chapter
Blockchain 101
How does blockchain work?
What is blockchain used for?
Chapter 1 - Blockchain 101
Table of contents
What is blockchain?
How are the blocks connected?
Blockchain and decentralization
Byzantine Generals Problem
Why does blockchain need to implement decentralization?
What is a peer-to-peer network?
What is a blockchain node?
Public chain and private chain
How does the transaction work?
How to trade Bitcoin
How to withdraw Bitcoin from Binance
How to send Bitcoin from Trust Wallet to Electrum
Who invented blockchain technology?
Pros and Cons of Blockchain Technology
advantage
shortcoming
What is blockchain?
Blockchain is a special type of database. You may have heard of the term distributed ledger technology, or DLT, and in many cases, a blockchain is a distributed ledger.
Blockchain has some characteristics, such as a set of rules on how to add data on the chain, and once the data enters the storage system, it is almost impossible to modify or delete it through virtual means.
Over time, data is added to structures called blocks. Each block builds on the previous block, and each block contains a piece of information that connects it to the previous block. We only need to look at the latest block to see if it was the last block created. Therefore, if we continue to search along the "chain", we can find the first block, which is commonly known as the genesis block.
For example, let's say you have a spreadsheet with two columns. In the first cell of the first row, you can enter whatever data you want to save.
The data in the first cell is then converted to a two-letter identifier and continues to be entered as part of the next cell. In this example, the two-letter identifier KP must be entered in the cell on the second row (defKP). This means that if you change the first entered data (abcAA), the combination of letters in the next cell will change.
Each entry in the database is related to the previous entry.
Now let's look at line 4, the latest identifier is TH. Remember what I mentioned earlier? We can't reverse the process, and we can't move or delete entries. Because of the nature of the blockchain, every user can visually see that the operation is completed, and they will simply ignore the changes you attempt.
Suppose you change the data in the first cell, the identifier you get will change, which means the data in the second block will change, causing the identifier in row 2 to also change, so that And so on. Essentially, TH is the product of all the information that preceded its creation.
How are the blocks connected?
What we discussed above, two-letter identifiers, simply simulates the blockchain's use of hash functions. Hashes are the glue that ensures that blocks are related to each other. Hashing takes data of any size and uses a mathematical function to produce a string of outputs (hash values) that are always the same length.
The use of hashing algorithms in blockchain makes sense because the chance that a user will find two pieces of data that produce the same output is extremely slim. As shown in the identifier above, once the input data is slightly changed, the exported output will be completely different.
SHA256 is a function widely used in the Bitcoin field. Let us use this function to explain. As you can see, even just changing the case of letters is enough to completely change the output.
Input data | SHA256 output |
|---|---|
Binance Academy | 886c5fd21b403a139d24f2ea1554ff5c0df42d5f873a56d04dc480808c155af3 |
Binance Academy | 4733a0602ade574551bf6d977d94e091d571dc2fcfd8e39767d38301d2c459a7 |
Binance Academy | a780cd8a625deb767e999c6bec34bc86e883acc3cf8b7971138f5b25682ab181 |
Currently, there have been no SHA256 collisions (i.e. two different inputs leading to the same output), which is particularly important in the context of blockchain. This means that every block containing a hash can be traced back to the previous block, and any attempt to edit an older block will be exposed to plain sight.
Each block contains the fingerprint of the previous block.
Blockchain and decentralization
We have covered the basic structure of blockchain in detail. If you hear other people talking about blockchain technology, you may find that the topic they are discussing is not the database itself, but the ecosystem built around blockchain.
Blockchain has a separate data structure and is therefore only useful in niche applications. If we provide these tools to strangers to facilitate coordination and cooperation, it will be interesting to see how things develop. At the same time, if combined with other technologies and some knowledge of game theory, blockchain can become a distributed ledger that is not controlled by anyone.
This means that no user can edit an entry in violation of system rules (more on the rules later). In this sense, you can think of the ledger as shared by everyone: participants need to agree on changes in the blockchain at all times.
