What is Blockchain technology?
What is Blockchain and how to use the technology?
Welcome back I am your Crypto Guide David in this course we will learn about the fundamentals of Blockchain. I'm sure by now you heard about Blockchain and If you have, I still would like for you to get a quick overview and perhaps learn something new. Before I explain the amazing use cases and the problems Blockchain technology solves I want to read a few definitions so that we can dive a little deeper.
The definition of Blockchain from Investopedia:
Investopedia is an subsidiary of Dot Dash Meredith an online digital and print publisher founded in 1999 they state that they “simplify financial decisions and information to give readers the confidence to manage every aspect of their financial life.”
A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As a database, a blockchain stores information electronically in digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin for maintaining a secure and decentralized record of transactions. The innovation with a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
Lets pause here and highlight a few things. I first grasped the full understanding of Blockchain about 8 years ago it was during a Ted Talk from Charles Hoskinson who is the founder of Cardono and co founder of Ethereum.
Years prior I read the Bitcoin white paper and learned about the Merkel Tree, open ledger transaction, the 10 minute proof of work algorithm and how this was all stored on the Bitcoin blockchain. However at that time I still did not grasp the true power of Blockchain technology not until Mr. Hoskinson explain that the Blockchain was a open distributed Database. A database that is shared among the nodes of a computer network.
Now being a computer scientist and web developer I have been working with relational databases for years and than everything clicked because I saw how Ethereum leveraged the power of the distributed database. I understood how the nodes of the computer network created cryptocurrency thru crypto mining and how smart contracts distributed tokens. All of the information is in the Database in the form of the transaction. The nodes also formed what is called a Mesh Network or Hyperboria. We will discuss this when we speak on Web 3.0. Okay here is another definition of Blockchain.
The definition of Blockchain from Merriam Webster: a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network also: the technology used to create such a database transactions between two parties efficiently and in a verifiable and permanent way. - Marco Iansiti and Karim R. Lakhani
Okay now what make this particular database more powerful than the traditional relational database is that it is simultaneously used and shared but yet is decentralized.
How Does a Blockchain Work from Investopedia?: The goal of blockchain is to allow digital information to be recorded and distributed, but not edited. In this way, a blockchain is the foundation for immutable ledgers, or records of transactions that cannot be altered, deleted, or destroyed. This is why blockchains are also known as a distributed ledger technology (DLT). First proposed as a research project in 1991, the blockchain concept predated its first widespread application in use: Bitcoin, in 2009. In the years since, the use of blockchains has exploded via the creation of various cryptocurrencies, decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.
In this fundamentals course we will discuss DeFi, NFTs and Smart Contracts or you can skip ahead and view those topics now. I first want to highlight a few keywords from this explanation. The first are immutable ledger this means you can see the transaction, own a copy of the transaction but you can not manipulate the transaction. Distributed Ledger Technology removes the need for banks. Now before I speak about the many Use Cases and the problems Blockchain solves, I will read one more definition from 101 Blockchains.
What is Blockchain Technology from 101 blockchains?: Blockchain is a network of peers who can interact, communicate, and transfer information without being dependent on a centralized entity. The key features of blockchain include transparency, security, immutability, and decentralization. A blockchain utilizes a consensus algorithm that ensures that the transactions done within the network are valid and authenticated to achieve all of these. Let’s take a look at a more simplistic representation.You can visualize the blockchain as a Jenga tower. There are small pieces that hold the whole tower. If you remove one block, then the whole tower will fall off. This means that the integrity of the tower is broken if one block is removed or changed. Blockchain works the same way as each block is verified with the help of the previous block. The data integrity is what makes blockchain so amazing!
And one last concept I would like to highlight is Proof Of Work. “Proof of work (PoW) is a form of cryptographic proof in which one party (the prover) proves to others (the verifiers) that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expenditure with minimal effort on their part.” - Wikipedia
Proof of Work Vs Proof of Stake:
In Proof of Work the Validation is done by a network of miners these miners are also called nodes because the have a copy of the Database. In the case of Bitcoin miners are paid in BTC as a reward for to pay for transaction fees. The competitive nature uses lots of energy and computational power to mine the transaction.
In Proof of Stake the Validation is done by participants who offer tokens as collateral in the case of Etheruem the collateral is called Ether. Ether is paid for transaction fees only we will deep dive into this as well some transaction fees can be quite significant. The benefit of Proof of Stake is computational power used less energy, but open the door for centralized control.
The Blockchain Use Case.
The best way to understand Blockchain technology is to explore the many use cases it provides and see the problems this technology solves.
Banking:
Real-time applications of blockchain is payment processing. If you are working in a different country, then it becomes a whole new problem. Transferring money overseas can leverage a lot of fees as well. This makes the income of people earning overseas lower than what they earn. On top of that, you also need to wait for a few days before a transaction is completed. Banks and foreign exchange regulations make all of these restrictions. Clearly, blockchain is the solution to money transfers, especially to overseas money transfers. They can save you the hassle as blockchain enables you to do instant transfers even across borders. Banks also use cryptocurrencies to manage overseas funds as they are swift and cost less than doing it in a more traditional manner. Ripple is one of the cryptocurrencies that are controlled by banks to do money transfers. It is largely used for bank-to-bank transfers. This is one of the finest practices and real use cases of blockchain. /101 Blockchain
Here is a short list of decentralized Stablecoins:
USD | Reserve | DAI | FRAX | Mstable
Asset Management:
Other practical use cases of blockchain are asset management. In asset management, traders can manage and trade assets. This makes it one of the risky trades to be in. Each party needs to be very methodological in its approach. To reduce the risk, each party needs to have key players when doing asset management. This includes having a custodian, broker, or settlement manager. They take care of the records and ensure that no errors creep in when managing those records. That’s a lot of work for doing asset management. Blockchain empowers asset managers to work more efficiently. They can use blockchain to reduce errors and ensure the whole process is smoother than ever. They can remove mediators if needed. /101 Blockchain
Here is a short list of decentralized Asset Management Blockchains:
Yearn | Jarvis | Zapper | Zerion | Akropolis
Real Estate:
Real estate is not at its best. Right now, if you want to make a purchase, then you need to go through a long process of documentation, verification, and transfer of ownership. There is currently a lot of paperwork that goes in while buying or selling a property. On top of that, you also need to do verification work for both parties. If you are taking a loan, then things get more complex as more paperwork needs to be done. Lastly, there are also chances of getting fraud. The fraud generally happens from sellers who sell their property to multiple parties at the same time, which makes them hard to catch. To solve all these issues, we have blockchain at our hands. If you ever want to buy a house faster, you need to take blockchain. Blockchain offers the ability to tokenize real-world assets. This means that the sellers can sell their land or property with the use of smart contracts.
