What is Blockchain Technology? An Essential Guide

Chapter

1. Blockchain 101

2. How does blockchain work?

3. What are the benefits of blockchain?

Bab 1 - Blockchain 101

List of contents

• What is blockchain?

• How are the blocks connected?

• Blockchain and decentralization

• Byzantine Generals Problem

• Why should blockchain be decentralized?

• What is a peer-to-peer network?

• What are blockchain nodes?

• Blockchain public vs. private

• 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

  • Pro

  • Against

What is blockchain?

Blockchain is a special type of database. You may have also heard the term distributed ledger technology (or DLT) – in many cases, they mean the same thing.

Blockchain has certain unique properties. There are rules regarding how data can be added, and once data has been stored, it is almost impossible to modify or delete it.

Data is added over time in structures called blocks. Each block builds on the last block and contains a piece of information related to the previous block. By looking at it, we can know whether a block was created after the last one or not. So, if we continue down the chain all the way to the beginning, we will reach the first block – known as the genesis block.

To make an analogy, assume you have a spreadsheet with two columns. In the first cell of the first row, you put whatever data you want to hold.

The first cell data is converted to a two-letter identifier, which will then be used as part of the next input. In this example, the two-letter identifier KP must be used to fill the next cell in the second row (defKP). This means that if you change the first input data (abcAA), you will get a different combination of letters in every other cell.

A database where each entry is linked to the last.

Looking at row 4 now, the newest identifier is TH. Remember that you can't go back and remove or delete entries? That's because it would be easy for anyone to find out, so there's no point in trying to make changes.

Suppose you change the data in the first cell – you will get a different identifier, which means your second block will have different data too, this will result in a different identifier in row 2, and so on. In essence, TH is a product of all the information that came before it.

How are the blocks connected?

What we discussed above – the two-letter identifier – is a simplified analogy for how a blockchain uses a hash function. Hashing is the glue that holds blocks together. Hashing works by taking data of any size and passing it through a mathematical function to produce an output (hash) that is always the same length.

The hashes used in blockchain are particularly interesting, because it is almost impossible for you to find two pieces of data that give the exact same result. Like our identifier above, a slight modification of the input data will give completely different results.

Let's illustrate with SHA256, a function widely used in Bitcoin. As you can see, even changing the case of the letters is enough to randomize the output.

The fact that there are no known SHA256 collisions (i.e., two different inputs giving the same output) is invaluable in the blockchain context. This means that each block can point back to the previous block by entering a hash, and any attempt to edit the previous block will be immediately discovered.

Each block has the fingerprint of the previous block.

Blockchain and decentralization

We have discussed the basic structure of blockchain. But when you hear people talk about blockchain technology, they're likely not just talking about the database itself, but rather the ecosystem built around the blockchain.

As a self-contained data structure, blockchain is useful only in suitable applications. The interesting thing is when we use it as a tool for people who don't know each other to coordinate among themselves. Combined with other technologies and some game theory, blockchain can act as a distributed ledger that is not controlled by anyone.

This means that no one has the authority to edit entries outside of the system rules (more about the rules will be discussed later). In this case, you can assume that the ledger is simultaneously owned by everyone: the participants reach agreement on its shape and appearance every time.

Byzantine Generals Problem

The real challenge that hinders a system like the one described above is the so-called Byzantine Generals Problem. Conceived in the 1980s, it describes a dilemma in which isolated participants must communicate to coordinate their actions. A more typical dilemma involves a handful of military generals surrounding a city, to decide whether to attack it. The generals could only communicate through messengers.

Each must decide whether to attack or retreat. It didn't matter whether they attacked or retreated, the most important thing was that all the generals agreed to a common decision. If they decided to attack, they would only succeed if they moved at the same time. So how do we ensure that they can do this?

You might reply, of course they can communicate via herald messengers. But what if the messenger was intercepted while carrying a message saying “we attack at dawn”, and the message was replaced with “we attack tonight”? What if one of the generals betrayed and deliberately misled the others to ensure they were defeated?

All generals were successful when attacking (left). If some retreat while others attack, they will be defeated (right).

