Blockchain is a vast topic, as large as the possibilities it unlocks. Understanding what a blockchain is and being aware of its applications is fundamental when dealing with the world of digital business, as well as for those who work in finance, public administration, government initiatives, and so on.
In 2023, mastering the topic is essential since it offers concrete opportunities in every sector, and it would be a mistake not to seize them.
Let's start from the beginning: blockchain technology was devised in 1991 by two American researchers and was initially intended to avoid digital timestamp tampering. However, it remained unexploited until 2008, when Satoshi Nakamoto used it to create the first cryptocurrency, Bitcoin.
A blockchain is a digital database that is shared and decentralized, available to anyone who is part of a network. When data enter a blockchain, it is extremely difficult to edit them. As the name suggests, a blockchain stores data in blocks. To put it simply, each block in the chain contains three elements:
Knowing how a blockchain works provides the necessary awareness to deal with trade markets. Here are a few companies and projects that have highly benefitted from it:
As already discussed, each block of the chain is linked to the previous one with the hash, going backward until the first block, which contains only its hash and is called the genesis block. In case a hacker attempts to tamper with a block, the following blocks will become invalid, as the hash of the tampered one will change, disrupting the link with the others. The whole chain would fail.
In addition to the hash system, a blockchain uses a cryptographic protocol called proof of work. This protocol requires additional calculations, slowing the creation of new blocks and enhancing even more protection against potential alteration attempts.
Moreover, what makes a blockchain unique and drastically secure is decentralization. A blockchain avoids referring to a centralized structure, but it relies on a peer-to-peer network to spread the data among the different network nodes. Every person who joins the network becomes a node and obtains a copy of the blockchain. Therefore, a central authority doesn't need to verify, check, and authorize each exchange; when someone creates a new block, all nodes receive a copy of it so that each one verifies the block and adds it to the chain only if confirmed.
“Don’t trust, verify” is the system's motto, as there is no need to trust a third party, but everyone can verify each new block by themselves.
Blockchain technology is mistakenly associated solely with cryptocurrency as it has proved to be an ideal solution for companies and public administration.
To fully understand its benefits, it is important to underline that a blockchain is a shared and unalterable database and can simplify the recording of transactions and the supervision of assets within business networks.
A key characteristic of a blockchain is creating unique digital assets. Imagine you write a text in Microsoft Word. When saved on your laptop, the created document is unique. If you share that document though, those who receive it can copy it and send it to others. Potentially, the original document can be altered and edited, compromising the unicity of the original asset. With a blockchain ledger, the cryptographed asset remains unique and identical. As anything valuable can be exchanged in a blockchain network, exchanged assets can be tangible or intangible.
In both cases, using a blockchain implies a certain convenience, providing lower risks and cost reductions for everyone involved.
Moreover, not only is a blockchain secure and reliable, but it offers transparency. Any operation made through a blockchain is visible to all participants. Everything is digitally available, up with the times.
Even though blockchains are mainly used to record cryptocurrency transactions, they can be vital in securely storing any type of data, such as smart contracts, medical records, and NFT. Here, you can find out more about their applications for smart contracts and NFT, and down below is a list of some of the other applications of a blockchain:
Now that you know what a blockchain is, you just need to understand how to start taking advantage of it and dive in!