They can create a legal process by coding it in the smart contract and then execute it when the terms are met. For instance, if the buyer pays the amount, then the legal owner of a property is transferred to the buyer in a matter of a few minutes. Blockchain for real estate can also offer the ability to remove fraud by ensuring transparency, immutability, and security. /101 Blockchain
Here is a short list of decentralized Real Estate Blockchains:
Varit | RealT | ManageGO | Real-Blocks | Smart-Realty
Supply Chain Monitoring:
One of the best practical use cases of blockchain is supply chain monitoring. The supply chain is an integral part of our economy. Have you ever wondered how you get your bread in the morning? It is all because of impeccable supply chain systems that are implemented across the place you are staying in. If the supply chain is not working properly, you get delayed products or no products. A problem in the supply chain can also lead to a shortage. However, this is not where the supply chain problems end. One of the biggest concerns for companies and consumers like you is to get rid of fake or fraud items that can get into the supply chain by fraud elements in the market. The solution? You guessed it – blockchain. Blockchain for supply chain offers immutability and the ability to monitor the supply chain products throughout its journey. It offers enough transparency for the companies to track the products. Companies can monitor fraud elements in the supply chain and find out about the inefficiencies that are part of the supply chain. This means that they can improve the supply chain by monitoring it through blockchain. Supply chain monitoring is the most practical use-case of blockchain. /101 Blockchain
Here is a short list of decentralized Supply-Chain Blockchains:
Vechain | OriginalTrail | CargoCoin | BEXT360 | CargoX
Digital Voting:
Voting systems have always been scrutinized all around the world. Sometimes they are scrutinized for transparency or the speed at which voting takes place. It is common for people to stand in line for hours before they get their chance to vote. This is not a healthy way to vote, especially for special people who cannot stand in line for so long. This is where Digital voting comes in. The idea of digital voting stems from the blockchain. As blockchain offers transparency, immutability, and security, it is an ideal system/platform for conducting the voting. /101 Blockchain
Copyright Protection:
Copyright is also one sector that requires attention from the likes of blockchain. If you are part of the creator’s industry, you know how hard it is to protect your creation. There are many ways to copyright your work, but that doesn’t mean that your work is always protected. For instance, you wrote an e-book and wanted to distribute your work through platforms such as Amazon. A buyer buys the book and then distributes it without your knowledge of different PDF files. The other users are also downloading the book and distributing it without your knowledge. They are violating basic copywriting rules, but hard to detect and then punish. One of the best ways to provide copyright and royalty protection is by using blockchain. Blockchain offers a unique approach by providing content through the network. As the blockchain is a vast network that provides transparency, anyone trying to break copyright can be reported automatically and be executed according to the copyright laws. The same can be said for the royalty protection where the creator gets paid for their creations. /101 Blockchain
Here is a short list of decentralized Copyright Protection Blockchains:
Anchorage Digital | AutoGraph | Fortress Trust | Oasis Labs | Binded
Entertainment:
As a creator, it is not possible to reach the right audience due to the mediators and platforms that control the content distribution. For instance, if you are a music developer, then you have to register on the popular music platform devices, and then they distribute your work. This can be limiting in many ways due to the algorithm that you are going to use. On top of that, these mediator platforms also take a good amount of fees as a cut. With blockchain, musicians can directly connect with their audience and sell their music directly to them without a mediator’s need. There are already platforms that offer payment options through blockchain, and anyone familiar with basic cryptocurrency can buy music through blockchain. /101 Blockchain
Here is a short list of decentralized Entertainment Blockchains:
LiveBash | Audius | Muscoin | Royal | Melodity
Insurance:
Insurance claims are next on our list of blockchain applications. In reality, insurance claims can also be improved with the help of blockchain. Insurance is one of the big industries that need re-work. Blockchain can help just that. Currently, if you take insurance, you have to go through big hassles when claiming it. It requires keeping in contact with your insurance guy and also requires a good amount of documentation. The claims process is simplified with blockchain’s help as it can store information securely, and hence can be verified for processing the claim. Once the claims are uploaded to the blockchain network, the claims are then transmitted to the relevant parties. The parties then go through the information and release the insurance. Smart contracts can also help improve the claims process’s automation, where the user can simply put claims and get their claims once approved. This can be achieved on some type of insurance, but not all. As you can see, blockchain for insurance can offer a lot of possibilities. /101 Blockchain
Here is a short list of decentralized Insurance Blockchains:
Nexus Mutual | Solace | UNSLASHED | inSure DeFi | Bridge Mutual
Okay the next fundamental we will learn is called Decentralized Finance DeFi for short. Stay tuned.
Additional Resources:
https://www.jpmorgan.com/onyx/index
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