Blockchain technology is commonly associated with cryptocurrency, Bitcoin, and sometimes with massive digital frauds. Partly, it’s true, but it’s not a fair and complete perspective.

Blockchain technology is at the root of all cryptocurrencies, but it’s more than crypto trading and digital fraud. For instance, blockchains may be used in medicine, logistics, and banking. Fortune 500 and other huge businesses have already implemented blockchains into their workflow.

Familiarizing yourself with blockchains isn’t a waste of time and it can be a successful bet in the future. This article summarizes blockchain technology, its basic principles, and its potential impact in the future. Certainly, it’s a good start to familiarize yourself with blockchain technology.

What Is a Blockchain

Blockchain technology is at the root of all cryptocurrencies.

From the start, it’s not wrong to consider a blockchain as a particular type of database. It’s 100% true, yet a blockchain has a few crucial particularities:

Append-only approach: Nobody has the privilege to delete information from the blockchain. This is a crucial feature because a blockchain keeps track of every activity of its members. Thanks to this feature, a blockchain is the perfect choice to implement in medicine to keep track of patients’ history.

Decentralization: A blockchain isn’t stored in a single place; it’s kept in the machines of its members. It means that participants must confirm all operations within a blockchain. No one has a leading position; everyone participates in the blockchain activity.

Immutability: Data within a blockchain is organized in blocks. These are timestamped and approved by nodes, and each one has a particular security code that matches only with the previous block. Therefore, no one can change the blocks’ order. 

All these features make a blockchain a trust-free environment, allowing users to perform transactions without needing to trust each other.

For instance, a bank acts as a middleman in a traditional financial transaction, and sellers and buyers must trust it. In a blockchain transaction, you no longer need a middleman because every member of the blockchain has access to all transactions.

Therefore, a blockchain has the potential to simplify and speed up transactions and operations in numerous industries.  

Blockchain Technology & Terminology

Some terms specific to blockchain technology are widely used and you might know them. Yet, some readers might be completely new to this area, so explaining some basic terminology is essential.

Besides, a recap is always welcome, so here are a few terms to better understand this article and blockchain technology. 

Block. If you associate a blockchain with a ledger, a block is similar to a page. Practically, it’s a group of transactions accepted into a blockchain.

Centralization. Software, apps, and websites that use a centralized architecture, meaning there is a unique server for control, authorization, and trust. The quasi-majority of our online tools are centralized. 

Decentralization: It refers to the manner of building online tools based on a decentralized architecture, which is the specific structure of Web 3.0 online apps and websites.

Node: A computer that stores a copy of a blockchain ledger. Nodes are crucial in syncing the network’s data, validating transactions, and managing requests.

Transaction: A chunk of data that is stored in a block. Typically, a transaction may involve a smart contract or a currency exchange operation.

Smart contract: It designates a sequence of code deployed on a blockchain and is executed when a set number of conditions are met.

How a Blockchain Works

How a Blockchain Works - Each blockchain has its set of particular features.

Each blockchain has its set of particular features, but generally speaking, the following algorithm occurs in a blockchain. 

  1. Transaction Initialization: A user decides to act and initiates a transaction. While financial transactions are the most popular, they aren’t the only ones. A user should specify the receiver and sender, along with relevant information like the amount of money or the voting decision within an organization.
  2. Verification and Validation: The nodes of the blockchain verify the transaction and commence the validation process after receiving a positive input following verification. Validation implies that the nodes should solve a complex mathematical problem, requiring computational power and a significant consumption of electricity. Many blockchains have adapted the validation process to reduce electricity waste.
  3. Recording the Transaction: The nodes not only validate the transaction but also record it by inserting the transaction into a block.
  4. Distribution and Completion: Once the transaction is finalized, the newly added block is added to the blockchain, and all the nodes update their database copy. Finally, the operation is completed (sending the money, executing a code, or transmitting the vote). At this moment, the transaction is done and cannot be reversed, while users can view it at any time they wish.

Benefits of Blockchains

Blockchains come with an interesting list of benefits. It’s still in the early stages, so expect more from it shortly. The following benefits make many software engineers, developers, and online entrepreneurs consider blockchain for their future projects.

Enhanced transparency: All the transactions within a blockchain are visible to all its members. Everyone is free to check the blockchain activity and discover the transactions of members.

Imagine that a blockchain can be used in an enterprise organization to keep track of employees’ revenue. Everyone would see the wages of every member of the organization. It can’t get more transparent than a blockchain in this respect.

Traceability: All blocks of a blockchain are timestamped, and they can’t be altered. Under these circumstances, a blockchain is an excellent solution when traceability is a must. Anyone, at any time, may have access to all the data of each block.

Strong Security: Centralized apps have a massive security issue: the assets are kept on a server. Almost everything can be done if you have access to the server. In contrast, a blockchain is a distributed ledger with no one more privileged than others.

For a hacker to compromise an app or a website, they need access to the server. However, the same hacker needs access to more than half of the blockchain’s machines, which is a far more complicated task.

Automation and Efficiency: The activity of a blockchain is completely automated, saving time and resources.

Types of Blockchains

Are you wondering how a big bank or an enterprise company can use blockchain technology to which everyone has access? Indeed, no major company utilizes public blockchains for sensitive information.

Instead, they create blockchains that are restrictive, allowing only specific users to access them. As you deduced, there are different types of blockchains.