We need a strategy in which consensus can be achieved, even if some participants betray or messages are intercepted. Not being able to maintain a database isn't a life and death situation like attacking a city without reinforcements, but the same principles apply. If there is no party monitoring the blockchain and providing the “correct” information to users, then users must be able to communicate among themselves.

To overcome the potential failure of one (or a few) users, blockchain mechanisms must be carefully assembled to withstand such obstacles. Systems that can achieve this are called Byzantine fault-tolerant. As we will see later, consensus algorithms are used to enforce robust rules.

Why should blockchain be decentralized?

You can of course operate the blockchain yourself. But chances are you'll be dealing with a clunky database compared to other superior alternatives. The huge potential of blockchain can be exploited in a decentralized environment – ​​that is, where all users are equal and equal. That way, the blockchain cannot be deleted or taken over by malicious or treasonous parties. This is the only source of truth that anyone can see.

What is a peer-to-peer network?

Peer-to-peer (P2P) networks are the user (or general in the previous example) layer. There are no administrators, so instead of calling a central server to exchange information with other users, users send it directly to their peers.

Look at the image below. On the left, A needs to send a message through a server to convey it to F. However, on the right, they are connected without an intermediary.

Centralized networks (left) vs. centralized networks decentralized network (right).

In general, the server stores all the information the user needs. When you access Binance Academy, you ask its servers to provide all the articles. If the website is offline, you will not be able to view it. However, if you download all the content, you can load it on your computer without asking Binance Academy.

In essence, this is what each peer in the blockchain does: the entire database is stored on their respective computers. If anyone leaves the network, other users can still 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 everyone can update their own copy of the ledger.

Make sure you read our article entitled Explanation of Peer-to-Peer Networks for a deeper discussion of this type of network.

What are blockchain nodes?

Simply put, nodes are also referred to as machines connected to a network – they store a copy of the blockchain, and share information with other machines. Users do not need to handle this process manually. Generally, all they need to do is download and run the blockchain software, and the rest will be taken care of automatically.

The above explanation is of nodes in the purest sense, but the definition of nodes also includes other users who interact with the network in any way. In cryptocurrency for example, a simple wallet app on your phone is also known as a light node.

Blockchain public vs. private

As you know, Bitcoin laid the foundation for the blockchain industry to grow into what it is today. Since Bitcoin began to prove itself as a legitimate financial asset, innovators have thought about the potential of the underlying technology in other fields. The result? Exploration of blockchain in many uses outside of finance.

We call Bitcoin a public blockchain. This means that anyone can view transactions in it, and if you want to join in, you only need an Internet connection and software. Since there are no other requirements for participation, we can call it a permissionless environment.

On the other hand, there is another type of blockchain called private blockchain. This system sets the rules regarding who can view and interact with the blockchain. Therefore, we call it a permissioned environment. While private blockchains may seem redundant at first, they have several important applications – especially in enterprise environments.

To dive deeper into this topic, you can check out Public, Private, and Consortium Blockchains - What's the Difference?

Do you want to own cryptocurrency? Buy Bitcoin on Binance!

How do transactions work?

If Alice wants to pay Bob via bank transfer, she must notify her bank. To keep things simple, let's assume that both parties use the same bank. The bank checks whether Alice has the funds to carry out the transaction, before updating its database (say - $50 to Alice, + $50 to Bob).

This is not too different from what happens with blockchain. Both are databases. The main difference is that in blockchain there is no single party to check and update the balance. All nodes must do so.

If Alice wants to send five bitcoins to Bob, he will broadcast this message to the network. The transaction will not be added to the blockchain immediately – the nodes will see it, but also other actions must be completed for the transaction to be confirmed. See How are blocks added to the blockchain?

Once a transaction is added to the blockchain, all nodes can see it. Each node will update their copy of the blockchain to accommodate the addition. Now, Alice can no longer send the same five units to Carol (if this happens, it is called double-spending), because the network knows that Alice has already spent them in a previous transaction.

There are no usernames and passwords here – public-key cryptography is used to prove ownership of funds. To receive funds in the first place, Bob needs to create a private key. A private key is a very long random number, which is almost impossible for anyone to guess, even if you were given hundreds of years to guess. But if he tells someone else, then someone else will be able to prove ownership of (and possibly spend) his funds. So it's important that Bob keeps it a secret.