Byzantine Generals Problem
In fact, the real obstacle to the development of the above system is the Byzantine Generals Problem. The problem, which first received attention in the 1980s, describes a dilemma in which isolated actors must communicate with each other in order to coordinate their actions. In this special predicament, after a group of generals led their troops to surround a certain city, they needed to decide whether to attack. But the general could only communicate his decisions by courier.
Each general needs to give orders to attack or retreat. Regardless of whether it is an attack or a retreat, as long as the generals reach an agreement. If they decide to attack, the entire army must attack to achieve victory. So, how can we ensure that nothing goes wrong?
True, they had messengers as a medium of communication. But what would happen if the courier was intercepted and the enemy changed the message of "Attack at Dawn" to "Attack Tonight"? What if one of the generals rebelled and deliberately misled the other generals, causing their defeat?
A joint attack by all generals is necessary for success (left). Otherwise, they will be defeated (right).
Therefore, we need to establish a strategy that allows everyone to reach a consensus, even if participants defect or messages are intercepted. If the army attacks a city without support, the situation will be very tragic, and the failure to maintain the database will also lead to bad consequences. Although it is not a matter of life and death, the truth is the same. If the blockchain is left unsupervised and may not provide users with the “correct” information, then users must be able to communicate with each other.
In order to address potential failures faced by one (or more) users, the blockchain mechanism must be properly designed to cope with these obstacles. Subsequently, Byzantine fault-tolerant systems came into being. As we will see next, consensus algorithms can be used to enforce rules that are as solid as iron walls.
Why does blockchain need to implement decentralization?
Of course, you can also run the blockchain yourself. But in the end, you will find that the amount of data and information overload is so terrible that it cannot compete with other carefully operated blockchains. Because only in a decentralized environment where all users are equal can the true potential of blockchain be fully developed. This way, the blockchain is protected from deletion or malicious takeover. Since there is only one source of data, all information is available to every user.
What is a peer-to-peer network?
A peer-to-peer (P2P) network consists of our user layer (or that group of generals in the example described earlier). There is no administrator position in this network, so if users need to exchange information, they can send information directly to the other party without calling the central server.
Please see the picture below. A in the diagram on the left needs to go through the server to route its messages to F. But as you can see from the picture on the right, they can be connected directly without an intermediary.
Centralized network (left) and decentralized network (right).
Under normal circumstances, the server will store all the information required by the user. For example, when you visit Binance Academy, you are actually asking its server to provide all articles on the site. If the site is offline, you will no longer be able to view it. However, if you have already downloaded everything and loaded it onto your computer, there is no need to send an application to Binance Academy.
In fact, this is exactly how each peer operates on the blockchain: the entire database is already stored on their computer. No matter who leaves the network, it will not affect other users' ability to access the blockchain and share information with each other. When a new block is added to the blockchain, the data in it will be propagated to all users on the network, so each user can update their own copy of the ledger in a timely manner.
Be sure to read "A Detailed Explanation of Peer-to-Peer Networks" for an in-depth discussion of experts in this type of network.
What is a blockchain node?
Nodes, simply put, are the machines we use to connect to the network. These machines are responsible for storing copies of the blockchain and sharing information with other machines. Users do not need to handle these processes manually. Usually, they only need to download and run the blockchain-related software, and the system can automatically take over the remaining operations.
The above description of nodes is very concise, and the definition also includes other users who interact with the network in any way. For example, in the cryptocurrency world, a simple wallet app on your phone is a so-called light node.
Public chain and private chain
You may know that the blockchain industry has developed to this day thanks to the solid foundation laid by Bitcoin. Since Bitcoin established itself as a legitimate financial asset, innovators have begun thinking about the potential of applying the underlying technology to other areas. Hence, the exploration of blockchain into countless use cases beyond finance.
Bitcoin, also known as the public blockchain. This means that every user can view transactions on the chain and simply have access to the Internet and the necessary software to join the blockchain. There are no other requirements to participate in the blockchain, so we can call it a permissionless environment.
The counterpart is private blockchain, which is another type of blockchain. These systems create a set of rules that limit permissions to access and interact on the blockchain. Therefore, we call it a permissioned environment. Although private blockchains may seem a bit useless at first glance, some important applications have been developed using them, mostly in enterprise environments.
