Metaverse and NFTs were the subjects of two of my previous articles. Each of them, Web 3.0, Cryptocurrencies, and other new concepts that are becoming increasingly popular among people has Blockchain as its core. In this post, I’d want to share with you what I’ve learned about a breakthrough technology that will dramatically transform our world.

I’ll largely use the Bitcoin blockchain as an example because it’s the most well-known and was formerly one of the most widely used. The examples, terminology, and so on apply to almost all blockchains. When I’m solely talking about Bitcoin’s blockchain or similar ones, I’ll say so.

What is a Blockchain, and how does it work?

A blockchain is a decentralized database that is shared among computer network nodes. It keeps a safe and decentralized record of transactions by storing data in a digital format. As a result, confidence is generated, eliminating the requirement for a trusted third party to participate in any action. *“Distributed ledger technology” *( DLT ) is another name for blockchains.

The structure of the data on a blockchain differs from that of a traditional database. Tables are used to organize data in the database.

The Blockchain organizes data into groupings known as blocks, each of which contains a collection of data. The storage capacities of the blocks are as follows: They are closed and linked to the preceding block when they are filled with data, forming a data chain known as blockchain. Each block on the chain has a timestamp that indicates when it was added to the chain, and they are arranged in chronological order.

The most popular application of blockchain so far has been as a transaction ledger. The first logical application was due to the immutability (the data entered is irreversible) and transparency of decentralized blockchains.

For example, every Bitcoin transaction is permanently recorded on the blockchain and can be read by anybody.

The purpose of Blockchain, as you may have guessed from what I’ve mentioned above, is to allow digital information to be stored and transmitted but not altered. The blockchain serves as the basis for an immutable ledger or record of transactions that cannot be changed, deleted, or destroyed.

On the Blockchain, how does a transaction take place?

The transaction is entered, and it is sent to a global network of peer-to-peer computers, which solve equations to check the transaction’s legitimacy. Once the transaction is determined to be valid, it is clustered together into blocks. Finally, the transaction is completed after several blocks are chained together, creating a long history of permanent transactions.

Blockchain Decentralization

One of the most appealing aspects of blockchain is its decentralization. I’ll explain it further with an example because I feel it will help you comprehend it better.

For example, suppose a corporation runs a server with 10,000 PCs that maintains a database with all of its clients’ account information. These computers are kept in a warehouse. Can you fathom what it would be like if you didn’t succeed? Consider what would happen if the power went out, the internet went down, or someone accidentally deleted everything. What would happen if one of these events occurred? The information is lost. Everything is lost for the company.

This is where blockchain comes in, which happily eliminates the risk. It lets the database’s data be distributed among multiple network nodes in different places. It adds redundancy to the system and ensures that the data stored there is accurate.

Another example is if one user tampers with Bitcoin’s transaction record, all of the other nodes will cross-reference each other and readily identify the node with the wrong data.

This system aids in the establishment of a precise and visible sequence of events. No one node in the network can change the data it contains. Information and history are inextricably linked.

A majority of the decentralized network’s computing power would have to agree to validate additional entries or records to a block. A consensus mechanism (“Proof-of-Work” — PoW or “Proof-of-Stake” — PoS) secures blockchain by allowing for agreement even when no single node is in charge, preventing malicious actors from approving bad transactions.

Transparency

Another feature of blockchain is its transparency. All transactions can be viewed in real-time using either a personal node or blockchain explorers.

Each node maintains its copy of the chain, which is updated as new blocks are confirmed and added.

The blockchain records are encrypted, which means that only the record’s owner may decrypt it and reveal their identity. The finest thing is that blockchain users may maintain their anonymity while preserving transparency.

Security

For many people, security was and still is a major issue. The sensation of being safe and secure with your data, transactions, and other personal information is difficult to accomplish in today’s digital environment, but blockchain overcomes this problem and achieves decentralized security and trust in various ways.

New blocks are always added to the blockchain’s “end” and are always recorded in a linear and chronological order. It’s difficult to change the contents of a block after it’s been added to the chain since each block has its hash, as well as the hash of the block before it, and so on.