However, what Bob should do is get the public key from the private key. He can then give this public key to anyone, because it is almost impossible to reverse engineer the public key to obtain the private key. In most cases, Bob will perform other operations (such as hashing) on ​​the public key to obtain the public  address.

Bob will give the public address to Alice, so she knows where to send the funds. Alice creates a transaction that says pay these funds to this public address. Then, to prove to the network that she is not trying to spend funds that are not hers, Alice creates a digital signature using her own private key. Anyone can take Alice's signed message and compare it to her public key, and know for certain that she has the right to send those funds to Bob.

How to make Bitcoin transactions

To illustrate how you can make Bitcoin transactions, let's imagine two different scenarios. In the first, you withdraw bitcoins from Binance, and in the second, you send funds from 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, you can check out our guide on Bitcoins and how to buy them.

2. Click Wallet, and select Spot Wallet.

3.Click Withdrawal on the menu on the left.

4.Select the coin you want to withdraw – in this case, BTC.

5. Copy the address you want to withdraw your bitcoins to, and paste it into the BTC receiving Address.

6. Determine the withdrawal amount.

7. Click Enter.

8. Soon you will receive a confirmation email. Make sure that the address mentioned is correct. If correct, confirm the transaction.

9. Wait for your transaction to be processed via blockchain. You can monitor the sending status in the Deposit and Withdrawal History menu or using the block explorer.

How to send bitcoins from Trust Wallet to Electrum

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

1. Open the Trust Wallet application.

2. Select your Bitcoin account.

3. Select Send.

4. Open your Electrum wallet.

5. Click on the Receive menu in Electrum and copy the address.

Or alternatively, you can go back to Trust Wallet and press the [–] icon to scan the QR code of your Electrum address.

6. Paste the Bitcoin address into the Recipient Address in Trust Wallet.

7. Determine the quantity.

8. If everything is correct, confirm the transaction.

9. Done! Wait for your transaction to be confirmed on the blockchain. You can monitor the transaction status by copying the address to the block explorer.

Do you want to own cryptocurrency? Buy Bitcoin on Binance!

Who invented blockchain technology?

Blockchain technology was formalized in 2009 with the release of Bitcoin – the first and most popular blockchain. However, its creator, who uses the pseudonym Satoshi Nakamoto, took inspiration from technology and proposals in previous times.

Blockchain makes extensive use of hash functions and cryptography, which have been around for decades before Bitcoin was released. Interestingly, blockchain structures can be traced back to the early 1990s, although at that time they were only used for timestamping documents so that they could not be changed later.

To dive deeper into this topic, check out our article entitled Blockchain History.

Pros and cons of blockchain technology

A well-assembled blockchain solves problems plaguing stakeholders in a number of industries, from finance to agriculture. Distributed networks present many advantages over traditional client-server models, but they also have some disadvantages.

Pro

One of the immediate benefits noted in Bitcoin's white paper is that payments can be transmitted without involving an intermediary party. Next-generation blockchains have taken this even further: allowing users to send all kinds of information. Eliminating counterparties means there is less risk for the users involved, and leads to lower costs, as there is no middleman taking a cut.

As mentioned previously, public blockchain networks are also permissionless – there is nothing blocking entry, because no one has power. If a person can connect to the Internet, then he can interact with fellow peers on the network.

Perhaps many would argue that the most important quality is that a blockchain has a high level of resistance to censorship. To take down a centralized service, a malicious party only needs to target the server. however, in a peer-to-peer network, each node acts as its own server.

A system like Bitcoin has over 10,000 visible nodes spread across the globe, making it nearly impossible for an attacker, even well-resourced, to disrupt the network. It is worth noting that there are many hidden nodes as well, which are invisible to the wider network.

These are some of the general advantages. There are many more specific benefits of blockchain, as you will see in the chapter What are the benefits of blockchain?

Against

Blockchain does not offer a solution to every problem. If optimized for advantage in one area, blockchain weakens in other areas. The most obvious obstacle to blockchain mass adoption is scalability.

This applies to all distributed networks. Because all participants must stay in sync, new information cannot be added too quickly. If it's too fast, the nodes can't keep up. Therefore, developers tend to intentionally limit the speed at which the blockchain can update, to ensure that the system remains decentralized.

