You can use the term “blockchain” to identify a set of technologies that make it possible to maintain a distributed ledger, structured as a chain of blocks containing transactions.
When someone performs a transaction, consent and change are spread to all the nodes in the network. All the nodes in this network can participate in verifying transactions to be included in this register, strengthening authentication capabilities for a single Blockchain.
How the Blockchain works
Although blockchain-based services are increasing rapidly, the way they work is similar across all platforms. This means that it is possible to summarize how they work in a few key points:
Decentralization: decentralization means that the information in a digital register is spread out to more than one place. This helps keep the system secure even if one part of it is attacked or lost.
Traceability: In the register, each thing is traceable. You can trace it back to the very beginning and know everything that has happened to it.
Disintermediation: The individual parts of the Blockchain certify information. That means that we don’t need companies or other bodies to do it.
Transparency: the contents of the register are visible to everyone and can be easily checked. Anyone can verify this because they know what’s going on. The register cannot be changed without the whole network knowing about it.
Solidity: after you add information to the record, it cannot be changed without the consent of everyone else on the network.
Programmability: the transaction can be set to happen after certain conditions are met. If the needs are not met, then the transaction will not occur.
These conditions allow the technology to compete with the institutions and professionals in charge of certifying economic transactions. The distributed ledger presents itself as a secure method for keeping important information. It is difficult to modify this information without leaving traces, and it’s impossible to break it down if at least two blocks can certify that information.
Blockchain and cryptocurrencies
But what is the link between blockchains and crypto? To understand in detail, you need to know how authentication works in Blockchain.
A single node checks the Blockchain and verifies everything. Then it collects new transactions and sends them to be authenticated. This complex process uses information from the previous blocks and data from the new block to create a hash or fingerprint of the new authenticated block.
Once this hash is obtained, it’s distributed over all other blocks, adding it to a giant ledger that cannot be changed or modified later.
To encrypt all of the transactions takes a lot of computing power. More and more blocks are needed to make sure that the transactions are authentic. Computers that provide their computing power are called miners.
They get a small fraction of new cryptocurrency (never owned before by someone else or not already in past recorded transactions) for every block in which they participate.
Therefore, cryptocurrency can be used as a reward for those who help grow the distributed ledger blocks and as a transaction tool to circulate the market.
Blockchain and applications
The Blockchain is a promising technology to use today. It’s easy to make new versions of the Blockchain, so it isn’t connected with making money.
The Blockchain has benefits in all sectors where you need the information to be certified: financial transactions, accounting assets, money transfers, distributed social networks, and global supply chains.
Some companies on the market offer online certifications. We can use them to subscribe to a Smart Contract for something, like a song, painting, or meme. Their services can also be used in fundraisers by ICOs with Tokens.
A new evolution of the Blockchain is called a DAPP (Decentralized APPlication): we can use it on our phones, smart TVs, and other electronic devices without even realizing it. This happens because people make an application that will compile itself when needed, following the chain of blocks already present.
Token and ICO
Another field of development for the Blockchain is that people can use tokens to buy something. People can get tokens from a company, and they will have a right to things in the company. Smart contracts govern the token.
The most famous tokens are the Non-fungible tokens (NFT). These tokens can certify ownership of a single thing like a song, project, game, or meme. This means that homes will become obsolete in a few years. Record companies like this because they can always prove they own the intellectual property by giving people their specific NFTs, which we can sell or give away at any time.
An ICO is a crowdfunding campaign for new cryptocurrencies. If it is successful, token holders will get tokens when they are distributed. The ICO can also be used to raise money for traditional projects or digital ones.
The Blockchain is also used for smart contracts. These digital contracts are defined as “contractual type arrangement”, incorporating contractual clauses managed not by words (as on old contracts) but by computer language, thus containing computer protocols, algorithms, or specific software.
These contracts are famous for starting automatically based on certain conditions decided by the parties at the time of signing: it is not even necessary to sign any sheet of paper since blockchains can certify the intentions of both parties in the game.
A smart contract is a type of contract that is better than a traditional contract. It is more advanced, and it will work on the Blockchain. The Blockchain will ensure that we will execute the contract correctly and that it cannot be corrupted, as the Blockchain is impartial.