Decoding Blockchain: Everything You Need to Know About the Technology Shaping the Future of the Web

After the Bitcoin price surge in 2017, everyone heard about cryptocurrency. The world’s media were trumpeting the new technology holding unparalleled transformative potential. Although the words Bitcoin, Cryptocurrency, and Blockchain have been at the ear for several years, few people have taken the time to examine the terms in detail.

What exactly is behind one of the most impactful modern technologies? How does blockchain work? What opportunities does it offer? There is no big deal if you have asked yourself these questions about the blockchain recently. It’s never too late to learn. You’ll find all the basics about blockchain technology below.

Brief History of Blockchain

Let’s take a quick tour of blockchain history to see the milestones leading the technology to its current state.

1979–2004

The origins of blockchain date back to the late 20th century, when such pioneers as Ralph Merkle (Merkle tree), David Chaum (Digital Cash), Stuart Harber (timestamping), Adam Black (Hashcash), Cynthia Dwork (Proof-of-Work), and Hal Finney (non-fungible tokens) introduced the scientific foundation for the blockchain technology.

2008–2009

An anonymous individual or a team under the pseudonym Satoshi Nakamoto published the Bitcoin whitepaper, introducing the blockchain concept to a broader public. Nakamoto built the first Bitcoin software based on the discoveries from previous decades.

In 2009, Nakamoto mined the first (Genesis) bitcoin block that contained 50 coins. Then, the legendary figure released Bitcoin v.0.1 on SourceForge web service as open-source software.

2010–2017

During these years, the interest in blockchain technology solidified.

• Laszlo Hayencz made the first Bitcoin purchase, buying two pizzas for 10’000 Bitcoins;
• Thailand and China banned Bitcoin and other cryptocurrencies;
• Vitalik Buterin published the whitepaper of Ethereum, the first decentralized application platform;
• Financial institutions and other industries started to explore blockchain technology potential;
• These events resulted in a memorable Bitcoin price surge in 2017 when the cryptocurrency reached the $20000 per coin bar. At the time, 15% of banks started to use blockchain technology to some extent.

2018–2023

This period of blockchain technology development started with the bitcoin value drop. Later, some big tech and Fortune 500 companies started to adopt blockchain technology which sparked a new, bigger, wave of interest.

• Amazon launched Amazon Managed Blockchain for building resilient Web 3 applications;
• Deloitte research revealed that 40% of business representatives incorporated blockchain technologies into production. Another 55% viewed it as a strategic priority;
• In 2021, Bitcoin reached another all-time high with $68,789 per coin while an NFT (Non-Fungible Token) artwork was sold for $68 million worth in Ethereum;
• The pandemic and the threat of economic recession caused the crypto market to drop;
• Governments and enterprises continued to implement blockchain for voting, financial transactions, IoT, vaccine distribution, cybersecurity, smart contracts, supply chain management, entertainment, sports, transportation, and other processes.

What is Blockchain Technology Now?

Blockchain is a database or ledger that stores the transaction data as encrypted blocks. In contrast to a regular database, blockchain storage distributes the transaction data across multiple computers called nodes.

Each node plays a part in automatic transaction validation by leveraging computing powers generated by the participating computers (this is how PoW works). When transactions are confirmed, the system adds them to blocks that are connected with unique hash codes. Each block is marked by a hash (an alfa-numeric code) which is contained in a previous and a following block, forming a chain of blocks or a blockchain.

Once a block is committed to a blockchain, it is registered throughout every node (computer) of the system. Thus, the block of a blockchain cannot be altered unless you change it in every node supporting the blockchain ecosystem. Simply put, a hacker will need to exceed the whole computational power behind a blockchain to alter the hash codes of the blocks, which is impossible.

Features and Benefits of Blockchain Technology

Immutability

You cannot change the data stored on the blockchain unless the system provisions it. The feature makes blockchain networks resilient to various types of cyber attacks.

Decentralization

There’s no central authority controlling a blockchain network. Blockchain technology is governed by the multiple nodes (computers) supporting the system.

Distributed network

A blockchain distributes data among all the devices running the blockchain software, protecting data from fraud.

Transparency

Blockchain data is transparent, meaning you can look up any transaction accessing the ecosystem via blockchain software.

Consensus

Consensus is the blockchain’s decision-making algorithm that helps to make quick and unbiased decisions. Active computers or nodes leverage the algorithm to reach an agreement on any action on the blockchain.

The Impact of Blockchain Technology on Global Technological Development and Its Use Cases

As blockchain earned fame due to Bitcoin, an average Joe can see only one application of the technology — cryptocurrency. What an underestimation! Bitcoin is only the tip of the blockchain technology iceberg. There are many more use cases for blockchain now, and there will be, considering the wild blockchain expansion and adoption in various industries. So, what does blockchain technology bring to the technological table and how does it set the standards for future technological advancements?

Decentralized Finance (DeFi) and Cryptocurrency

Blockchain technology provides an ideal environment for P2P trading and cryptocurrency transactions. Above that, the DeFi concept based on smart contracts brings a new level of transparency and operational efficacy.

Web 3 and Decentralized Apps Development

Decentralized apps are applications built with blockchain technology that help to integrate new DeFi solutions. Also, blockchain with its decentralized apps (dApps) is the core of the next generation of the Web. Web 3 is a semantic Internet of the future where:

• Users have more control over their info;
• AI/ML automatically manages the data;
• Web-based businesses operate efficiently and transparently;
• Companies and individuals have better monetization and sales opportunities;

Smart Contracts and NFTs

Smart contracts are the algorithms written on the blockchain that can execute automatically and interact with software outside the blockchain network. Smart contracts can execute business logic in response to different events. Also, blockchain-powered contracts register the actions between two parties without a trusted intermediary in the form of non-fungible tokens or NFTs. The tokens can be related to any digital or tangible object to prove ownership over them.

Smart contracts and NFTs create a plethora of opportunities for the future of sales, entertainment, logistics, real estate, law, and other fields of human endeavor.

Internet of Things Data Management

Blockchain paired with AI/ML is an ideal system to securely store, manage, and analyze IoT data in real-time. The advantages blockchain presents are implemented for supply chain inventory, asset traceability, digital twins, fleet management, and wireless network management.

Cybersecurity

The blockchain’s encryption mechanisms and distributed network allow individuals and businesses to use the technology for authentication, secure data management, communication, and ownership verification. Blockchain meets the basic cybersecurity requirements, including confidentiality, integrity, and availability.

Key Takeaways

• Blockchain is the distributed ledger technology that uses encryption to store and manage data;
• Blockchain is not a cryptocurrency but a sophisticated technology. The technology has its roots in mathematics and computer science;
• You can use blockchain in various ways apart from cryptocurrency. Its applications include cybersecurity, IoT data management, decentralized apps (dApps) development, deals execution, and decentralized finance;
• Blockchain provides the necessary features to shift to the next evolutionary stage of the Internet called Web 3.