For network users, this can mean long waiting periods if too many people try to make transactions. Blocks can only hold so much data, they don't add it to the chain instantly. If there are more transactions than can fit in a block, it must wait for the next block.

Another possible possibility in a decentralized blockchain environment is: the system cannot be easily upgraded. If you write your own software, you can add new features as you wish. You don't need to work with anyone else or ask permission to make modifications.

In an environment with potentially millions of users, making changes is much more difficult. You can change some of your node's software parameters, but ultimately you will be disconnected from the network. If the modified software is incompatible with other nodes, the nodes will know about it and refuse to interact with your node.

Suppose you want to change the rules regarding block size (from 1MB to 2MB). You can try sending these blocks to the nodes you are connected to, but they have a rule that says “don't accept blocks larger than 1MB”. If they receive a larger block, they will not include it in the blockchain copy.

The only way to drive change is to get most of the ecosystem to accept it. In large blockchain environments, there are intense discussions that can take months – or even years – in forums before changes can be coordinated. You can see Hard Fork and Soft Fork for more information on this.

Chapter 2 - How does blockchain work?

List of contents

• How are blocks added to the blockchain?

• Mining (Proof of Work)

  • Pro Proof of Work

  • Kontra Proof of Work

• Staking (Proof of Stake)

  • Pro Proof of Stake

  • Kontra Proof of Stake

• Other consensus algorithms

• Are blockchain transactions reversible?

• What is blockchain scalability?

• Why does blockchain need scalability?

• What is a blockchain fork?

  • Soft fork

  • Hard fork

How are blocks added to the blockchain?

So far, we've covered a lot of ground. We know that nodes are interconnected and store a copy of the blockchain. Nodes also communicate information regarding new transactions and blocks to each other. We've covered what a node is, but you might be wondering: how are new blocks added to the blockchain?

There is no single source to tell users what to do. Since all nodes have equal power, there needs to be a mechanism to decide who can add blocks to the blockchain. We need a system that makes it very expensive for users to cheat, and rewards them for acting honestly. Every rational user will take actions that are economically beneficial to them.

Because this network is permissionless, block creation must be accessible to anyone. Protocols often ensure this by requiring users to actually get involved – they have to put their own money at risk. Doing so allows them to participate in block generation, and if they generate a valid block, they will be paid a reward.

However, if they try to cheat, all users on the network will know. Any assets they put as stake in the network will be lost. We call this mechanism a consensus algorithm, because it allows network participants to reach consensus on what blocks should be added next.

Mining (Proof of Work)

Mining is by far the most commonly used consensus algorithm. In mining, the algorithm used is Proof of Work (PoW). Users must sacrifice computing power to try to solve the puzzles set by the protocol.

This puzzle requires users to hash the transactions and other information included in the blocks. But for a hash to be considered valid, it must fall below a certain number. Since there is no way to predict what the output will produce, miners must continue hashing slightly modified data until they find a valid solution.

Of course, repeatedly hashing data is an expensive activity. In a Proof of Work blockchain, the “stake” a user submits is the money invested in a miner's computer and the electricity used to run it. They do this in the hope of getting a block reward.

Remember how we discussed earlier that it's practically impossible to reverse a hash, but it's easy to check? When a miner sends a new block across the network, all other nodes use it as input in the hash function. They only need to run it once to verify that the block is valid based on blockchain rules. If it is not legal, miners will not receive rewards, and they will just waste electricity for nothing.

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

Pro Proof of Work

• It has gone through a trial and error process – to date, Proof of Work is the most mature consensus algorithm and is worth hundreds of billions of dollars.

• Permissionless – Anyone can join to mine and run a node to validate.

• Decentralization – miners compete with each other to generate blocks, meaning that hash power is never controlled by one party.

Kontra Proof of Work

• Wasteful – mining uses a lot of electricity.

• The higher the barrier to entry – as more miners join the network, the protocol increases the difficulty of the mining puzzle. To stay competitive, users have to invest in better equipment, which of course doesn't come cheap. This may be too expensive for many miners.

• 51% attack – although mining supports decentralization, it is possible that one miner obtains the majority of the hash power. If this happens, they could theoretically invalidate the transaction and compromise the security of the blockchain.

