What is Blockchain Technology? Ultimate Guide

Sections

1. Blockchain 101

2. How does blockchain work?

3. What is blockchain used for?

Section 1 - Blockchain 101

Content

• What is blockchain?

• How are the blocks connected?

• Blockchains and decentralization

• The Problem of the Byzantine Generals

• Why do blockchains need to be decentralized?

• What is peer-to-peer network?

• What are the nodes of a blockchain?

• Public vs. public blockchains private blockchains

• How do transactions work?

• How to make Bitcoin transactions

  • How to withdraw bitcoins from Binance

  • How to send bitcoins from Trust Wallet to Electrum

• Who invented blockchain technology?

• Pros and cons of blockchain technology

  • Pros

  • Contras

What is blockchain?

A blockchain is a special type of database. You may have also heard of distributed ledger technology (DLT) – in many cases, both concepts refer to the same thing.

A blockchain has certain unique properties. There are rules that determine how data should be added, and once it has been stored, it is virtually impossible to modify or delete it.

Data is added, over time, into structures called blocks. Each block is built on top of the previous one and includes a portion of information that links it to it. Looking at the most recent block, we can verify that it was created after the previous one. So if we continue down the “chain”, we will reach our first block – known as the genesis block.

Using an analogy, imagine you have a spreadsheet with two columns. In the first cell of the first column, you enter any information you want to keep.

The data in this first cell will be converted into a two-letter identifier, which will then be used as part of the next input. In our example, the two-letter identifier KP should be used to fill the next cell in the second row (defKP). This means that if you modify the data in the first input (abcAA), you will have a different letter combination in all the remaining cells.

A database in which each entry is linked to the last one.

If we now look at row 4, we see that our most recent identifier is TH. Remember how we mentioned that you can't go back and delete or delete entries? The reason is that it would be easy for anyone to notice that this has happened, and your attempt to change would simply be ignored.

Imagine that you change the data in the first cell – you would get a different identifier, which means that your second block would have different data, resulting in a different identifier in row 2, and so on. TH is, in essence, a product of all the information that precedes it.

How are the blocks connected?

The above discussion – with our two-letter identifiers – is a simple analogy of the way a blockchain employs hash functions. Hashing is the glue that holds blocks together. It consists of taking data of any size to produce an output (a hash) that will always have the same length.

The hashes used in blockchains are interesting, because the probability of finding two pieces of information that generate exactly the same output is astronomically low. As with our identifiers above, any slight modification to our input data will result in a completely different output.

We can illustrate this with SHA256, a function used extensively in Bitcoin. As you can see, even the differential use of capital letters is enough to completely alter the output.

The fact that there are no known "collisions" (i.e. two different inputs giving the same output) for SHA256 is incredibly valuable in the context of blockchains. It means that each block can point to the one before it by including its hash, and any attempt to edit old blocks will be immediately apparent.

Each block contains a fingerprint of the previous one.

Blockchains and decentralization

We have explained the basic structure of a blockchain. But when you hear people talk about blockchain technology, they're probably not referring to the database itself, but rather the ecosystem built around it.

As independent data structures, blockchains are only useful for very specific applications. Where things get interesting is when we use them as a tool for strangers to coordinate with each other. Combined with other technologies and some game theory, a blockchain can act as a distributed ledger that no one controls.

What this means is that no actor has the power to edit the input around the system's rules (more on the rules shortly). In this sense, we could argue that everyone is in possession of the ledger simultaneously: participants agree on its appearance at all times.

The Problem of the Byzantine Generals

The real challenge that stands in the way of a system like the one described above is what we know as the Byzantine Generals Problem. Conceived in the 1980s, it describes a dilemma in which isolated participants must communicate to coordinate their actions. The dilemma in question involves a series of army generals surrounding a city, while deciding whether to attack it. Generals can only communicate through a messenger.

