What is Blockchain? American comedian Stephen Colbert says that “it’s gold for nerds.” Well, the nerds are now the popular kids on the block, and blockchain technology is becoming one of the most prominent trends in finance and digital innovation since the creation of the Internet.
Most people mix Bitcoin with Blockchain, and there is nothing farther from reality. Although Bitcoin is indeed the representation of the value of this technology, Blockchain is more than that. It is the whole framework that is generating disruptive innovation in any single industry.
For instance, it is creating enormous economic and financial opportunities.
Bitcoin Chaser’s founder said it well: “Blockchain is the tech. Bitcoin is merely the first mainstream manifestation of its potential.”
But what really is Blockchain? Let us walk you on the topic and why the technology of the chain of blocks will change the world forever. No matter if you are interested in the technology per se, or want to invest in Blockchain or be a blockchain software developer, you should understand the whole concept behind this type of decentralised database.
In essence: this new technology allows for faster and safer global transactions, which in turn supports a more connected and potentially fairer economy. Welcome to our ‘Blockchain for dummies’ guide to get you started.
Blockchain Technology Explained
Blockchain is a technology that changes the way a database is created. It aims for a decentralised and distributed ledger technology where all data is stored in blocks that are connected in a massive chain of blocks distributed on thousands of servers around the world. No single institution has the control of the network, but authority is shared across all members.
Each new block contains the information of its predecessor and new data is stored in chronological order. It is based on a peer-to-peer topology that allows all participants to see all entries in real-time.
You might be familiar with P2P if you’ve ever used BitTorrent to exchange files directly with your friends or other people around the world. The main difference here is that we’re not making any copies of bitcoin.
Blockchain Transaction processes
The process in a blockchain-powered network is different from other databases as participants’ consensus should validate the data. Then, once the data is confirmed and the block is generated, it remains immutable.
- A transaction is received.
- The transaction is identified by the network of peer-to-peer users distributed around the world.
- The network solves the transaction, equation or algorithm and confirms the legitimisation of the transaction.
- The group of users compiled the information in cryptographic sets of data and they create a new block with the given information plus the sign of the previous block.
- The new block is added to the chain in chronological order and permanently.
- The transaction is successful.
Usually, all the users who helped in the validation process get a reward in the form of a cryptocurrency in a situation called mining. You can read more about Bitcoin and how it is generated in our 2021 Bitcoin Guide.
Why Blockchain is changing the world?
While Blockchain is better known for its association with Bitcoin and the banking system, this technology’s applications go beyond any single meaning of payments and data management. Blockchain is currently disrupting the banking industry, but also the logistics, healthcare, technology and housing sectors.
Blockchain and the distributed ledger technology, also known as DLT, represent a new paradigm for information management. Both startups and consolidated companies are testing blockchain innovations for their products and services.
In fact, according to the World Economic Forum in a report about blockchain implementations published in 2020, blockchain technology is called to restore trust between critical players in any industry.
Significant inefficiencies in sectors like pharmaceutical products, medical supplies, and food services are powered by the lack of transparency and the absence of trust between the chain players. However, DLT creates a “shared truth” among supply chain stakeholders.
The World Economic Forum’s report concludes that “the essence of Blockchain is to offer a new way of collaboration through decentralisation. At the same time, it is important to keep in mind that decentralisation is not an all-or-nothing objective but a balanced one that can require trade-offs for practical reasons.”
And the future is now. As the Forum said, there is no better time than now to look for blockchain investments, deployments, mass implementation and the use of DLT solutions around the world, especially in a post-COVID-19 world.
It produces a better network, more transparent, more efficient, cheaper, and with real-time access to the data.
Real-World Blockchain Use Case Examples
The cross border transactions
Let’s say that you want to send 10.000 euros to your friend Adam, who currently lives in London. In the current banking system (where fractional-reserve banking is used), the process is as follows:
- You find out that you can make international transfers only in the strictly defined official hours.
- The next hurdle is that the transactions may take up to several days.
- Your euros will be converted into the GBP by the exchange rate that is in favour of the bank.
- You will have to pay the bank for other expenses.
