What Is Blockchain and How Is It Used?

Technology is forever changing, birthing new inventions and protocols that revolutionize the way people live their lives. Cryptocurrencies, NFTs, web 3.0, and blockchain, have risen to prominence in the last decade and finally dominate the traditional news cycle. The infrastructure for this technology has been around since the late 80s, but most people still can’t articulate what any of these items are. I’ll get into all of these aspects of tech in the upcoming weeks, but let’s focus on the infrastructure that it all sits on the blockchain network. 

According to Manav Gupta, author of Blockchain for Dummies, Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a network. A blockchain is made up of individual blocks stored in chronological order. That is blockchain in its most basic definition. Not that impressive when plainly stated, but as I share the separate elements of the ecosystem, just about anyone will see why the world is rushing to take advantage of blockchain technology. First, let’s look into the individual blocks themselves.

*** Disclaimer: Numerous terms and acronyms will be thrown your way throughout this article and future ones. Take a glance at the dictionary if you need a quick definition or recap.***  

Blocks

As stated earlier, a blockchain is a chain of individual blocks linked together to form a chain. Blocks record and confirm the time and sequence of transactions. 

Image by Blockchain for Dummies

Blocks are made up of three components:

  1. Hash
  2. timestamped batches
  3. previous hash

The hashing of the blocks deserves more credit. Each block has a unique hash attached to it, calculated based on the data stored in the block. The hash value of one transaction is the input of another transaction. Meaning every time a block is appended to the chain, the new block contains the hash of the previous block, making it almost impossible to modify the data in the block. If so, the chain would be destroyed, thus making the blockchain immutable (unchangeable). The only way to reverse the transaction would be to add another block that reverses the transfer.

Impressive, right! Hopefully, the security of a blockchain is clear. Let’s move on to the network.

Blockchain Network

blockchain network is a technical infrastructure that provides a ledger to a decentralized network where users can send transactions without needing an authority figure or server. At least in my mind, the revolutionary portion of blockchain is the decentralized ecosystem. Blockchain networks are an ecosystem of users, node operators, developers, and miners who benefit from the network. Since there is no one governing party or administrator, all transactions must be approved through a democratic process or consensus mechanism. 

The benefit of having a decentralized network of users is that blockchain transactions are constant, fast, secure, inexpensive, and immutable. 

  • Transactions are constant because networks operate globally, 24/7. This isn’t the stock market; users can execute deals when it is convenient for them. 
  • Transactions are fast because they are sent from sender to receiver without an intermediary. Once the smart contract is confirmed, the deal is done. 
  • Transactions are inexpensive because go-betweens or intermediaries often charge a fee for their service; there is no need for a fee with them out of the picture. 
  • Lastly, transactions are immutable. Due to the hashing algorithms mentioned earlier, the data is transparent and impossible to modify. The transparency of these transactions (on a public network) is an added benefit. 

Public v. Private Networks

There is a difference in blockchain networks. BitCoin is the most well-known cryptocurrency, followed by Ethereum. Ethereum is similar to BitCoin but geared toward an ecosystem of decentralized applications(dApps), platforms, and digital assets. These networks are open-source and allow anyone to build onto the technology without the need for a trusted third party to monitor transactions. On the other hand, private networks limit who can participate in the network through permissions. Private networks are more common in corporations to make the company more efficient. 

Blockchain In Action

Blockchain technology, originally thought to only be helpful for banking purposes, has been adopted across various industries. Walmart utilizes IBM’s  Hyperledger Fabric to back up its supply chain process. Walmart intends to track its food from farm to store and allow consumers to check the product’s origins before committing to the purchase. 

The government of Dubai is trying to become the first-ever smart city. This broad initiative led to the formation of the Smart Dubai governmental office. Smart Dubai offices work with many companies to digitize and automate government entities, including police stations.

Here is a list of some of the most prominent companies that use blockchain technology. 

(Photo by 101Blockchains)

Conclusion

While simple in nature, blockchain technology has given rise to many disruptive technologies. Cryptocurrencies such as BitCoin and Ethereum were just the beginning. Virtually everything is on the table. From smart homes to fully automated police stations, the future is here. Over the next few weeks, I’ll dive into other nuances of this tech and highlight some exciting projects that are coming out soon. Until then, take a look at Blockchain in 7 minutes, to get a visual understanding of everything I just covered.

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