What is Blockchain?
Blockchain is an ever-growing list of electronic records in real time, with each block containing a timestamp, information about the previous block in the chain, and data . The blockchain architecture is therefore resistant to data changes within the blockchain chain. The first blockchain prototype occurs in the early 1990s when scientist Stuart Haber and physicist W. Scott Stornetta applied cryptographic techniques in the blockchain chain to protect digital data and documents from potential abuses. This event further inspired many other developers and cryptographic enthusiasts, which eventually led to the creation of Bitcoin as the first decentralized digital “cash” system or simply – the first cryptocurrency. BItcoin’s “White Paper” was published in 2008. under the pseudonym Satoshi Nakamoto. The Bitcoin protocol, which has an immutable, distributed blockchain at its core – has since continued to inspire others to develop numerous other cryptocurrencies and tokens that are based on blockchain.
Blockchain technology
Blockchain technology is older than Bitcoin – it is a fundamental component of most cryptocurrency networks that acts as a decentralized, distributed and public digital ledger that permanently records all previously confirmed transactions in the blockchain. Transactions on the blockchain take place within a “peer-to-peer” network of globally distributed computers. Each computer represents a “node” in the network. “nodes” ) containing a copy of the blockchain, and contributing to the functioning and security of the entire network. This technology is called distributed ledger technology (DLT). Based on The DLT type of technology – Bitcoin is the first decentralized digital currency that does not require third-party mediation in order for transactions to take place. More about You can read Bitcoin on our blog, which guides you in detail through everything about this cryptocurrency, and explains its consensus mechanism in more detail. Also, on one of our previously published blogs, you can learn all about the differences between bitcoin and gold.
Designed to be resistant to modifications and fraud such as double spending, blockchain today enables instant transactions in minutes anywhere in the world. The data that is stored in most cases on the blockchain network is precisely the transactions of selling and buying cryptocurrencies, and we can say that the blockchain functions like a “digital ledger” that contains all the essential information about transactions such as participants, amounts, success. With bitcoin, we are talking about the so-called “Proof-of-Work” consensus mechanism, which is exactly what allows Bitcoin that its blockchain can continuously operate as a distributed network, even if some of the participants show unfairness or inefficient functionality. The algorithm on which consensus is based is important for the mining process of Bitcoin.
Blockchain Technology – Distributed ledger technology (DLT) Although it is designed to work as a distributed digital ledger on decentralized systems – blockchain can also be placed on centralized systems to ensure data integrity and kst to all users.
How does it work?
Let’s take Hansel and Gretel as an example and imagine that a transaction is taking place between them. For starters, Ivica buys from Marica a certain amount of bitcoin or some other cryptocurrency. After the transaction has been executed and confirmed – all the details of this purchase are recorded and added to the list. All lists containing transaction data are stored in one of the blocks in the chain, each of which has its own limit, that is – can not receive an infinite number of lists of transactions. This number depends on the potential of the individual network. When one block is filled, it connects to the previous block, whereby it becomes part of one long, chronologically complex chain. New transactions are further added to the list, which is further stored in the next empty block. Lists are stored in a block in such a way that the data cannot be changed, and that they provide chronological insight into transaction history.
Confirm transactions
The blockchain is powered by a network of computers, which means that every computer that uses blockchain simultaneously acts as its engine. To become part of the network, you need internet access and a computer. All computers, i.e. all participants in the chain, check the details of the transaction to determine if it is valid. One way to check transaki is with the help of explorers that can be tied to only one cryptocurrency, such as in the case of Bitcoin – Blockchain explorer, or for multiple cryptocurrencies – Blockchair explorer. Given that each computer can see transactions from previous blocks, participants can easily determine the validity of new transactions. After the computers approve the transaction, it is stored in the block and added to the chain, after which it can no longer be changed.
The main features of blockchain
- Transparency: a database that all users of the blockchain network have access to;
- Decentralization: unlike most other databases where data is stored in folders where it can be added, modified, deleted – Blockchain technology stores data in decentralized blocks, in chronological order;
- Security: Data in the blockchain cannot be changed, and is cryptographically protected – which guarantees security to all users.