Each one must decide whether to attack or retreat. It won't matter if they do one thing or the other, as long as all the generals share the same decision. If they decide to attack, they will only be successful if they move in unison. So how can we ensure they achieve this?

Of course, they could communicate through the messenger. But what would happen if the messenger is intercepted with a message that says “we will attack at dawn,” and said message is replaced by another that says “we will attack tonight”? What if one of the generals is a malicious actor who deliberately deceives the others to ensure their defeat?

Generals succeed when everyone attacks (left). When some retreat while others attack, they will be defeated (right).

We need a strategy by which consensus can be reached, even in the event that participants turn out to be malicious or messages are intercepted. Failing to maintain a database is not a life-or-death situation equivalent to attacking a city without reinforcements, but the same principle holds. If there is no one in charge of overseeing the blockchain and giving users “correct” information, then it will be the users who must be able to communicate with each other.

To overcome the potential failure of one (or several) users, the blockchain mechanisms must have been carefully designed to be resistant to such setbacks. We call systems capable of achieving this Byzantine Fault Tolerant. As we will see shortly, consensus algorithms are used to enforce firm rules.

Why do blockchains need to be decentralized?

One could, of course, operate a blockchain alone. But you would end up having a clunky database, compared to other superior alternatives. And its true potential can only be harnessed in a decentralized environment – ​​that is, one in which there is equality among all users. In this way, the blockchain cannot be eliminated or maliciously dominated. It will be a single source of truth that will be visible to all.

What is peer-to-peer network?

The peer-to-peer (P2P) network is our user layer (or the general layer, in our previous example). There is no administrator, so instead of connecting to a central server every time someone wants to exchange information with another user, what they do is send it directly to their peers.

Let's look at the graph below. On the left, A needs to send his message through the server to get it to F. On the right side, however, the two are connected without an intermediary.

A centralized network (left) vs. a decentralized network (right).

Typically, the server stores all the information that users need. When you access Binance Academy, you are asking their servers to provide you with all their items. If the web page is "offline", you will not be able to see them. However, if you downloaded all the content, you could upload it to your computer without needing to query Binance Academy.

Basically, that's what each peer on the network does with the blockchain: they store the entire database on their computer. If someone leaves the network, users who remain on it will still be able to access the blockchain and share information with each other. When a new block is added to the chain, the data is propagated across the network so that everyone can update their own copy of the ledger.

Don't forget to read our Introduction to Peer-to-Peer Networks for a more detailed analysis of this type of networks.

What are the nodes of a blockchain?

The nodes are, simply, the machines that are connected to the network – they are responsible for storing copies of the blockchain and sharing information with the rest of the units. Users do not need to manually manage these processes. Generally, all they need to do is download and run the blockchain software, and the rest will work automatically.

Above we described what a node is in its purest sense, but the definition can also include other users who interact with the network in some way. In the case of cryptocurrencies, for example, a simple wallet-type app on your phone would be what we call a light node.

Public vs. Public Blockchains private blockchains

As you may know, Bitcoin laid the foundation for the blockchain industry to become what it is today. As soon as Bitcoin began to prove itself as a legitimate financial asset, innovative players began to think about the potential of the underlying technology for other fields. This has led to the exploration of blockchain for countless use cases outside of finance.

Bitcoin is what we call a “public blockchain.” This means that anyone can view the transactions it contains, and all that is needed to join is an Internet connection and the necessary software. Because there are no other requirements to participate, we can refer to these types of environments as permissionless.

In contrast, there is also another type of blockchain that we call "private blockchains". These systems establish rules that determine who can view and interact with the blockchain. For this reason, we refer to them as permitted environments. Although private blockchains may seem redundant at first, they present certain important applications – mainly in corporate scenarios.

If you want to know more about the topic, take a look at Private, Public and Consortium Blockchains - How are they different?

Are you thinking about getting started in the world of cryptocurrencies? Buy Bitcoin on Binance!

How do transactions work?

