pseudonyms
2. What blockchain does?
main functionality of a blockchain is to store data. You can think about blockchain as a database. But why to choose blockchain instead of a database?
Three simple reasons: security, scalability, decentralization
If you want to be in control of your data and to be the only one who can reveal information about yourself use a blockchain.
With a database there is an administrator who manage all the info about you, even if you don’t realize it or if you don’t want so. The majority of corporations steels your privacy and exploits it in order to grow their business. They don’t care about what they reveal as long as they benefit. This is scarry and unfair.
In contrast, blockchain is about ownershipIn a blockchain network there is no middleman. You decide if you want to reveal your gender, your name, in which field you work on, your location, what you are paid for, what transfers you make and so on. You have now the ability to transfer value peer-to-peer.
But how is all this possible you wonder?
The key is automation.
To understand this concept, let’s take a look together on the blockchain infrastructure!
How blockchain works?
Short answer: with
We all use computers, and we understand them, but why can’t all of us understand blockchain? Because is not that easy: blockchain is about cryptography, coding, strong hardware components and ethics
Blockchains are software protocols that allow multiple parties to operate under shared assumptions and data without trusting each other.
Components of the blockchain:
- Smart contracts
Smart contractsautomated agreements on application level that define the business logic and behavioral rulesets of all participants. In this way, the policy is enforced automatically using cryptography and computers instead of people. There is no place for human errors, making the blockchain more
Basically, they’re just lines of codes, written by ‘coders’ or ‘developers’ in a specific public application. For a very simple overview they are something like this something happens…, something else happens…’.
about a vending machine you put the money in it, press the button for your desired snack, you receive your own choice.
Of course, there are risks like bugs or hacks, but smart contracts become such a strong tool that is harder and harder to exploit them due to the advanced technology.
Because smart contracts ensure that the blockchain is controlled by technology and no administrator, we call it a peer-to-peer network, a decentralized network.
2.Blocks
Blocks are cryptographically secured data pieces.
Like how a database has files to put the info in, the blockchain has blocks. So, blocks are where all the network information is stored.
Structure of a block:
- the unique characteristic of each block.
Hashing is a cryptography process for converting any data form into a unique text string. Like you have a fingerprint, a block has a hash. This is how a block is identified in a digital way, let’s say.
- a number that can be used only once in a cryptographic communication.
The nonce is used in securing and sustaining the blockchain network.
For a blockchain to keep running, there are so called that use powerful hardware to solve mathematical problems to find the nonce in order to validate a block.
validator’ is called Nodes are the people behind the computers that are connected to a blockchain network and ‘solve the nonces’. As a node, the more performant your equipment is, the bigger are the chances to be the first one who discovers the nonce.
After that, you get rewards in form of cryptocurrencies.
- the info that is encrypted.
The data in a block can’t be deleted, moved or changed. It can also be seen by anyone, but in the encrypted form.
transactions, the data has the form of a long , called the public key. Blockchain provides a private key for each transaction that is owned and seen just by the owner. It is like a password, but in fact it is a secret number used in cryptography that proves you own a blockchain address, by using your private key to ‘sign’ a transaction
- because the blocks are created in a specific order, also the hash of the previous block also needs to be integrated in the structure of a single block
With this rule, the sustainability is maintained.
3.The chain
As we mentioned, the blocks have an order. The hashes and ex-hashes ensure the chronological order, like a merkle tree. The sum of them represents the chain. (Blockchain= a chain of blocks)
The chronology is important to protect the chain from malicious actors. Every node has an exact copy of the chain in a specific moment. When someone tries to hack a block, the other validators will see that something is wrong and the chains no longer match, so the ‘malicious block’ and the block added after it will be altered.
In this way, if a hacker wants to take control over the blockchain network she or he will need to be in control of more than 51% of the blocks in the same time. Theoretically it is possible, but in practice no one can do it, because is time consuming and the power needed is too high to achieve the bad goal. This also proves that the blockchain network is temper resistant.
4.Consensus mechanism:
By understanding the infrastructure of a blockchain and how blocks work you already know the blockchain consensus protocol. Congrats! You just need the name of it now: Proof-of-work (PoW)
Simply put miners validate the block, add them continuously in the chain and get rewards.
There are also other protocols for a blockchain. One of the most important is Proof-of-Stake (PoS). The differences between these two, is that in a PoS, the validators need to ‘ (to have tokens that are locked or can’t leave the protocol) an amount of the blockchain’s native tokens in order to add block and get rewarded.
4. Blockchain impact on the real world
for the blockchain network are;
- lower fee costtime saver, because there is no middleman who take a fee for each money transfer and the transaction can happen in minutes or seconds depending on the blockchain and it does not count where you and the person who receive the money is located. The money is in form of cryptocurrencies.
- Decentralized applications: lending, borrowing, earning interest for the unbanked. With blockchain, digital applications were created, where just having some cryptocurrencies in a crypto wallet let you to lend or borrow money without any questioned asked by the banks. You can also earn interest like you earn from a savings account, but at a higher rate, using different crypto protocols. Instead of making a fiat deposit, you make a crypto deposit.
- Medical records: if all of our past data about diseases, medication or surgery is stored on a blockchain, the paperwork will be easily removed when we are looking for a medical treatment. Because the blockchain proves ownership, storing the info there, will make you save time from gathering all the documents in order to have access to a surgery or some form of medication. This can potentially save lives.
Blockchain is here to stay!
The most established blockchains are Bitcoin, Ethereum, Solana, Cardano, Polkadot, Polygon and the list can go on. The mass adoption of the blockchain technology and the evolving creation of them proves the power of these new storing data solution.
Don’t be afraid of the change!
Look how much crypto space grows day by day and never forget that blockchain is the core of all crypto industry.
Disclaimer: This is not financial advice! Only educational and informational purpose!
For more education, visit: Elena?? (@CatalinaDidita) / Twitter
