03

HOW TO HARNESS THE POWER OF THE BLOCKCHAIN TECHNOLOGY

03

HOW TO HARNESS THE POWER OF THE BLOCKCHAIN TECHNOLOGY

In parts 1 and 2, we mentioned something called “blockchain technology”, which is a critical part of how cryptocurrencies work, and how they are able to so quickly and anonymously secure transactions.

But what exactly is a “blockchain”? How does it work to make these currencies decentralized?

blockchain technology

WHAT IS A BLOCKCHAIN?

blockchain technology

WHAT IS A BLOCKCHAIN?

Before we can dive into how to power this platform/database that Bitcoin, Ethereum, and cryptocurrencies in general are built on, we need to understand what it is and isn’t.

The blockchain can be looked at like this...

blockchain technology

...Where a huge conglomeration of computers, technology, or entities dedicate power, energy, and time to the chain. This results in the creation and verification of “blocks” of data.

Similar to building a house of bricks, each brick goes under the previous brick making it possible to show how the building was built from the bottom up. The blockchain lets you see which bricks were placed first, where they were placed, and by whom, so that the system is secure and is continually being built bigger and stronger.

That’s part of the power.

A consensus and reported history of the what has been done, added to, and expanded upon is in the blockchain.

Instead of having a situation like the Equifax hack where the major shareholders sold shares before going public, you would be able to see this transaction real time and most likely understand what was happening.

As Don Tapscott of Blockchain Revolution says “The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

In other words, by layering on the bricks and allowing them to intercommunicate as a smart system, the blockchain records a ledger for everything that happens to it.

This makes it antifragile in the sense that it can learn and adapt, and help us to learn and adapt as well.

Before we continue, we want to take an excerpt from the book “Ethereum” by Henning Diedrich to give more insight to what the blockchain is and isn’t:

“ A Blockchain is understood as something that

  • Helps make data 100% trustworthy
  • Facilitates trust-less transactions
  • Forces data to be freely accessible/visible
  • Allows to anonymously buy drugs online
  • Leaves traces for every transaction
  • Can be used to manage identities
  • Prevents honest errors
  • Prevents errors from being fixed
  • Prevents anyone from changing data ex-post
  • Empowers miners to change history
  • Can prove a certain state at a given time
  • Cannot guarentee for data to ever be final
  • Creates money from nothing
  • Can be used to mirror real assets
  • Will make banks obsolete
  • Could be a productivity boost for banks
  • May end hyper-capitalism
  • Hastens the commodification of everything
  • Will help empower the developing world
  • Will help to bank the unbanked
  • Can help to end tax evasion and money laundering
  • Is all about distribution
  • Is stuck with a singleton model
  • Is all about decentralization
  • Is the ultimate centralization of perspective

All of the above is somewhat correct, including the apparent conditions. Some of it will change. Some points are a distraction from what the actual value is. “

Now, we know that is a lot of options to look at and ponder when it comes to what is and what isn’t a Blockchain.

That’s why we want to give you the simplest ways to think about and understand a blockchain without the technical experience - just using a model of thinking.

blockchain technology

TWO MAIN FUNCTIONS OF A BLOCKCHAIN

blockchain technology

TWO MAIN FUNCTIONS OF A BLOCKCHAIN

Function 1: A blockchain itself is decentralized and mirrored by every device on it.

When we briefly mentioned the ability to “mine” Bitcoin, what is meant is that the computer itself has a full record of Bitcoin’s blockchain (creating a mirror) and is building on top of that foundation.

It is helping to create the evidence of that brick being laid, and once that block is completed it is put into the history forever.

This mirroring helps to prevent the ability to edit the blockchain by one person without it having to replicated everywhere.

It’s a simple and easy way to ensure honesty in transactions, although that typically falls on function #2...

Function 2: A Transaction Ledger Based With Cryptography

I know this is a bit of technical jargon but it’s required in order to understand the blockchain and how it works.

Cryptography is the root keyword of the prefix of cryptocurrency, and is the coding mechanism that keeps cryptocurrency safe and operating on its own.

Transaction ledgers are essentially contracts (some call them smart contracts) recorded on the blockchain with a specific purpose. This ledger then is recorded and shown as having been completed, storing it in the blockchain database.

In this “database” you can find records of every other ledger, agreement, and so on, that the blockchain has experienced.

These transaction ledgers are stored in the blocks, hence making more and more blocks building that building one block at time.

However, these transaction ledgers record transactions, not necessarily how much Bitcoin you have. Instead its recording looks more like:

  • The amount of X being sent
  • The sender’s account number
  • The receiving account number

It’s a very simplistic ledger (for Bitcoin at least) and one that can and is being expanded on, especially with a coin like Ethereum.