If Alice wants to pay Bob via bank transfer, she will need to notify the bank. For simplicity, let's say that both parties use the same bank. The latter will check that Alice has the necessary funds to carry out the transaction, before updating its database (that is, writing down -50$ to Alice and +50$ to Bob).

It is not something very different from what happens in a blockchain. After all, it is also a database. The main difference is that there is no single actor that is in charge of the controls and updates the balances, but rather all the nodes must do so.

If Alice wants to send five bitcoins to Bob, she will broadcast a message announcing it to the network. This will not be immediately added to the blockchain – the nodes will see it, but other actions will need to be completed for the transaction to be confirmed. See How are blocks added to the blockchain?

Once the transaction is added to the blockchain, all nodes will be able to see that it has been executed. Next, what they will do is update their copy of the blockchain to reflect this. From then on, Alice will not be able to send those same five units to Carol (which would be committing a "double spend"), because the network will know that she already spent them in a previous transaction.

There are no concepts of "username" and "password" – public key cryptography is used to prove ownership of funds. So first, in order to receive funds, Bob will need to generate a private key. This is simply a very long random number, which is virtually impossible for anyone to guess - even if they have hundreds of years to try. But if Bob reveals his private key to anyone, they can act as the owner of his funds (and therefore can spend them). So it's important that you keep it a secret.

What Bob can do, however, is derive a public key from his private key. You can then give this public key to anyone, because it is virtually impossible for anyone to reverse engineer the private key from it. In most cases, Bob will perform another operation on the public key (such as hashing it) to obtain a public address.

Bob will give Alice the public address so she knows where to send the funds. She will generate a transaction that says pay these funds to this public address. Next, to prove to the network that she is not trying to spend funds that are not hers, Alice will generate a digital signature using her own private key. Anyone can get hold of Alice's signed message and compare it to her public key to determine with certainty whether she has the right to send those funds to Bob.

How to make Bitcoin transactions

To illustrate how you can transact Bitcoin, let's imagine two scenarios. In the first you prepare to withdraw bitcoins from Binance, while in the second you propose to send funds from your TrustWallet to your Electrum wallet.

How to withdraw bitcoins from Binance

1. Log in to your Binance account. If you don't have bitcoins yet, check out our Bitcoin guide on how to buy them.

2. Hover over "Wallet" and select "Spot Wallet."

3. Click "Withdraw" in the left sidebar.

4. Choose the currency you want to withdraw – in this case, BTC.

5. Copy the address where you want to send the bitcoins you withdraw, and paste it into Recipient's BTC Address.

6. Specify the amount you want to withdraw.

7. Click on "Send".

8. You will receive a confirmation email shortly after. Please check carefully that the address is correct. If it is, confirm the transaction in the same email.

9. Wait for your transaction to go through the blockchain. You can monitor its status in the Deposit and Withdrawal History tab or using a block explorer.

How to send bitcoins from Trust Wallet to Electrum

In this example, we will send some bitcoins from Trust Wallet to Electrum.

1. Open the Trust Wallet app.

2. Click on your Bitcoin account.

3. Click on "Send".

4. Open your Electrum wallet.

5. Click on the Electrum "Receive" tab and copy the address.

Alternatively, you can return to Trust Wallet and tap the [–] icon to scan the QR code pointing to your Electrum address.

6. Paste your Bitcoin address into “Recipient Address” in Trust Wallet.

7. Specify the quantity.

8. If everything looks correct, confirm the transaction.

9. You're done! Wait for your transaction to be confirmed on the blockchain. You can monitor its status by entering your address in a block explorer.

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Who invented blockchain technology?

Blockchain technology was formalized in 2009 with the launch of Bitcoin – the first and most popular blockchain. However, its creator pseudonym, Satoshi Nakamoto, would be inspired by previous technologies and proposals.

Blockchains make extensive use of hash functions and cryptography – elements that, when Bitcoin was launched, had already existed for decades. Interestingly, the origin of the blockchain structure can be traced back to the early 1990s, however, at that time it was merely used to "timestamping" documents - so that they could not be altered later.