Staking (Proof of Stake)

In a Proof of Work system, the thing that encourages you to act honestly is the money you invest in mining computers and electricity. You won't get a return on investment if you don't mine blocks properly.

With Proof of Stake (PoS), there are no external fees. There are also no miners, there are validators who propose (or “forge”) blocks. Validators can use regular computers to generate new blocks, but they must hand over a large portion of their funds to stake for this privilege. Staking is carried out with the native cryptocurrency of the blockchain in question, in predetermined amounts, according to the rules of each protocol.

Different implementations have different variations, but once a validator submits a stake, they can be randomly selected by the protocol to announce the next block. By doing it right, they will receive a reward. Alternatively, there may be several validators who approve the next block, in which case the reward will be distributed proportionally according to the stake each has submitted.

“Pure” PoS blockchains are rarer than DPoS (Delegated Proof of Stake), which requires users to vote on nodes (witness) to validate blocks across the network.

Ethereum, the leading smart contract blockchain, will soon switch to Proof of Stake in its migration to ETH 2.0.

Pro Proof of Stake

• Environmentally friendly – ​​the carbon footprint of PoS is very small when compared to PoW mining. Staking eliminates hashing operations that require a lot of power.

• Faster transactions – because there is no need to spend additional computing power to solve the puzzles set by the protocol, some PoS proponents argue that it can increase transaction throughput.

• Staking rewards and interest – Rewards for securing the network are paid directly to token holders, not to miners. In some cases, PoS allows users to generate passive income in the form of airdrops or interest, just by placing their funds for staking.

Kontra Proof of Stake

• Relatively untested – PoS protocols have not 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 get richer” ecosystem, as validators with large stakes tend to earn more rewards.

• Nothing-at-stake problem – in PoW, users can only “bet” on one chain – they mine on the chain they believe is most likely to succeed. During a hard fork, they cannot bet on multiple chains with the same hash power. However, validators in PoS can work on multiple chains with little additional cost, this can cause economic problems.

Other consensus algorithms

Proof of Work and Proof of Stake are the most common consensus algorithms, but there are many others. Some hybrid ones combine elements of both systems, while others are completely different methods.

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

• Explanation of Delayed Proof of Work

• Explanation of the Leased Proof of Stake Consensus

• Explanation of Proof of Authority

• Explanation of Proof of Burn

Are blockchain transactions reversible?

Blockchain is a database that is designed to be very strong. Its inherent nature makes it very difficult to delete or modify blockchain data once it has been recorded. When it comes to Bitcoin and other large networks, this activity is almost impossible to do. So, when you make a transaction on the blockchain, you should assume it will last forever.

However, there are many different blockchain implementations, and the most fundamental difference between the various blockchains is how they achieve consensus within the network. This means that, in some implementations, a relatively small group of participants can gain enough power in the network to effectively reverse transactions. This is especially likely to be the case for altcoins running on small networks (with low hash rates because there is little mining competition).

What is blockchain scalability?

Blockchain scalability is usually used as a general term referring to the ability of a blockchain system to serve increasing demand. Blockchain has desirable properties (such as decentralization, censorship-resistance, and immutability). But to achieve all that, something must be sacrificed.

In contrast to decentralized systems, centralized databases can work at much higher speeds and throughput. This makes sense because it doesn't require thousands of nodes spread across the world to synchronize with the network every time its contents are modified. Blockchain is just the opposite. As a result, scalability has been a highly debated topic among blockchain developers for years.

A number of solutions have been proposed or implemented to mitigate some of the performance drawbacks of blockchain. However, until now, there is no clear best approach. Maybe all these different solutions need to be tried out first until we find the answer to this scalability problem.

On a broader level, there is a fundamental question regarding scalability: Should we increase the performance of the blockchain itself (on-chain scalability), or should we let transactions execute without bloating the main blockchain (off-chain scalability)?

There may be clear advantages to both. On-chain scalability solutions can reduce transaction sizes, or even simply optimize how data is stored within blocks. On the other hand, off-chain solutions batch transactions out of the main blockchain, to then add them later. Some of the most well-known off-chain solutions are so-called sidechains and payment channels.