Benefits of Blockhain
Experts around the world consider blockchain technology revolutionary for the world of finance, gaming, entertainment, but also in the development of science. The main advantage of blockchain is the fact that it does not require the involvement of a third party in order for transactions to take place. If you are trading cryptocurrencies, you can invest in crypto without an advisor and without a bank that would process your payment slip per credit or debit card as a central entity in fiat transactions. With blockchain, you don’t need the approval of a bank or financial experts, and transactions can be made in just a few minutes.
In addition to simplicity, the absence of an intermediary also has a financial advantage because no commission is given to a third party, regardless of the number of transactions made. Blockchains are owned but also managed by users who act as a reliable and decentralized peer-to-peer database. Copies of all transactions on the blockchain are stored on a network of distributed nodes. Each transaction is checked before adding it to the block , and security is guaranteed because there is no single failure point in the peer-to-peer network.
With traditional databases, the decline of a centralized storage provider can bring all your data offline, which is not the case with blockchain. Verification takes place in a way that the blockchain uses a consensus mechanism to validate each transaction. After the transaction is confirmed, only then is it added to the data block in the form of a block. In this way, hackers are prevented from inserting false data.
Another advantage of blockchain technology is that it supports the creation of new types of decentralized applications, but also business models. You’ve certainly encountered the term “NFT” (Non fungible token) lately. It is an irreplaceable token, i.e. a cryptographically protected piece of blockchain that is designed to be unique. Its purpose is to preserve value, but also to easily verify, i.e. proof of ownership of other forms of digital or physical assets. Some of the examples are works of art, collectible uniques, and the like. NFTs are often created as irreplaceable and unique records on the ethereum blockchain, based on Ethereum smart contracts, but there are ALSO NFTs on other networks. In addition to irreplaceable tokens, blockchain is the foundation for the development of a whole generation of decentralized innovative applications (ENG). DAO) with wide application in finance, gaming, science.
Given that they do not have existing financial infrastructure, blockchain-based applications, contribute to the financial autonomy of people who are not bank users. According to the survey, as many as 1.7 billion people in the world currently do not have access to banking services. With blockchain technology, the world of financial trading and savings is becoming accessible to anyone with a smartphone and doing so throughout the day, 24/7. If you use blockchain-based apps, you don’t have to wait until morning or Monday for the bank to open, but through your smartphone, you can do everything yourself, without intermediaries because the blockchain network is always ready.
Disadvantages of Blockhain
In addition to all the advantages mentioned, of course – there are also a lot of disadvantages of blockchain. Although this technology has the potential and a wide range of applications, and can support the development of innovative applications and services, we must take into account that it is also very complex and new.
Limited network scalability
Network maintenance and a shortage of skilled engineers make blockchain technology expensive to develop and maintain, and therefore it is still not in the “mainstream” phase of application. Also, the speed of transactions is expected to increase in the future, and it currently amounts to less than 50 transactions per second with Bitcoin and Ethereum. Although the safest due to decentralization, crypto mining based on the “Proof-of-Work” mechanism is extremely harmful to the environment due to the consumption of large amounts of electricity, which is necessary in order to approve and add each block to the chain. Another disadvantage is related to encryption, which is the basis for network security, but if you lose your private key as a user – you also lose access to all your means. There are known cases in which users lost millions because their access to their blockchain account was disabled without a private key.
As blockchain technology matures, experts estimate its adoption will accelerate. Blockchain added value is projected to rise to $176 billion by 2025. Non-financial uses of technology, for example in science, are included in the value.
In what ways is blockchain technology applied?
Science and healthcare
According to PreScout’s report, drug development and supply chain management, clinical research management, and a personalized patient approach are the three areas with the greatest potential for blockchain adoption and expansion. When manufacturing drugs and managing the supply chain – blockchain can be very effective as a security solution. Specifically, origin identification and monitoring of drug development are two key areas that are in the non-blockchain world under the jurisdiction of centralized public health institutions. Here, blockchain can greatly provide security when storing data due to the inability to change records of batches of pharmaceutical ingredients in the manufacturing process. Current processes identifying the origin of the drug and monitoring the supply chain are fragmented due to silos that are created in databases, leaving room for human error, but also malfeasance.