To learn more about the topic, see History of Blockchain.

Pros and cons of blockchain technology

Blockchains that are properly designed solve a problem that affects stakeholders in various sectors - from finance to agriculture. A distributed network has numerous advantages over the traditional client-server model, but it also has certain drawbacks.

Pros

One of the immediate benefits noted in the Bitcoin white paper is the possibility of making payments without the participation of an intermediary. Subsequent blockchains have gone a step further, allowing users to send all types of information. Eliminating counterparties translates into lower risk for the users involved, and results in lower commissions - because there is no middleman taking the cut.

As we mentioned before, a public blockchain network is also “permissionless” – there is no barrier to entry, because no one is in charge of it. If a potential user can connect to the Internet, then they will be able to interact with other peers on the network.

Many will argue that the most important quality of blockchains is that they have a high degree of censorship resistance. To disable a centralized service, all a malicious actor would need to do is target a server. But in a peer-to-peer network, each node acts as a server on its own.

A system like Bitcoin has more than 10,000 visible nodes spread around the world, making it virtually impossible for even a well-resourced attacker to compromise the network. It is necessary to note that there are also many hidden nodes - which are not visible to the network at large.

These are some of the general advantages. There are many specific use cases that blockchains can satisfy, as you will see in What is a blockchain used for?

Contras

Blockchains are not a silver bullet for all problems. Since they are optimized for their strengths, referred to in the previous section, they end up having deficiencies in other areas. The most obvious obstacle to mass adoption of blockchains is the fact that they don't scale very well.

This is valid for any distributed network. Since all participants must stay synchronized, new information cannot be added too quickly, otherwise the nodes will not be able to keep up. Therefore, developers tend to deliberately limit the speed at which the blockchain can be updated, to ensure that the system remains decentralized.

For users of a network, this can manifest itself in the form of long waiting periods if too many people are trying to make transactions. Blocks can only hold a certain amount of data and are not added to the chain instantly. If there are more transactions than a block can hold, the additional ones will have to wait for the next block.

Another possible disadvantage of decentralized blockchain systems is that they cannot be easily updated. If you're creating your own software, you can add new functionality as you see fit - you don't need to collaborate with others or ask their permission to make changes.

In an environment with millions of potential users, making changes is considerably more difficult. You will be able to modify certain parameters of your node software, but eventually you will end up isolated from the network. If the modified software is incompatible with other nodes, they will detect it and reject interaction with it.

Let's say you want to change the rule that determines the maximum block size (from 1MB to 2MB). You could try to send said block to the nodes you are connected to, but they have a rule that says “do not accept blocks larger than 1MB”. If they receive anything larger, they will not include it in their copy of the blockchain.

The only way to implement changes is to get the majority of the ecosystem to accept them. In the case of major blockchains, it can take months – or even years – of intense forum discussions before changes can be coordinated. To learn more about this topic, see Hard Forks and Soft Forks.

Section 2 - How does the blockchain work?

Content

• How are blocks added to the blockchain?

• Mining (Proof of Work)

  • Pros de Proof of Work

  • Contras de Proof of Work

• Staking (Proof of Stake)

  • Pros de Proof of Stake

  • Contras de Proof of Stake

• Other consensus algorithms

• Can I reverse blockchain transactions?

• What is blockchain scalability?

• Why does blockchain need to scale?

• What is a blockchain fork?

  • Soft forks

  • Hard forks

How are blocks added to the blockchain?

Up to this point we have covered many topics. We know that the nodes are interconnected and that they store copies of the blockchain. Also, they transmit information about transactions and new blocks to each other. We have already analyzed what nodes are, but you may be wondering: how are new blocks added to the blockchain?

There is no single source that tells users what to do. Since all nodes have equal power, there needs to be a mechanism to fairly decide who can add blocks to the blockchain. We need a system that makes it expensive for users to cheat, but rewards them when they act honestly. Any rational user will want to act in a way that is economically beneficial.