To learn more about this topic, please refer to "What is the difference between public chain, private chain and consortium chain?" 》
Want to start your cryptocurrency journey? Go to Binance and buy Bitcoin now!
How does the transaction work?
If Alice wants to pay Bob via a bank transfer system, she will first notify the bank. For simplicity, we assume that both parties use the same bank. The bank checks to see if Alice has sufficient funds to perform the transaction (e.g. $50 is debited from Alice's account and $50 is credited to Bob's account) before updating its database.
Blockchain works similarly. After all, both are essentially databases. But the key difference is that the blockchain omits the need for a third party to check and update the balance. All nodes will complete these operations automatically.
If Alice wants to pay Bob 5 Bitcoins, she simply broadcasts this message to the network. The transaction is not added to the blockchain immediately, but the information is received by the various nodes because other operations need to be completed before the transaction can be confirmed. Please read How are blocks added to the blockchain?
Once a transaction is added to the blockchain, all nodes receive information that the transaction has been completed. These nodes update their copy of the blockchain to reflect the new transactions. Now, Alice can no longer send these five units to Carol (thus avoiding a duplicate send) because the network knows that she has already paid out these units in a previous transaction.
The concept of usernames and passwords does not exist in blockchain, and public key cryptography can be used to prove ownership of funds. The first step to receiving funds is that Bob needs to generate a private key. A private key is a long, randomly generated number that is so complex that no one can crack it even if it takes hundreds of years. But if you tell others your private key, then others can prove their ownership of his funds (and therefore have the right to spend them). Therefore, confidentiality is crucial.
But Bob can also take the following action, which is to derive a public key from the private key. He can give his public key to anyone because the possibility of reverse engineering the public key to obtain the private key is slim. In most cases, he will perform another public key operation (such as running a hash algorithm) to obtain a public address.
He will give Alice the public address so she knows where to send the funds. She constructs a transaction to pay funds to this public address. She then needs to generate a digital signature using her private key to prove to the network that she is using her own funds. All users can take Alice's signed message and compare it to her public key to determine that she has the authority to send those funds to Bob.
How to trade Bitcoin
Let us explain how to trade Bitcoin through the following two scenarios. The first case is to withdraw Bitcoin from Binance and the second case is to send funds from your TrustWallet to the Electrum wallet.
How to withdraw Bitcoin from Binance
1. Log in to your Binance account. If you don't already own any Bitcoin assets, check out our Bitcoin guide to learn how to buy one.
2. Hover your cursor over "Wallet" and select "Spot Wallet".
3. Click "Withdraw" on the left sidebar.
4. Select the Bitcoin you want to withdraw (this time, select Bitcoin).
5. Copy the sending address of the withdrawn Bitcoins and paste it to the recipient Bitcoin address.
6. Determine how many Bitcoins you need to withdraw.
7. Click "Submit".
8. You will receive a confirmation email shortly. Make sure the address is correct. If it's correct, just confirm the transaction via email.
9. Wait for the transaction to enter the blockchain. You can check the transaction status by going to the "Deposit and Withdrawal History" tab or using the block explorer.
How to send Bitcoin from Trust Wallet to Electrum
In this example, we will send Bitcoins from the Trust Wallet to Electrum.
1. Open the Trust Wallet application.
2. Click on your Bitcoin account.
3. Click "Send".
4. Open the Electrum wallet.
5. Click the Receive tab in Electrum and copy the address.
You can also return to the Trust Wallet and click the [–] icon to scan the QR code to jump to your Electrum address.
6. Paste your Bitcoin address to the "Recipient Address" in Trust Wallet.
7. Determine the quantity.
8. If the process is correct, please confirm the transaction.
9. You’re done! Wait patiently for the transaction to be confirmed in the blockchain. You can copy the address to the block explorer and keep track of its status at any time.
Want to start your cryptocurrency journey? Go to Binance and buy Bitcoin now!
Who invented blockchain technology?
