Much more potential than Bitcoin.
At the end of 2008, Satoshi Nakamoto published the Bitcoin P2P e-cash paper, where he presented a digital currency and explained that a third party was not needed to carry out a reliable and secure transaction. This way the Bitcoin network, the first blockchain technology application, was launched in early 2009.
Although Bitcoin was the beginning of the cryptocurrencies world, what’s truly revolutionary about the Bitcoin network is the use of Blockchain technology, which through decentralization of information generates unthinkable potential and allows us to witness a global technological evolution.
It is important to establish that Blockchain is a technology and it’s being used by many networks. Each network it’s a universe itself. (Bitcoin Network, Polygon Network, Ethereum Network etc.)
Why is Blockchain technology necessary?
Information management, until the arrival of blockchain, was mainly Centralized. This implies that the information of institutions, companies and governments is stored in servers which can be replicated or in the cloud for greater security, but whose final owners are always the same organizations or service provider companies.
Centralized information storage has several disadvantages. On one hand, it gives institutions the power to manage people’s information, allowing them to use this information without authorization, generating cases of fraud and corruption. But it also makes this data vulnerable to hacker attacks who can steal, damage or delete it. And last, the information can also become inaccessible in the event of a server crash and delays processes since transactions can only be verified in one place.
Blockchain decentralized technology has the power to make transactions to be Peer2Peer (P2P) and does so in a reliable, permanent, untraceable, transparent, secure way.
How is this possible? Let’s talk about how Blockchain works.
Blockchain is a transaction ledger that works with a chain made of blocks. Each blockchain network is made up of several nodes and each node contains the ordered block history since the beginning of the network.
Blocks are where the transactions are stored. (For example, Each Bitcoin network node contains in its blocks a history of all bitcoin transactions since its creation in 2009.)
If we consider that each Node and its respective blocks contain lots of information, it’s logical to think that they have to be stored in a physical space. It is at this point where miners show up. The miners are, among other things, the responsables for storing the nodes. They can do it on servers from anywhere in the world. All network nodes are connected to each other by the internet. As nodes are added to a network, it rises it´s value since the greater the number of nodes, the greater its decentralization.
How are transactions added and verified in the blockchain?
Each block receives and stores transactions, its capacity will depend on the blockchain structure and each transaction size. When it reaches its limit, it will be time to validate it and seal it, which is the process that miners do. For a block to be sealed it is necessary to solve a cryptographic operation (hash). The node that first solves this operation is the one that seals the block and for that job receives a reward. Once the block is sealed, the other nodes are notified and after they verify this operation the block is added to the chain. When more than half of the network nodes process it, that block is taken as inalterable and is permanently registered in the chain.
Blockchain information certification is based on consensus, if we all have the same information, it means that this information is true, in this way we can say each blockchain network has a single version of reality.
Let’s go back over Blockchain Technology benefits:
- Decentralized: The network information is replicated in each one of its Nodes, interconnected and distributed anywhere in the world.
- Peer2Peer (P2P): No intermediaries are needed to carry out transactions.
- Secure, permanent and reliable: It is only necessary for a network node to be active in order to be able to access information. In the case a block is attacked by a hacker all the other network blocks would stop recognizing it as valid since it would not be equal to the majority.
- Untraceable and transparent: Transactions are done anonymously but anyone can see the network transaction history.
Who can take advantage of this technology?
Although the blockchain revolution began and expanded itself in the crypto world, there’s a whole universe for enterprise/business applications and opportunities.
Industries, governments, educational institutions, among others, have unlimited possibilities to create and develop.
Some implementation examples
- Self-Sovereign digital identity (SSI): With the implementation of identity wallets and verifiable credentials, it allows us to recover power and control over our identity and operate with different institutions without exposing all of our personal information.
- Smart contracts: They work like traditional contracts but under Blockchain technology. They are special instructions that are stored in a blockchain network, they can auto execute actions based on a series of parameters already programmed. They do not require intermediaries and are not subject to interpretation.
- Asset Tokenization: Blockchain technology allows the issuance of secure and reliable tokens, promoting the tokenization market for both digital and physical assets.
- NFT: The non-fungible tokens of which we heard so much about lately. They are unique digital tokens stored in a blockchain that, through the use of smart contracts, can register the information of authorship, property and rights on a digital work, video, photo, etc.