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Blockchain - Basics, Definitions and Application

21 September 2018 | Katarzyna Stachyra | blockchain

What are the possibilities of using a Blockchain-based technology for your business? Check how the Blockchain works and how to start earning money with this technology.

From the article you will learn:

  • what is the Blockchain and how does it work
  • how to start using the Blockchain technology
  • who uses the Blockchain
  • what are the pros and cons of the Blockchain technology
  • how can you earn money by using the Blockchain technology

The Blockchain is a technology that was first developed with cryptocurrencies in mind Considered by many to be a system that can not be broken, it now changes many industries. Since 2008, when the first implementation took place, the popularity of this technology is constantly growing, and more and more possibilities of putting it to use are being found. That is because the Blockchain revolutionises the way transactions are being concluded, settled and recorded. The Blockchain technology is based on such values as security, privacy, trust, decentralisation and transparency.

Blockchain - how does it work

The Blockchain is used to send and store information about transactions that have been concluded on the Internet. These transactions occur in the form of successive blocks of data.

One block contains information on a specified number of transactions. When it becomes filled up with information, a new block of data is being created, and then another one and another, creating a kind of chain of blocks - hence the name "Blockchain".

Every computer in the network can participate in the transmission and authentication of transactions, without the need for central management systems that verify them. The essence of the Blockchain is to maintain a joint and collective transaction ledger, distributed across the entire network. This ledger, although open to everyone, is fully protected against unauthorised access. The entire transaction history is public, but accessible only under the access rights for a specific user. This means that you can check and verify the entire history of completed transactions, while protecting the users' privacy.

Blockchain - how to start

In order to take advantage of the opportunities that each new technology brings, you need to grasp its core. In the case of the Blockchain, this may seem quite abstract at first, but thanks to the functionality of the solution, you can quickly notice the benefits hidden in it.

At the very beginning, it is worth to understand that the basis for the functioning of the Blockchain technology is data, and the whole solution depends on it. Generally speaking, the Blockchain is a decentralised database.

As the popularity of the topic does not fade since the creation of Bitcoin, there are more and more ways to acquire and expand your knowledge.

If you are just starting your adventure with the Blockchain technology, it is worth to get acquainted with the broad range of literature regarding the topic, available on the market. A popular publication for ‘beginners’ is the book ‘Blockchain for dummies’ created by the IBM company specialising in this technology. This is, of course, just one of many books that are worth reading. On the Amazon platform you can find many titles to choose from, and their list is constantly growing.

While it is worth to understand the basics of the Blockchain technology by reading books, one must remember that the Blockchain, like every technology, is developing rapidly. Therefore, you should follow industry blogs and up-to-date articles published on the web. On the Medium platform you can find a collection of articles by various authors working on a daily basis with the Blockchain technology. It is advisable to regularly check the blog of the Blockchain company.

It is also worth to take advantage of the opportunity to participate in industry conferences. You can find both, an event organised in Poland, such as BlockchainTech in Warsaw, as well as all around the world. For example, in Berlin you can attend Blockchain Technology Conference, Malta Blockchain Summit in Malta, or Blockcon in Los Angeles. It is also worth to participate in Blockchain Expo Global, that takes place in fast-developing cities.

Who uses the Blockchain

The Blockchain, as a technology based on security, privacy and trust, can find its application in many different industries. The financial industry - was the first to recognise the potential of the Blockchain, while being aware of the risks posed by the capabilities of this technology. Currently, more and more companies are being established, developing their own cryptocurrencies. It develops so fast that we can see the rise of a new FinTech industry that is based on these solutions. Together with the banks, FinTech companies established a consortium, the goal of which is developing Blockchain-based methods.

Law enforcement agencies are also more and more willing to take advantage of the opportunities offered by the Blockchain technology. Thanks to smart contracts, they can automate their operations, and the flow of money is almost immediate. By keeping public records, it is easier to resolve cases concerning intellectual property rights.

Blockchain solutions allow for increasing the trust in the activities of charities. Thanks to transparency and access to completed transactions, it is easy to check the credibility of this type of institution.

It is similar in the case of government bodies. The Blockchain helps to manage their resources, and in addition – using this technology reduces the degree of corruption.

Healthcare also can benefit a lot from using the Blockchain technology. The decentralised database supports the maintenance of a complete medical history of each patient, at the same time ensuring their privacy.