Since the launch of Bitcoin, the first and most popular blockchain, in 2009, blockchain technology has been formalized. However, its anonymous creator, Satoshi Nakamoto, drew inspiration from earlier technologies and proposals.
Blockchain makes extensive use of hash functions and cryptographic concepts that preceded the release of Bitcoin by decades. Interestingly, the structure of blockchain dates back to the early 1990s, but at the time the technology was only used to add a timestamp to documents that couldn’t be tampered with.
To learn more about this topic, see Blockchain History.
Pros and Cons of Blockchain Technology
Blockchain has been carefully designed to solve numerous problems that plague stakeholders in various industries. From finance to agriculture, blockchain can effectively play its role. Distributed networks have many advantages over the traditional client-server model, but they are not perfect.
advantage
As mentioned in the Bitcoin white paper, one of the direct benefits of the blockchain is that users can transfer money directly, bypassing intermediaries. Subsequent blockchains have deepened this functionality, allowing users to send various types of information. Eliminating the counterparty system means users are less likely to be exposed to risk, and fees are correspondingly lower as there are no intermediaries charging fees.
As mentioned earlier, the public blockchain network is a permissionless environment. Since there is no person in charge, there are no barriers to entry. Potential users can interact with others on the network as long as they have an Internet connection.
Many believe that blockchain is best known for its highly censorship-evasive nature. If a malicious actor attempts to attack a centralized service, they can simply target the server and be done with it. But in a peer-to-peer network, each node can act as its own server.
Systems like Bitcoin have over 10,000 visible nodes spread across the world, making it nearly impossible for an attacker to compromise the network even if they are well-resourced. It is worth noting that there are many hidden nodes in the system, which are hidden in the extensive network.
Some of the advantages are described below. Blockchain can serve many special use cases, see What is Blockchain Used for?
shortcoming
Blockchain is not a one-size-fits-all solution to all problems. As mentioned in the previous section, although strengths are reinforced, there are also other areas of weakness. The biggest obstacle to blockchain is its inability to be used on a large scale due to poor scalability.
This is also a common problem in distributed networks. Since all participants must stay in sync, the speed at which new information is added must be controlled, otherwise the nodes will not be able to keep up. Therefore, to ensure the decentralization of the system, developers tend to consciously limit the update speed of the blockchain.
For users on the network, if too many people attempt transactions, the waiting period will be extended indefinitely. Blocks have limited capacity to hold data, and data often cannot be added to a block immediately. If the number of transactions exceeds the block's capacity, the excess transactions will need to be queued to wait to enter the next block.
Another potential disadvantage of decentralized blockchain systems is that they cannot be upgraded at will. If you develop a piece of software, you can naturally add new functions at will. You don't need to seek the cooperation or consent of others to ensure successful implementation of your changes.
However, with millions of potential users in the same environment, it is understandable how difficult it is to make changes. Maybe you can change some parameters of the node software, but it will eventually cause you to break away from the original network. If the software is improved and becomes incompatible with other nodes, other nodes will quickly notice the difference and refuse to interact with your node.
Suppose you want to change the size of the blocks (e.g. from 1MB to 2MB). You can try to send the block to the nodes you are connected to, but these nodes follow one rule - they will not accept blocks larger than 1MB. If they receive a larger block, they will not include it in their copy of the blockchain.
The only way to implement changes is to have the vast majority of users in the ecosystem accept them. For most blockchains, coordinating changes requires extensive discussion among users in forums, which can take months or even years. See Hard Forks and Soft Forks for details.
Chapter 2 - How does blockchain work?
Table of contents
How are blocks added to the blockchain?
Mining (proof of work)
Advantages of Proof of Work
Disadvantages of Proof of Work
Equity pledge (proof of equity)
Advantages of Proof of Stake
Disadvantages of Proof of Stake
Other consensus algorithms
Can a blockchain transaction be reversed?
What is blockchain scalability?
Why does blockchain need to expand?
What is a blockchain fork?
soft fork
hard fork
How are blocks added to the blockchain?