Because the network is permissionless, block creation must be accessible to anyone. Protocols often ensure this by requiring the user to put some “skin in the game”: they must put their own money at risk. Doing so will allow them to participate in the creation of blocks, and if they generate a valid one, they will be paid a reward.

However, if they try to cheat, the rest of the network will know. Any stake they have submitted will be lost. We call these mechanisms consensus algorithms because they allow network participants to reach a consensus on which block should be added next.

Mining (Proof of Work)

Mining is by far the most widely used consensus algorithm. In mining, the Proof of Work (PoW) algorithm is used. This involves users sacrificing computing power to try to solve a puzzle set by the protocol.

The puzzle requires users to control the transactions and other information included in the block. But for the hash to be considered valid, it must be below a certain number. Since there is no way to predict what the given result will be, miners must continue analyzing slightly modified data until they find a valid solution.

Obviously, repeated hashing data is computationally expensive. In Proof of Work blockchains, the “stake” that users submit is the money invested in the mining computers and the electricity used to power them. They do this in the hope of getting a block reward.

Remember how we said earlier that it's virtually impossible to reverse a hash, but it's easy to verify? When a miner sends a new block to the rest of the network, all other nodes use it as input to a hash function. They simply need to run it once to verify that the block is valid according to the rules of the blockchain. If not, the miner does not receive the reward and will have wasted electricity for nothing.

The first Proof of Work blockchain was Bitcoin. Since its creation, many other blockchains have adopted the PoW mechanism.

Advantages of Proof of Work

• Tried and tested: To date, Proof of Work is the most mature consensus algorithm and has secured hundreds of billions of dollars' worth.

• Permissionless: Anyone can join the mining competition or simply run a validator node.

• Decentralization: Miners compete with each other to produce blocks, meaning that hashing power is never controlled by a single party.

Contras de Proof of work

• Wasteful: Mining consumes a huge amount of electricity.

• Increasingly high barriers to entry: As more miners join the network, protocols increase the difficulty of the mining puzzle. To remain competitive, users must invest in better equipment. This could cost many miners.

• 51% attacks: Although mining promotes decentralization, there is a chance that one miner will acquire the majority of the hashing power. If they do, they can theoretically undo transactions and undermine the security of the blockchain.

Staking (Proof of Stake)

In Proof of Work systems, what incentivizes you to act honestly is the money you have paid for mining computers and electricity. You won't get a return on your investment if you don't mine blocks correctly.

With Proof of Stake (PoS), there is no external cost. Instead of miners, we have validators who propose (or "forge") blocks. They can use a regular computer to generate new blocks, but they must put a significant portion of their funds at stake to obtain the privilege. Staking is done with a predefined amount of the blockchain's native cryptocurrency, according to the rules of each protocol.

Different implementations have different variations, but once a validator stakes its units, the protocol can randomly select them to announce the next block. By doing it correctly, they will receive a reward. Alternatively, there may be multiple validators who agree to the next block, and a reward is distributed proportionally to the stake each has submitted.

"Pure" PoS blockchains are less common than DPoS (Delegated Proof of Stake), which require users to vote on nodes (witnesses) to validate blocks for the entire network.

Ethereum, the leading smart contract blockchain, will soon transition to Proof of Stake as it migrates to ETH 2.0.

Advantages of Proof of Stake

• Environmentally friendly: The carbon footprint of PoS is a fraction of PoW mining. Staking eliminates the need for resource-intensive hashing operations.

• Faster transactions: Since there is no need to spend additional computing power on arbitrary puzzles set by the protocol, some PoS proponents argue that it could increase transaction throughput.

• Staking rewards and interest: Instead of going to miners, rewards for securing the network are paid directly to token holders. In some cases, PoS allows users to earn passive income in the form of airdrops or interest, simply by staking their funds.