These are just examples of areas that already make use of the possibilities offered by the Blockchain technology. More and more organisations see the advantages of this technology and the means of putting them in use in their activities.

Pros and cons of the Blockchain

If more and more industries are starting to use the Blockchain solutions, what are the actual advantages of this solution, and what are the challenges facing the designers of Blockchain-based solutions?

Pros of the Blockchain technology

  • The strength of decentralisation - a decentralised system is less vulnerable to errors. If a node fails, there are other nodes that will keep the system working. Decentralisation also increases security. As the information stored on one computer is copied to other network nodes, to change the information you need to have access to all nodes, which is virtually impossible.
  • Transparency - transparency is the key feature of the Blockchain. Full transaction information is available and can not be hidden. This increases the value of the system itself and affects trust increase. The platform is open to everyone and does not require anyone's permission to use it.
  • User safety - the Blockchain uses an advanced cryptographic technology, thus offering a safe environment for users. Modification of data in one block requires very large computational resources and also entails the necessity to change the data in all network nodes. This deters hackers from attempting attacks, making the Blockchain really safe.
  • System stability - since the information is being recorded in a public digital book and stored in many nodes, it is virtually impossible to modify the data. The information entered into a block becomes immutable. Thanks to this, the Blockchain is resistant to manipulation and guarantees system stability.

Cons of the Blockchain technology

  • WHigh cost - high transaction fees are one of the problems that the Blockchain is facing. The fees for processing transactions go up whenever demand increases. A big challenge for the Blockchain designers is to keep low transaction fees or completely remove them.
  • Use of energy - the Blockchain, to ensure user safety, relies heavily on encryption. This requires high computing power, and the resources needed to run the Blockchain use large amounts of electricity.
  • Efficiency - due to its decentralised nature, the Blockchain will always be slower than a centralised database. During the processing of transactions, the Blockchain performs standard operations, typical of a regular database. In addition, it is pitted against additional burdens, such as signature verification or a high number of calculations.

Blockchain - how to earn money and invest

The persons who have quickly recognised the potential of the Blockchain, and have invested in the purchase of Bitcoins, certainly do not regret it. But the Blockchain is more than just Bitcoin. So how can you earn money and invest in this technology?

Investing in cryptocurrencies

Although the Blockchain has a much wider scope of application than just cryptocurrencies, it was the first use of this technology. It is also the most direct way to make an investment. This type of operation is characterised by a fairly high degree of risk and uncertainty, but the return on the investment can be really big. The first Bitcoin rate was priced at $1 = 1309 BTC, and in December 2017 the value of one Bitcoin was already $15,000. While Bitcoin is a kind of sa phenomenon, and the purchase of cryptocurrencies does not have to automatically involve a large profit, it is worth to observe the situation on the cryptocurrency market and consider investment options.

Investing in startups using the Blockchain technology

The Blockchain is still a new and dynamically developing technology that - used in a proper way - can solve various problems. More and more startups are wondering how to use the power of the Blockchain technology for many different purposes. Technology companies are being developed in this direction, and the Blockchain developers are in demand on the labour market. It is worth to observe young developing companies. Investing in this type of organisations can bring a lot of profits, although it has a relatively high degree of uncertainty.

Build your own Blockchain-based app

If you are interested in developing an application in your company or establishing a technology company, the Blockchain technology opens the door to new possibilities. For example, thanks to smart contracts, both parties can implement legal agreements using a digital code, what - due to increased security - can be used in many industries. Thanks to the distributed ledger that allows you to store and track the transactions made, the Blockchain technology guarantees not only data security, but also accessibility. The ledger can be either private (for example in the case of internal banking systems) or public (for example in the case of public voting systems).

Of course, you do not need to be a Blockchain specialist if you want to use this type of solution in your business. More and more companies specialise in the Blockchain and offer assistance in implementing projects based on this technology. If you are wondering whether the Blockchain is what you need, it is worth to have a meeting with a technology partner who will help you choose the right solution. You can learn more about using the Blockchain technology in apps on our website.

To sum up, the key feature of the Blockchain is to eliminate the factor of human error, and rely on trust in science and technology, which are definitely less susceptible to errors. The Blockchain technology, when used appropriately, can solve many problems and be put to use in many industries.

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