A 'block' is a record of new transactions. Once a block is completed, the block is added to the chain; hence, blockchain! Therefore, each transaction is verified and linked to the previous transaction which creates a chain of transactions.
The blockchain is public so all transactions are publicly visible to everyone. Blockchain leaders often use the google docs analogy to describe blockchain technology: when someone updates the google doc, everyone else can instantly see the change.
The blockchain is decentralized - doesn't rely on a single server or computer to function. Once a block is added to the blockchain, the data in a block cannot be changed without altering all the subsequent blocks which would require immense computing power to override the entire network of servers. Therefore, blockchain technology enables trust between individuals and organizations.
Blockchain is encrypted and require new transactions to be processed via solving very complicated math puzzles. The math puzzle difficulty increases as the blockchain grows. "Miners" compete to solve these puzzles and are rewarded with cryptocurrency. For example, if you "mine" bitcoin, then you will earn bitcoin.
private key - a password that grants access to an account
public key - an address that allows others to send an asset to an account or view how much is in the account
There's more to blockchain technology but now that you have some understanding, what are blockchain applications? (As you gain experience in the cryptoworld, you will notice that every coin falls into an application group. To avoid a long post, I've named just a few below).
Public Ledger
In this case, all transactions are documented and is publicly available on the blockchain. Anyone can know how much crypto was transferred from one account to another - but may not know who owns each account.
Instead of using a bank or payment processing platform, the blockchain will verify all transactions and eliminate the middle man. This also enables faster and hassle-free transfer of cryptocurrency across the world and avoid third parties (banks and potentially governments).
Example: You agree to sell your car for 5k to a buyer and the transaction is approved and recorded publicly on the blockchain. If the buyer comes back to you a few months later and falsely claims that you agreed to sell for 2k, you can point to the blockchain for the agreed upon transaction of 5k - avoiding "he said, she said."
Smart Contracts
Contracts can be programmed to be executed when specific conditions are full-filled.
Example: Friends reruns. Jennifer Aniston receives periodic residuals (fee for every time a Friends episode airs on TV). For added context, there are 200+ episodes spread over 10 seasons. Each Friends rerun produces a different residual amount based on her contract for the specific episode and season. A smart contract would quickly send the exact amount of money to her instead of having a team of accountants manually calculate how much she should receive. This would save time and ensure accuracy by avoiding human errors.
Identity Management (IDM)
IDM on a blockchain will allow you to better prove who you and others are. A secure identity is very important for peer-to-peer (P2P) interactions where good reputation and trust is key for conducting online transactions.
An example is the SelfKey (KEY) platform.
Supply Chain Audit
This application would confirm if a company's advertising claims are legit. Trust comes from blockchain technology recording the date stamp, time stamp, and location that correspond to a product.
Example: Using blockchain technology, you can audit if the apple your purchased was from an organic farm (location), and you can confirm that the farm did not purchase pesticides in the past 5 years (time and date stamp). Thus, you can gain reasonable assurance that you consumed an organic apple.
Internet of Things (IoT)
IoT is a system of electronic devices, machines, and living things (i.e., dog, person) that digests data, improves process efficiency, and transfers data without human interaction. Applications range from predictive maintenance (i.e., low tire pressure) to automated data analytics and adjustments.
For example, you're trying to bake a lasagna for your friends and want to ensure that it is ready to eat once they arrive. GPS sensors will notify your oven of your friends' ETA, the oven will control the cooking temperature and time, and the oven will ensure the lasagna is at the perfect temperature when you and your friends are ready to eat.
This is fascinating! The blockchain improves trust and can automate and improve a process with limited to no human interaction.
As you research and learn about cryptocurrency projects, try to understand how they use blockchain technology and how it can improve a current process.
What other blockchain applications can you think of? Maybe you have a million dollar idea! Join the picnic!
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