If you are interested in exploring this topic, you can read our article entitled Blockchain Scalability - Sidechains and Payment Channels.

Why does blockchain need scalability?

If a blockchain system is to compete with its opponents in a centralized environment, then the blockchain must perform at least as well as them. However, realistically, it may have to perform better to incentivize developers and users to switch to blockchain-based platforms and applications.

When compared to centralized systems, using blockchain should be faster, cheaper, and easier for developers and users. This is not an easy thing to achieve while maintaining the blockchain characteristics we discussed earlier.

What is a blockchain fork?

Like any other software, blockchain needs to be upgraded to fix problems, add new rules, or remove old ones. Since most blockchain software is open-source, in theory, anyone can propose updates to be added to the software that governs the network.

Please remember that blockchain is a distributed network. Once the software is upgraded, thousands of nodes spread across the world must be able to communicate and implement the new version. But what happens if the participants do not agree to the proposed improvements? Usually, there is no authority to decide, and This will lead us to soft forks and hard forks.

Soft fork

If there is general agreement on how improvements should be made, it is a relatively simple matter. In a scenario like this, the software is updated with backward-compatible changes, meaning that updated nodes can still interact with non-updated nodes. However, despite this, in reality, it is expected that all nodes will be upgraded over time. This is called a soft fork.

Hard fork

Hard forks are even more complicated. Once implemented, the new rules will not be compatible with the old rules. So, if a node running the new rules tries to interact with a node running the old rules, the two will not be able to communicate. This results in splitting the blockchain into two – in the first chain, the old software is executed, in the second chain, the new rules are implemented.

After a hard fork, there will basically be two different networks running two different protocols in parallel. It should be noted that when a fork occurs, the original unit balance of the blockchain is replicated from the old network. So, if you had a balance on the old chain when the fork occurred, you will also have a balance on the new chain.

To learn more about this topic, you can read Hard Forks and Soft Forks.

Chapter 3 - What are the benefits of blockchain?

List of contents

• Blockchain for supply chains

• Blockchain and the gaming industry

• Blockchain for healthcare

• Blockchain remittance

• Blockchain and digital identity

• Blockchain dan Internet of Things (IoT)

• Blockchain for governance

• Blockchain for charity

• Blockchain for speculation

• Crowdfunding with blockchain

• Blockchain and distributed file systems

Blockchain technology can be used in various fields. Let's explore some of them.

Blockchain for supply chains

An efficient supply chain is at the heart of many successful businesses, concerned with handling goods from supplier to consumer. Coordination of multiple stakeholders within a particular industry has traditionally proven difficult. However, blockchain technology can enable a new level of transparency in this area. To become more robust and reliable, industries need interoperable supply chain ecosystems with immutable databases.

If you are interested in reading more about this topic, please head to Blockchain Uses: Supply Chain.

Blockchain and the gaming industry

The gaming industry is already one of the largest entertainment industries in the world, and blockchain technology can make it even bigger. Usually, the fate of gamers tends to be in the hands of game developers. In most online games, gamers are forced to rely on developer-provided servers and follow their ever-changing set of rules. In this context, blockchain can help decentralize the ownership, management and maintenance of online games.

However, what will be the biggest problem is that game items cannot exist outside of the title, this can eliminate the possibility of real ownership and a secondary market. By using a blockchain-based approach, games can become more sustainable in the long term, and in-game items issued as crypto-collectibles can have more value in the real world.

If you want to read more about this topic, you can read our article entitled Uses of Blockchain: Games.

Blockchain for healthcare

Storing medical records in a proper manner is critical to healthcare systems, and reliance on centralized servers poses a risk to sensitive information. Blockchain technology with its transparency and security is an ideal platform for storing medical records.

By cryptographically securing records on blockchain, patients can maintain their privacy, while also being able to share medical information with healthcare institutions. If all participants of a healthcare system could tap into a secure global database, the flow of information would be much faster between them.

If you want to read more about this topic, you can read our article entitled Blockchain Uses: Health Services.

Blockchain remittance

Sending money internationally is a hassle for traditional banking. Mainly because the convoluted network of intermediaries, fees and long settlement times make this service expensive and unreliable for urgent transactions.