Contras de Proof of Stake

• Relatively untested: PoS protocols have not yet been tested on a large scale. There may be some undiscovered vulnerabilities in its implementation or cryptoeconomics.

• Plutocracy: There are concerns that PoS encourages a “rich gets richer” ecosystem, as validators with high stakes tend to earn more rewards.

• "Nothing staked" problem: In PoW, users can only "stake" one chain: they mine on the chain they believe is most likely to be successful. During a hard fork, they cannot stake multiples with the same hash power. However, validators in PoS can work on multiple chains with little additional costs, which can cause economic problems.

Other consensus algorithmsOther consensus algorithms

Proof of work and Proof of stake are the most common consensus algorithms, but there are many more. Some are hybrids that combine elements of both systems, while others are completely different methods.

We won't cover them here, but if you're interested, check out the following articles:

• Delayed Proof of Work Explicado

• Leased Proof of Stake Consensus Explicado

• Proof of Authority Explicado

• Proof of Burn Explicado

Can I reverse blockchain transactions?

Las blockchains son, por diseño, bases de datos muy robustas. Sus propiedades inherentes hacen que sea extremadamente difícil eliminar o modificar los datos de blockchain después de que se hayan registrado. Cuando se trata de Bitcoin y otras redes grandes, es casi imposible. Por lo tanto, cuando realiza una transacción en una blockchain, es mejor pensar en ella como escrita en piedra para siempre.

Dicho esto, existen muchas implementaciones diferentes de blockchain, y la diferencia más fundamental entre ellas es cómo llegan a un consenso dentro de la red. Esto significa que, en algunas implementaciones, un grupo relativamente pequeño de participantes puede obtener suficiente poder dentro de la red para revertir efectivamente las transacciones. Esto es especialmente preocupante para altcoins que se ejecutan en redes pequeñas (con bajas tasas de hash debido a la poca competencia minera).

What is blockchain scalability?

Blockchain scalability is generally used as a general term to refer to the ability of a blockchain system to meet growing demand. While blockchains have desirable properties (such as decentralization, censorship resistance, immutability), they come at a cost.

Unlike decentralized systems, a centralized database can operate with considerably higher speed and performance. This makes sense since thousands of nodes scattered around the world do not need to synchronize with the network every time their content is modified. But this is not the case with blockchains. As a result, scalability has been a hotly debated topic among blockchain developers for years.

Several different solutions have been proposed or implemented to mitigate some of the performance drawbacks of blockchains. At this point, however, there is no clear best approach. Many different solutions will likely need to be tried until there are more direct answers to the scalability problem.

On a broader level, there is a fundamental question about scalability: should we improve the performance of the blockchain itself (on-chain scaling), or should we allow transactions to execute without bloating the main blockchain (off-chain scaling)?

There may be clear advantages for both. On-chain scalability solutions could be reducing transaction sizes, or even simply optimizing how data is stored in blocks. On the other hand, off-chain solutions involve batch transactions outside the main blockchain, and only add them later. Some of the most notable off-chain solutions are called sidechains and payment channels.

If you want to dive deeper into this topic, read Blockchain Scalability: Sidechains and Payment Channels.

Why does blockchain need to scale?

If blockchain systems are to compete with their centralized counterparts, they must be at least as efficient as them. Realistically, however, they will probably have to do even better to incentivize developers and users to switch to blockchain-based platforms and applications.

This means that compared to centralized systems, using blockchains should be faster, cheaper and easier for both developers and users. It is not an easy task to achieve while maintaining the defining characteristics of blockchains that we have discussed above.

What is a blockchain fork?

As with any software, blockchains need updates to fix problems, add new rules, or remove old ones. Since most blockchain software is open source, anyone can theoretically propose new updates to add to the software that governs the network.

Keep in mind that blockchains are distributed networks. Once the software is updated, thousands of nodes spread around the world must be able to communicate and deploy the new version. But what happens if participants can't agree on which update to implement? Typically, there is no organization with an established decision flow to decide. This brings us to soft and hard forks.

