Top 5 Questions Answered About Blockchain 101
It cannot be easy to navigate Web3 without the information called Blockchain 101. Words like “blockchain,” “NFT,” and “smart contract” are cryptic jargon that, to a novice, serve more to stifle curiosity than to pique it. The statistics reflect this scepticism: only 1 in 10 internet users of working age own cryptocurrency, the digital tokens required to interact with a large portion of the Web3 ecosystem.
Ironically, Web3, the most recent iteration of the internet, was built on the principles of equity and accessibility. The misconception that crypto and NFTs are only for the elite and unwelcoming “crypto bro” niche is a caricatured generalisation, so don’t let the detractors deceive you. No matter who you are (or how old you are), these tools are worth the learning curve because they were created with everyone in mind. They are also fast altering how the world functions, which is equally important. Although the blockchain, the technology that underpins everything that makes up Web3, is sophisticated, the ideas on which it is based are actually rather simple. So let’s get started.
Describe Blockchain 101
Consider the blockchain to be a particular form of internet infrastructure. A distributed digital database known as the blockchain allows for storing, moving, and tracking data globally without compromising openness. This information is organised into “blocks” that connect to create a chain-like record of information flow. The blockchain also makes it possible for apps and programmes to function, albeit in a different way than how the internet made it possible for services like Gmail, Spotify, or PayPal to exist.
There are numerous blockchains, each with its own internet ecosystem. One blockchain each for Ethereum, Solana, Tezos, Flow, and Polygon. Blockchains are frequently referred to as public ledgers because no single entity or group serves as a gatekeeper to the information they contain; all data transactions are visible to everyone.
The blockchain’s decentralised architecture produces a permanent and transparent record of data flow. This is one of the factors that make blockchain technology so popular. Its openness and transparency stand in stark contrast to Web2-based databases and systems run by Big Tech companies like Apple, Google, and Microsoft, which restrict access to and even have the ability to change user data behind closed doors. Let’s delve deep into Blockchain 101.
But why is the blockchain so democratic, exactly?
A network of users controls blockchain technologies. Web3 is maintained by a distributed network of devices (known as nodes) running a certain blockchain’s software (like Ethereum) all over the world rather than relying on a single centralised source like Amazon’s data centres.
A chain of bookkeeping is created by storing data transaction records in blocks that connect to one another, similar to how bitcoin or NFT transaction records are stored. The consensus of the majority of computers (nodes) in the network is required for a block and the transactions it contains to be officially and irrevocably added to the global ledger. In the network, the majority consensus approves or rejects transaction requests. No single person or organisation is able to change or obfuscate the information on the blockchain, which is one of the features that makes it so safe and decentralised.
But what if those nodes are compromised?
The fundamental tenet is that system users, not outside parties like banks or IT firms, validate potential transactions. The blockchain users who run a validating node pick up on my request to transmit X amount of cryptocurrency to a buddy, verify its authenticity, and the network subsequently accepts the transaction as a whole.
Thousands of people and organisations operating software all around the world serve as the Ethereum blockchain’s validators. Hackers would need to get control of more than half of those nodes, which is virtually impossible, in order to fake a transaction on the blockchain. Even if hackers take over a node to attempt a fake transaction (and steal someone’s priceless digital assets in the process), other nodes in the network won’t be able to detect it. As a result, the blockchain is less vulnerable to hacking the more users operating nodes there are in a system.
Okay, so how exactly does blockchain technology operate?
Therefore, we now understand that in this system, data blocks connect to create a transparent and distributed record-keeping chain. The next thing to understand is that such blocks include a number of items.
A cryptographic hash of the previous block is the first step. You’re not alone if that phrase makes you a bit queasy, but try not to let it terrify you. The study of secure communication methods that allow only the sender and receiver to understand the contents of a message is known as cryptography. And a hash is just a method of data compression. Therefore, a cryptographic hash combines the message-relaying capabilities of a hash with the security features of cryptography.
In order to guarantee that it hasn’t been tampered with, each block includes the cryptographic hash of the one before it. A block will additionally have a timestamp that dates both the transactions and the associated data it contains.
What are smart contracts? I’ve heard about them.
Smart contracts are blockchain-based applications that run when specific criteria are met. Since they are programmed with instructions that only activate under the appropriate conditions, these are typically used to automate the implementation of an agreement without the need for a third party. They are a Web3 standard.
The ERC-721 data standard for Ethereum, which is used to create NFTs, is one well-known smart contract.
All of it is amazing, so why even utilise blockchain?
Although blockchain technology is largely utilised to facilitate transactions involving cryptocurrencies and NFTs, it solely serves as the supporting framework for those activities. As a result, there are almost endless applications for that infrastructure. Applications and websites can run on the internet as we know it, but the internet itself is not constrained to any one programme or service. Similarly, businesses worldwide are investigating how to use blockchain technology to innovate and improve a wide range of industries and applications, including data storage, payment processing, digital identification, tracking carbon credits, distributing royalties, healthcare, and many more.
The technology that will power the next iteration of the internet is simply too valuable and thrilling to ignore, despite Web3’s challenging 2022. Expect various industries to undergo significant and minor changes as more organisations start to experiment with blockchain technology. Web3 is still in its infancy, which makes it all the more important to educate yourself on the technology before it finds broad use.