Cryptocurrencies and blockchain eliminate these middlemen and enable cheap and fast transfers around the world. A number of projects utilize blockchain technology to carry out cheap and almost instant transactions.

If you want to read more, check out our article entitled Blockchain Uses: Money Transfers.

Do you want to own cryptocurrency? Buy Bitcoin on Binance!

Blockchain and digital identity

Managing identities securely on the Internet requires a fast solution. Vast amounts of our personal data are stored on centralized servers and analyzed by 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. Cryptographic wizardry like this provides a smoother online experience without sacrificing privacy.

If you are interested in reading more, check out our article entitled Blockchain Uses: Digital Identity.

Blockchain dan Internet of Things (IoT)

A large number of physical devices are connected to the Internet, and this number will continue to increase. Some people speculate that blockchain could significantly improve communication and cooperation between these devices. Automated machine-to-machine (M2M) micropayments could create a new economy that relies on secure, high-throughput database solutions.

If you want to read more, check out our article entitled Blockchain Uses: Internet of Things (IoT).

Blockchain for governance

Distributed networks can establish and enforce their own form of rules in the form of computer code. It is not surprising then that blockchain may have the opportunity to enter various governance processes at the local, national, or even international level.

Moreover, blockchain can solve one of the biggest problems currently facing the open-source development environment – ​​the lack of reliable mechanisms for distributing funds. Blockchain governance ensures that all participants can be involved in decision-making, and provides a transparent picture of policies being implemented.

If you are interested in reading more, check out our article entitled Blockchain Uses: Governance.

Blockchain for charity

The challenge that charitable organizations often face is the limited media in receiving funds. Equally worrying, the final destination of donated funds is difficult to track precisely. Undoubtedly, these weaknesses will discourage many people from supporting these organizations.

"Crypto-philanthropy" with the use of blockchain technology can solve this problem. The inherent properties of blockchain technology can be relied upon to ensure transparency, global participation and reduced costs, thereby maximizing the impact of the charity itself. One organization in this field is the Blockchain Charity Foundation.

If you want to read more about this topic, you can read our article entitled Uses of Blockchain: Charity.

Blockchain for speculation

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

Due to its inherent nature, blockchain is an excellent instrument for those willing to take risks. Some people even think that once the technology and regulations regarding blockchain mature, all global speculative markets will be tokenized on the blockchain.

If you want to read more, you can read our article entitled Blockchain Uses: Prediction Markets.

Crowdfunding with blockchain

Online crowdfunding platforms have laid the foundation for the peer-to-peer economy for nearly the last decade. The success of these sites shows that there is great interest in crowdfunding product development. However, since these platforms act as custodians of the funds, they may take a large portion of the funds for management fees. In addition, each platform also has its own regulations to facilitate agreements between participants.

Blockchain technology, and more specifically smart contracts, can create safer automated crowdfunding, where the terms of the agreement are specified in computer code.

Other crowdfunding applications that use blockchain are Initial Coin Offering (ICO) and Initial Exchange Offering (IEO). In a token sale like this, investors raise funds in the hope that the network will be successful in the future, so that they will get a return on investment (ROI).

Blockchain and distributed file systems

Distributing file storage across the Internet has many more benefits than conventional centralized alternatives. Most 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 problems in accessing, due to censorship of centralized servers.

From a user perspective, blockchain file storage solutions work the same as typical cloud storage solutions – you can upload, store, and access files. But what happened behind the scenes was very different.

When you upload files to blockchain storage, they are distributed and replicated across multiple nodes. In some cases, each node will store a different part of your file. The system can't do much with partial data, but you can then ask node to provide each piece, so you can combine them to get the complete file back.

Storage space comes from participants providing their storage and bandwidth to the network. Generally, these participants are economically incentivized to provide these resources, and conversely, are also economically penalized if they do not follow the rules or fail to store and serve files.

You can think of this type of network as similar to Bitcoin. However, in this case, the main purpose of the network is not to support the transfer of monetary value, but to accommodate censorship-resistant and decentralized file storage.

Other open-source protocols such as the InterPlanetary File System (IPFS) are already paving the way for this new, more permanent, distributed Web. Even though IPFS is a peer-to-peer protocol and network, the system is not fully blockchain. However, IPFS applies several principles of blockchain technology to increase security and efficiency.