Soft forks

If there is general agreement on what an update should look like, it's a relatively simple matter. In a scenario like this, the software is updated with a backward-compatible change, meaning that nodes that are updated can still interact with nodes that are not. However, in reality, almost all nodes are expected to be updated over time. This is called a soft fork.

Hard forks

A hard fork is more complicated. Once implemented, the new rules will be incompatible with the old ones. Therefore, if a node running the new rules tries to interact with a node running the old rules, they will not be able to communicate. This results in the blockchain being split into two: on one, the old software is running, on the other, the new rules are implemented.

After the hard fork, there are essentially two different networks running two different protocols in parallel. It is worth noting that at the time of fork, the balances of the native unit of the blockchain are cloned from the previous network. Therefore, if you had a balance on the old chain at the time of the fork, you will also have a balance on the new one.

See Hard Forks and Soft Forks for more information on this.

Chapter 3 - What is blockchain for?

Contents

• Blockchain for supply chains

• Blockchain and the gaming industry

• Blockchain for healthcare

• Remittances with blockchain

• Blockchain and digital identity

• Blockchain and Internet of Things (IoT)

• Blockchain for governance

• Blockchain for charity

• Blockchain for speculation

• Crowdfunding con Blockchain

• Blockchain and distributed file systems

Blockchain technology can be used for a wide range of use cases. Let's look at some of them.

Blockchain for supply chains

Efficient supply chains are at the core of many successful businesses and concern the handling of goods from supplier to consumer. Coordinating multiple stakeholders in a given industry has traditionally been difficult. However, blockchain technology could enable new levels of transparency in many industries. An interoperable supply chain ecosystem that revolves around an immutable database is just what many industries need to become more robust and reliable.

If you want to read more, check out Blockchain Use Cases: Supply Chain.

Blockchain and the gaming industry

The gaming industry has become one of the largest entertainment industries in the world, and could benefit greatly from blockchain technology. Generally, gamers tend to be at the mercy of game developers. In most online games, players are forced to rely on the developers' server space and follow their ever-changing rule sets. In this context, blockchain could help decentralize the ownership, management and maintenance of online games.

What might be the biggest problem, however, is that gameplay elements cannot exist outside of the titles, eliminating the possibilities of actual ownership and secondary markets. By opting for a blockchain-based approach, games could become more sustainable in the long term, and in-game items issued as crypto-collectibles could gain real-world value.

If you want to read more, check out Blockchain Use Cases: Gaming.

Blockchain for healthcare

Storing medical records reliably is vital for any healthcare system, and reliance on centralized servers leaves sensitive information vulnerable. The transparency and security of blockchain technology make it an ideal platform for storing medical records.

By cryptographically securing their records on a blockchain, patients can maintain their privacy and share their medical information with any healthcare institution. If all participants in the currently fragmented healthcare system could access a secure, global database, the flow of information between them would be much faster.

If you want to read more, check out Blockchain Use Cases: Healthcare.

Remittances with blockchain

Sending money internationally is a hassle with traditional banking. Mainly due to an intricate network of intermediaries, fees and settlement times make using traditional banks expensive and unreliable for urgent transactions.

Cryptocurrencies and blockchains eliminate this ecosystem of intermediaries and can enable fast and cheap transfers around the world. While blockchains undoubtedly sacrifice performance for some of their desirable properties, a variety of projects are leveraging the technology to enable cheap, near-instant transactions.

If you want to read more, check out Blockchain Use Cases: Remittances.

Are you thinking about getting started in the world of cryptocurrencies? Buy Bitcoin on Binance!

Blockchain and digital identity

Secure identity management on the Internet urgently needs a quick solution. An extraordinary amount of our personal data is stored on centralized servers and analyzed using machine learning algorithms without our knowledge or consent.

Blockchain technology allows users to take ownership of their data and selectively disclose information to third parties only when necessary. This kind of crypto magic could allow for a smoother online experience without sacrificing privacy.