  • Public blockchain implies that anyone can join it without restrictions. It’s the most common type of blockchain, and even those less tech-savvy can participate. Most crypto entities running on their blockchain encourage people to join and develop apps.
  • Private blockchains run on the same technologies as public ones but come with limitations. Access to the private blockchain is allowed to a limited number of people. Typically, private blockchains are created by large organizations to benefit from enhanced security. In these cases, only employees and collaborators are allowed to join the blockchain.
  • Consortium blockchain involves more organizations or entities being allowed to join and use a single blockchain. 

Blockchain Use Cases

Blockchains aren’t just new tools for banking institutions or fundaments for cryptocurrencies. They have a large set of potential usages that may substantially improve our lives. Here are a couple of domains where blockchains may bring impressive improvements.

Retail

Blockchains have a large set of potential usages that may substantially improve our lives.

A significant number of customers don’t believe that brands are fully transparent about the ingredients of their products.

Additionally, the origin of the ingredients matters to many customers. Brands invest heavily in marketing to convince customers about their products because trust and authenticity are core values in retail.

However, it’s challenging for brands to provide precise data about the origin and authenticity of ingredients to consumers.

Fortunately, blockchains resolve this issue very effectively. When blockchain technology is implemented in a large retail company, it significantly reduces or even eliminates the reluctance of buyers who prioritize ecological and ethical products.

Each product’s label can showcase its entire history in the form of blocks within a blockchain. Buyers can find out where and when the food was harvested and processed, how long it took to get to the shelf, and other relevant details.

As long as blocks are timestamped and immutable, customers can be confident that the data about the products is true and unaltered.

Supply Chain

Supply chains operate behind the scenes, yet they are of paramount importance to society. Once again, blockchain technology has the potential to accelerate and bring transparency to processes, eliminating bottlenecks.

For instance, many people are willing to pay more to ensure that their vegetables and fruits are fresh. A blockchain system allows both suppliers and buyers to know how long it takes for their products to travel from the production unit to the store.

Wouldn’t it be great to be sure that your veggies were harvested just a few hours ago?

IBM Food Trust is a blockchain technology and system aimed at addressing the challenges in retail and supply chains. Additionally, Amazon has invested in developing a similar system, making it clear that other retail and supply chain companies will likely invest in this technology.

Healthcare

Patients desire to keep their medical history private and secure, yet easy to use and share with doctors. Blockchain satisfies all these requirements and, in addition, offers fast operations and transparency.

Each consultation and treatment takes the form of a block. Consequently, the data is secure and immutable, allowing medical professionals to discover the entire medical history of patients with just a few clicks.

On top of that, blockchain technology reduces the possibilities of fraud and human-made mistakes.

Media and Copyright Data

Nowadays, ownership of digital creations poses a complicated problem. Proving that a digital asset is yours is quite challenging, and resolving these issues takes time and resources.

A time-stamped block in a blockchain can function as a digital property certificate. This way, most issues related to copyright verification are easily addressed with a simple blockchain. However, non-fungible tokens (NFTs) provide a better alternative for digital products and copyright data.

An NFT serves as the indestructible evidence of ownership for a digital product. NFTs are digital identifiers recorded on a blockchain, acting as proof of ownership. They are transferable from user to user, with the entire transaction history recorded on a blockchain.

Digital Identity and Privacy

Digital Identity and Privacy.

Nowadays, personal data is a hot topic, mainly due to the frequent occurrences of massive data leaks. Periodically, mass media reveals cases where the data of millions of people are exposed due to hacking attacks.

It’s a problem that can’t be easily fixed, even by major tech companies like Microsoft and Meta.

Blockchain technology offers a better alternative. To send and receive digital assets on a blockchain, you need a crypto wallet, which can be likened to email addresses or social media accounts.

A crypto wallet conceals your name; typically, it appears as a random string of letters and numbers. The wallet may include NFTs corresponding to your personal data, medical history, and online search activities.

In this context, nobody knows who is behind a wallet address, ensuring that your data remains anonymous and secure.

Cryptocurrency and Decentralized Finance (DeFi)

Indeed, many crypto projects lack sustainability and utility, but some are based on extremely captivating ideas.

For instance, MATIC is a cryptocurrency with a limited supply, making it non-inflationary. You can rest assured that nobody can insert more MATIC units into the ecosystem and create inflation.

Additionally, your identity is anonymous, and your money is securely kept. Polygon, the blockchain project behind MATIC, constantly evolves and devs constructed cool and used apps on it.

Polygon aims to improve blockchain technology compatibility, presenting an ambitious idea with numerous benefits. Therefore, owning MATIC units is a potentially profitable venture.

DeFi is a broad term that refers to financial services and applications built on decentralized platforms. Those who dislike banks and traditional financial institutions should consider exploring DeFi.

In essence, DeFi replicates the banking system—lending, borrowing, and trading—without relying on banks. Although DeFi is still in its early stages, and DeFi apps aren’t yet user-friendly, continuous improvements are being made.

Therefore, we can expect a significant boom in DeFi apps in the coming years.

Wrapping Up

Blockchain technology is highly complex, running on a series of innovative protocols and methods that are in constant evolution and frequently updated. It’s a dynamic industry, and to keep up with the rhythm of blockchain technology, one has to be an avid reader.

This article serves as a simple introduction and may not be sufficient to form a complete idea about blockchain technology. However, we strongly believe that this post can be the starting point for anyone willing to learn more about this area.

About the Author

Daniel Pintilie

Blogger and Internet marketer

Daniel is a blogger and Internet marketer ready to create valuable, actionable, and interesting content for your website. He is in love with WordPress and Internet Marketing. You can get in touch with him by visiting his portfolio – Daniel2Writing.com.

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