As you can see, such a money transfer system is extremely ineffective and always provides benefits to the banks. With the use of blockchain technology, this process is far more efficient and straightforward.
The original bitcoin blockchain is an open source technology that offers an alternative to the traditional transfer of currencies. The intermediary is replaced by a system with group verification which provides a high degree of traceability, safety, and speed.
In our case, we can send our cryptocurrencies to Adam directly through the blockchain, without the rigid imitations of banks.
The transfer speed and fees will depend on which cryptocurrency is used. But even with minimal costs, the transaction will be extremely fast. We simply send our crypto coins from our wallet to Adam’s wallet. The nodes (or people) on the network confirm this transaction, ensuring the funds are displayed on Adam’s account.
What about security? If Adam decides to challenge our transaction for some reason, we have a history of transactions in the public ledger.
JP Morgan’s Blockchain platform Onyx
In 2020, American global financial institution JP Morgan launched Onyx, an interbank information network of over 400 participants, including the top 50 banks globally, that operates in 78 countries. The platform also performs Liink, a new live app to confirm account info before payments and the JPM Coin, a new cryptocurrency.
With the platform, JP Morgan is attempting to solve the problem of information and payments in the chain supply. But with Onyx and Liink, people can see all the information regarding its products, people involved in the project and make real-time payments.
“We were the first global bank to create a production-grade, scalable, peer-to-peer blockchain-based network, formerly Interbank Information Network®, now Liink by J.P. Morgan.”
Bringing health to Africa
The UNODC, the United Nations Office on Drugs and Crime has partnered since 2018 with doc.com, a healthcare focused company that aims for affordable healthcare to the world. According to its website, it offers services in over 20 countries globally and has impacted over 300 thousand lives.
In the venture with the UNODC, doc.com platforms provide MTC digital tokens in exchange for information about them, such as how old they are, socioeconomic conditions, etc. With the MTC tokens, people have access to free essential healthcare services.
Why Should I Know About Blockchain Technology?
Blockchain technology is bigger than the financial sector. It can be used for all multi-level transactions, where high traceability and visibility are required. The supply chain is an important example where the blockchain can leverage the management & signing of contracts and audit the origin of the product.
Blockchain technology could also be used for voting platforms or managing medical records and identity. Practical examples of the blockchain applications are only expected to grow in the future.
Blockchain can also be used privately, although that kind of defeats the original vision. But the option is there nonetheless. Financial institutions are extremely exposed to high pressure to demonstrate compliance with regulations, and many companies are pursuing Blockchain implementation.
Blockchain’s exponential growth will come from the convergence of public and private blockchains into an ecosystem where businesses, customers, and suppliers can work together in a safe, verifiable and virtual way.
Blockchain technology is making a dent in human history as it enables digital transformation and transparency in all sectors. Blockchain investment could be a game-changer, and despite the price of crypto assets rallying in the last two years, there could still be a lot more room for gains.
It all depends on what you think about Blockchain. Is this technology able to transform the world and become the standard for all industries? If your answer is positive, you will find blockchain and bitcoin investments investments very attractive.
However, be sure to learn everything about Blockchain and be positive to understand the edges of any cryptocurrency before investing in them.
What exactly is Blockchain?
Blockchain is an innovative database that uses distributed ledger technology. It means that all information is stored in several blocks connected between them in chronological order, a block chain of immutable data. It is decentralised because no single person or institution owns the control, but it is distributed in a network of thousands of users and computers.
How does a blockchain work?
After the transaction is received, a network of peer-to-peer users distributed worldwide solves the transaction, equation or problem by consensus. Once the algorithm is resolved, data is encrypted and added in the form of a new block to the chain. Data can not be changed, and all users are witnesses of the information, so the network can not be hacked or cheated.
What is Blockchain good for?
A blockchain powered network can be used for several topics, and implementations have been developed in several industries. It can offer support for the logistic industry in the form of a chain supply platform, or the financial sector as a cross-border payment system, or as cloud data distribution, or information platform for multinational companies that need to make payments globally. Blockchain is good for a great many things that together will radically transform society in the years ahead.