If you want to read more, check out Blockchain Use Cases: Digital Identity.

Blockchain and Internet of Things (IoT)

An extraordinary number of physical devices are being connected to the Internet, and this number is only going to increase. Some speculate that communication and cooperation between these devices could increase significantly with blockchain technology. Automated machine-to-machine (M2M) micropayments could create a new economy that depends on a high-performance, secure database solution.

If you want to read more, check out Blockchain Use Cases: Internet of Things (IoT).

Blockchain for governance

Distributed networks can define and enforce their own forms of regulation in the form of computer code. It is not surprising that blockchain has the opportunity to disintermediate various governance processes at the local, national or even international level.

Additionally, it could solve one of the biggest problems currently facing open source development environments: the lack of a reliable mechanism for funding distribution. Blockchain governance ensures that all participants can participate in decision-making, and provides a transparent overview of the policies being implemented.

If you want to read more, check out Blockchain Use Cases: Governance.

Blockchain for charity

Charities are often hampered by limitations on how they can accept funds. Even more frustrating, the final destination of donated funds can be difficult to track accurately, which no doubt discourages many from supporting these organizations.

“Crypto-philanthropy” refers to the use of blockchain technology to circumvent these limitations. Relying on the inherent properties of technology to ensure greater transparency, global participation and reduced expenses, the emerging field seeks to maximize the impact of charities. One such organization is the Blockchain Charity Foundation.

If you want to read more, check out Blockchain Use Cases: Charity.

Blockchain for speculation

Without a doubt, one of the most popular uses of blockchain technology is speculation. Frictionless transfers between exchanges, non-custodial trading solutions, and a growing ecosystem of derivatives products make it an ideal playing field for all types of scalpers.

Due to its inherent properties, blockchain is an excellent instrument for those willing to take the risk of participating in such an asset class. Some even think that once the technology and surrounding regulation mature, global speculative markets can be tokenized on the blockchain.

If you want to read more, check out Blockchain Use Cases: Prediction Markets.

Crowdfunding con Blockchain

Online crowdfunding platforms have been laying the foundation for the peer-to-peer economy for almost a decade. The success of these sites shows that there is a real interest in the development of products financed by crowdfunding. However, as these platforms act as custodians of the funds, they can take a considerable portion of them as fees. Additionally, each will have its own set of rules to facilitate agreement between different participants.

Blockchain technology, and more specifically smart contracts, could enable more secure and automated crowdfunding where the terms of agreements are defined in computer code.

Another application of crowdfunding using blockchain is Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs). In token sales like these, investors raise funds in the hopes that the network will be successful in the future and they will get a return on their investment.

Blockchain and distributed file systems

Distributing file storage over the Internet has many benefits compared to conventional centralized alternatives. Much of the data stored in the cloud relies on centralized servers and service providers, which tend to be more vulnerable to attacks and data loss. In some cases, users may also face accessibility issues due to censorship by centralized servers.

From a user perspective, blockchain file storage solutions work just like other cloud storage solutions: you can upload, store, and access files. However, what happens in the background is quite different.

When you upload a file to a blockchain storage, it is distributed and replicated across multiple nodes. In some cases, each node will store a different part of your file. They can't do much with the partial data, but you can then ask the nodes to provide each part, so you can combine them to retrieve the entire file

Storage space is derived from participants who provide their storage and bandwidth to the network. Typically, these participants receive financial incentives to provide those resources and are financially punished if they do not follow the rules or do not store and serve files.

You might think this type of network is similar to Bitcoin. In this case, however, the network's primary goal is not to support transfers of monetary value, but rather to enable censorship-resistant decentralized file storage.

Other open source protocols, such as the Interplanetary File System (IPFS), are already paving the way for this new, more permanent and distributed web. Although IPFS is a peer-to-peer protocol and network, it is not exactly a blockchain. But it applies some principles of blockchain technology to improve security and efficiency.