One example of blockchain-health cooperation so far is between the FDA (Government Food and Drugs Administration) and IBM. In this collaboration, blockchain is being applied to identify, track prescription drugs, and distribute vaccines.
As for clinical trials – the benefits of applying blockchain technology – are even greater. As we encounter a large number of participants who include patients/respondents, sponsors, suppliers of medicines and medical devices, examiners, doctors and nurses, and various national regulatory authorities – there is great emphasis on the need for a high level of safety. Sensitive data, including patient health records and clinical trial outcomes, must remain completely private and safe, with the whole process being conducted transparently for all trial participants. Therefore, clinical trials are the perfect terrain for the application of blockchain technology – which allows for data records immutability, scalability, as well as different permission levels for different levels of data access.
The use of blockchain for the purpose of personalized medicine and individual approach to the patient is based on “smart contracts”. Here, smart contracts allow giving consent to manage health data and prescription medicines, manage patient requests, etc. The Prescrypt project, implemented by Deloitte in the Netherlands, uses blockchain technology where drug prescriptions are linked to blocks for secure communication, monitoring of use and analysis by healthcare professionals.
Real estate
Whether it’s property rights, the size and location of the property, the type of land – blockchain technology introduces greater transparency in the real estate industry, but also in transactions between contracting parties. It is estimated that in the future, all properties will be purchased on the blockchain. In fact, real estate blockchain is already becoming increasingly popular as a way for buyers, sellers and investors to communicate with each other. By using distributed ledger technology (DLT), trust is increased through greater transparency, and it is trust in the real estate sector that is imperative. Real estate blockchain also speeds up contract processes, saves time and reduces costs.
Vote
In Croatia, we are currently witnessing a major public debate, but also a much-needed revolution in the voting system. Although the application of blockchain is unlikely to happen soon – the benefits of using blockchain technology to improve transparency in democratic elections are evident. The most commonly mentioned arguments suggest that blockchain application could prevent potential voter fraud, and offer an easy way to count votes.
The Future of Blockchain
Although blockchain-based cryptocurrencies have persistently made headlines in recent years, and many have viewed decentralized finance (DeFi) systems as the ‘Wild West’ in the banking sector blockchain technology continues to evolve, and is finding wider application. The idea of maintaining the status quo in the world we know today is a farce, given that central banks around the world are struggling to develop their own offerings of cryptocurrencies that are pegged to fiat currency, for example the US dollar. Such cryptocurrencies are known as stablecoins that we will tell you about in one of our future blogs.
At the EU level, a bill to introduce a digital euro is being debated, while the USA is leading the way with a regulation on the plan for digital assets in the US, including the possibility of introducing a digital dollar. Also, major global online commerce chains such as Amazon, Alibaba, are sure to see the benefits of introducing blockchain technology, and will start accepting cryptocurrencies as payment for goods and services in order to increase the number of transactions per second. What is not in favor of blockchain is the environmental impact, i.e. excessive energy consumption, which is associated with ensuring a high level of security of all transactions on the blockchain. Combined with the discussion of climate change – this could slow the adoption of blockchain technology in the mainstream world.
We look forward to seeing how things develop further, and by then we hope for less volatility in the cryptocurrency market, as well as growth in value. In the following blogs, we will reveal more about interesting facts related to the development of blockchain technology, but also about other cryptocurrencies based on the blockchain protocol. In addition, we will introduce you to an interesting debate about whether blockhain really consumes so much energy or whether it is just a myth.
Until then, you have material to read, and we are here to answer your questions! Follow us and get back to us on Instagram. We look forward to your comment or inquiry. We may also meet on one of the Kriptomat.hr devices in the city, and discover the currently available locations through our web.
Until the next blog,
Your Kriptomat.hr Team