A mathematical function converts digital data into a string of numbers and letters, resulting in hash codes. If the data is changed in any way, the hash code will change as well.

Here’s an example of a hash code:

“Hello world!” à d3486ae9136e7856bc42212385ea797094475802

“Hello world” à 7b502c3a1f48c8609ae212cdfb639dee39673f5e

See how the “exclamation mark” makes a difference?

The following is an example of blockchain security:

A hacker who also operates a blockchain node wants to change the blockchain and steal cryptocurrency from everyone else. If he changes his unique copy, it will no longer match the one of everyone else. When everyone else compares their copies to each other and notices that the hacker’s version stands out, the hacker’s version is dismissed as fraudulent.

To be successful, the hacker must control and alter 51 percent or more of the blockchain copies at the same time. As a result, their new copy becomes the majority, and the chain is agreed upon.

Hacking something like this is highly expensive and, in my opinion, fruitless. When network members notice such significant changes on the blockchain, they will hard fork to a new version of the blockchain.

A ***hard-fork ***is a drastic modification to a network’s protocol that allows previously invalid blocks and transactions to become legitimate, or vice versa. This update necessitates that all nodes or users switch to the most recent protocol software version.

The soft-fork is the polar opposite of the Hard Fork, in which only previously valid transaction blocks are rendered invalid. The new rules can only be enforced if a majority of the miners agree.

Bitcoin vs Blockchain

The concept of blockchain technology was initially proposed in 1991. Bitcoin was the first real-world implementation of blockchain when it was launched in 2009.

“A new electronic monetary system that is peer-to-peer, with no trusted third party,” Satoshi described Bitcoin.

Bitcoin makes use of blockchain to keep track of ledger payments transparently. In theory, Blockchain can be used to store any number of data points, not just payments, such as votes, product inventory, state ids, deeds to properties, and more.

Blockchain vs Banks

Now I’ll compare Bitcoin’s blockchain implementation to the current banking system. The blockchain concepts that I will discuss in the following lines apply to all of them, not only Bitcoin’s implementation.

Blockchain usage

Many sectors can benefit from blockchain technology. I’d want to discuss a few of them further down.

Health and Finance

This is most likely the most profitable industry. Funds may be transferred between institutions more rapidly and securely, and transactions can be completed considerably more swiftly and at any time (24/7, 365 days a year).

Currency

A user’s data and currency are at the whim of their bank or government if they don’t use Blockchain. Private information is at risk if the bank’s servers are ever compromised.

Because there is no need for a central authority with Blockchain, the risk of losing private information is reduced, if not eliminated. Some countries or governments lack the infrastructure to give identification, preventing residents from having access to savings or brokerage accounts. Because of its crypto wallets, blockchain is the solution.

Healthcare

Patients’ health records can be encoded and kept on the blockchain using a private key that only a few people have access to. The level of privacy also rises.

Property Records

Without blockchain, a physical deed must be physically entered into the country’s central database and public index by a government employee at the local registration office.

There is no need to scan documents or track down actual files in a local recording office using Blockchain.

The blockchain can be used to store and verify property ownership. The owners can rest assured that their deed is correct and durable.

Smart Contracts

Are a type of computer code that can be incorporated into the blockchain to help with the facilitation, verification, or negotiation of contract agreements. Users must agree to a set of terms before they can use them.

“ If…this…then…that”

Supply Chains

Suppliers can use blockchain to track the origins of the materials they buy, as well as verify the legitimacy of their products and labeling ( organic, local ).

Pros and Cons of Blockchain

Because nothing is perfect, there are some advantages and disadvantages to this new technology. Let’s start with the pros of blockchain:

· Improved accuracy by removing human involvement

· Cost reductions

· It is decentralized à it is harder to tamper with

· Transactions are more efficient, private, and secured

· Transparent technology

· Banking alternative and a way to secure personal information for citizens of countries with unstable/underdeveloped government

The cons of Blockchain:

· Significant technological cost à mining

· Few transactions/ second

· History of use in illicit activities ( dark web )

· Regulation varies by jurisdiction and remains uncertain

· Data storage limitations

Let’s take a closer look at each of them now.