However, the recording in the database (blockchain) gets a lot more in-depth as time goes showing transfers, deletes, edits, updates, so on and so forth.

It is essentially creating a complete record of everything that goes in and is changed inside of it.

Using the building of the house analogy, you not only know which brick went first but where it was bought, where it was put, how it interrelates to the other bricks put down, which bricks were thrown out, which ones needed to be replaced, and so on and so forth.

Diving into the technical side can get complicated and is beyond this article.

Check out Blockgeeks’ fantastic guide at Blockgeeks.com/blockchain

blockchain technology

A REAL WORLD EXAMPLE - HOW BITCOIN USES THE BLOCKCHAIN

blockchain technology

A REAL WORLD EXAMPLE - HOW BITCOIN USES THE BLOCKCHAIN

Bitcoin, as we discussed, was one of the birth children and first test cases for the Blockchain.

In fact, when Vitalik Buteryin, Ethereum’s founder, realized that there was so much more that could be done on the blockchain than what Bitcoin was using, he created Ethereum.

Bitcoin is the poster child for blockchain technology and ledgers that allow for quick, monetary transfer without central control.

Bitcoin uses the blockchain in this way (which will be oversimplified):

  • John wants to send 23 Bitcoin to Fred
  • John’s wallet ID is: 1A4foti2
  • Freds wallet ID is: 369DAMNSOFINE
  • A virtual ledger is made between them for the transfer of 23 bitcoin, whether for a good or just to send it for nothing in return (ie. it is recorded)
  • Each computer that is mining within the system helps to verify the transaction and see that the ledger is executed by verifying the bits of information that pass through it
  • The blockchain saves this, stores it in a block, and records all necessary data around the transaction
  • Any updates, changes, deletions, etc. are then recorded
  • Fred now has 23 Bitcoin

Of course this is for simplicity sake, but it is an example of the blockchain and the way that it works.

By utilizing these principles, there are thousands of possibilities as to what can truly happen and be created on the blockchain, which is why Vitalik is helping to pave the way with Ethereum and the power being Dapps and DAOs.

blockchain technology

THE ENDLESS POSSIBILITIES OF BLOCKCHAIN TECHNOLOGY

blockchain technology

THE ENDLESS POSSIBILITIES OF BLOCKCHAIN TECHNOLOGY

From Deloitte to Visa, companies are taking notice of blockchain technology and how to use it for their business.

However, companies adapting the structure is just the beginning - using the blockchain to create and pave their way in the world is the next generation of companies.

Here some amazing companies just starting using blockchain technology:

  • Storj is a company that pays users to rent their extra disk space using blockchain technology to defeat the need for a centralized authority
  • Monegraph helps to ensure that musicians, photographers, designers and other creative creators have a digital watermark/cryptography intrinsic to their creation to get paid when it is used
  • Powerledger is helping create a blockchain based solar energy company where users can share their energy and sell it for certain amounts in Australia
  • Stellar enables customers to transfer, save, invest, borrow, and lend money from anywhere on earth. From Africa to Cambodia, people with no bank accounts will be able to send money, receive it, and save it for pennies
  • Substratum is working on creating a decentralized internet where there isn’t a need for VPNs because your browser can’t be traced, making it almost impossible for governments to punish or stop people from seeing websites and media

Currently, all of these companies are actively building infrastructure and starting to operate on the blockchain (many of these exist on the Ethereum blockchain as ERC-20 tokens.)

When it comes to honesty, truth, and value within the market, blockchain is paving the way to a new era.

blockchain technology

HOW PEOPLE ARE MAKING MONEY WITH BLOCKCHAIN TECHNOLOGY

blockchain technology

HOW PEOPLE ARE MAKING MONEY WITH BLOCKCHAIN TECHNOLOGY

This leads us to the last section of part of 3 of this series.

When most people think of cryptocurrency, blockchain, and the like, there seems to be an immediate gravitation to money.

It’s the intrinsic messaging of cryptocurrency that gravitates people toward the monetary, not necessarily the technology side of it, which is not necessarily a bad thing.

In order for this to grow, people need to gain interest and dive in.

It’s the whole reason the next part of this series is how people are making money with cryptocurrency, and is one of the main lessons we will be teaching you.

As for blockchain, from ledger auditing, whitepaper auditing, and testing site infrastructure many companies are starting to use their skills on the blockchain to ascertain value both in Fiat (USD) and cryptocurrency.

Otherwise, there’s a world out there of buying, selling, trading, and holding cryptocurrencies which anyone can dive into.

The next part of this series will cover how most people are making money on cryptocurrency and what you can do to take part.

---> Part 4 : How People Are Making Boatloads of Money with Cryptocurrency