Benefits of the Blockchain

Accuracy of the Chain

A network of thousands of computers approves transactions, removing the need for human involvement in the verification process. As a result, human error is reduced and information is recorded more accurately.

If a PC makes a mistake on the blockchain, only one copy of the node has the error, which is then changed, indicating that everything is fine. To spread the inaccuracy, at least 51% of the computers must be incorrect, which is impossible.

Cost Reductions

Because there is no need for a third party, there are no additional costs or fees.

Pay notary to sign a paper, for example.

Decentralization

Because the blockchain copies and spreads information throughout a network of computers, no information is stored in a central location. This makes it more difficult to mess with. The PC on the network is updated whenever a new block is added.

Efficient transactions

Transactions can be performed in as little as 10 minutes and secured in as little as 24 hours. They can be completed whenever you wish.

Private transactions

Many blockchain networks function as public databases, allowing anybody with an Internet connection to access a list of the network’s transactions. Although users have access to transaction details, they do not have access to information on the users who are conducting the transactions.

Blockchain networks are not anonymous, but they are private.

Secure transactions

The blockchain must verify the transactions that have been recorded. The operation is added to the blockchain after it has been confirmed. As previously stated, each block has its hash.

Transparency

It’s open-source software, which means anyone can look at the source code.

Who controls code and how it is edited has no actual authority.

Changes or upgrades can be suggested by anyone.

Banking and Unbanked

Because they reside in underdeveloped nations where the economy is in its infancy or because they only have cash, 2 billion adults do not have a bank account. As a result, robberies are on the rise.

With blockchain’s crypto wallets, the danger of robberies can be decreased because it is easier to hide a private key than cash.

The Drawbacks of Blockchain

Technology cost

To validate a transaction, enormous quantities of processing power are used.

Speed and Data Inefficiency

Only 7 transactions per second (Bitcoin) are managed.

Although Ethereum works better than Bitcoin, it is still constrained by the blockchain. For example, Visa processes 24,000 transactions per second.

Regulation

It is theoretically possible for governments to make it unlawful to own crypto or participate in their networks.

Blockchain Platforms

Allow consumers and developers to invent new ways to leverage a blockchain infrastructure that already exists.

The native coin of the Ethereum blockchain, for example, is ETH (ether). It enables the establishment of Ethereum-based Smart Contracts and NFTs that are secured by Ethereum nodes.

Private vs Public Blockchain

Before I go to the conclusion, I’d want to point out that, as indicated in the subtitle, there are two sorts of blockchains.

Anyone can join a public blockchain and set up a node for free. Cryptography and consensus techniques are required to secure the blockchain ( PoW ).

Before joining a private blockchain, each node must be approved.

The Blockchain is unquestionably here to transform and reshape the world we live in today. I am a strong supporter of this new technology and believe that its systems and assets have the potential to transform a variety of sectors.

With the massive rise of NFTs and Metaverse that we’ve witnessed recently, I’m confident that blockchain technology will gain traction as well. Although there would be no NFTs or metaverse without it, it is not as well-known as these two. Many people who enter this area are likely to first hear about these terms before understanding and learning about the blockchain.

This was a more technical piece, and I can tell you it was challenging. I truly wanted to share some of the knowledge I’ve gained on this subject with you. Information was gathered from a variety of sources, including websites, books, and, of course, videos. I still have a long way to go before I truly comprehend it, but I’m getting there.

I’d like to hear your thoughts on whether or not you feel blockchain technology will reshape the world. Feel free to contact me on Twitter if you have any questions or want to discuss anything.

I hope you learned something new today, or at the very least expanded your knowledge!

*The story was first published on Medium on January 12, 2022. I decided to relocate it here for a step-by-step migration in Web 3.0.

Have a wonderful day! Thank you very much!