We've covered a lot of concepts so far. We understand that nodes are connected to each other and they can store copies of the blockchain. In addition, nodes will share transaction information and new block information. We’ve discussed the definition of a node, but you may still have questions: How are new blocks added to the blockchain?
No one assigns tasks to users. Since all nodes have equal power, a mechanism needs to be established to fairly decide who is given the opportunity to add new blocks to the blockchain. We need to build a system where users pay high costs for cheating and are rewarded for acting honestly. Any sensible user would want things to work out for the best.
Because the network is a permissionless environment, creating a block requires the unanimous consent of all users. Protocols often require all users to share the risk, i.e. they must put their own money at risk in order for the network to function properly. This action allows them to participate in the block creation process, and if a valid block is ultimately successfully generated, they will all receive a reward.
However, once someone tries to cheat, they are immediately discovered by other users on the network. Cheaters will lose all the rights invested. We call this mechanism a consensus algorithm because it allows network participants to agree on what blocks should be added next.
Mining (proof of work)
Mining is by far the most commonly used consensus algorithm. The Proof of Work (PoW) algorithm is often used in the mining process. Users need to work hard to solve the difficult problems of protocol formulation at the expense of computing power.
Such puzzles require users to hash transactions and other information contained in blocks. But the hash value must be below a certain value to be effective. Since there is no way to predict a given output, miners must keep hashing slightly altered data until they find a valid solution.
Obviously, the cost of hashing data repeatedly is quite expensive. In a blockchain that uses a proof-of-work mechanism, the “equity” invested by users includes spending money to purchase mining machines and the electricity consumed by the mining machines. This move is aimed at earning block rewards.
We mentioned earlier that hash functions are theoretically irreversible, but the process for checking their correctness is quite simple. If a miner sends a new block to other users on the network, all other nodes will use that new block as input to the hash function. These nodes only need to perform one verification to confirm whether the block is valid under the rules of the current blockchain. If it is false information, not only will the miners not get any rewards, but they will also waste a lot of electricity costs.
Bitcoin is the first blockchain to adopt a proof-of-work mechanism. Since the creation of the proof-of-work mechanism, many blockchains have come into use.
Advantages of Proof of Work
Proven – Proof of Work is by far the most mature consensus algorithm and has created hundreds of billions of dollars in value.
No permissions required – all users can join mining competitions or simply run a validator node.
Decentralization – Miners compete with each other to produce blocks, meaning hashing power cannot be controlled by any one party.
Disadvantages of Proof of Work
Waste – Mining consumes a lot of electricity.
Barriers to entry are gradually increasing - the number of miners joining the network is increasing day by day, so the protocol increases the difficulty of the mining problem. To remain competitive, users must purchase better-performing devices. This is enough to deter many miners.
Equity Pledge (Proof of Equity)
In a system that runs a proof-of-work mechanism, you pay for the mining machine and pay the electricity bill, which is the incentive for you to act honestly. If you don’t mine the blockchain the right way, you won’t get a return on your investment.
With the Proof of Stake (PoS) mechanism, there are no external costs. In addition to miners, we also have validators who can propose (or produce) blocks. They can use ordinary computers to generate new blocks, but only if they invest a large amount of equity funds and account for a considerable proportion of the entire capital chain to enjoy this privilege. Depending on the rules of each protocol, users are required to stake a predetermined amount of the blockchain’s native cryptocurrency.
Although different implementations will result in wildly varying results, once a validator stakes their units, the protocol randomly selects an eligible user to announce the next block. If done correctly, these users can earn rewards. It is also possible that many validators want to mortgage the next block, then the blockchain will allocate rewards according to the mortgage ratio invested by each validator.
“Pure” proof-of-stake blockchains are less common than delegated proof-of-stake (DPoS), which requires users to vote for nodes (witnesses) that validate blocks across the network.
Advantages of Proof of Stake
Environmentally Friendly – Proof of Stake has a much lower carbon footprint than Proof of Work mining. Staking eliminates the need for resource-intensive hashing operations.
Faster Transactions – Some proponents of Proof-of-Stake believe it can increase the throughput of transactions by eliminating the need to invest additional computing power in any of the arbitrary puzzles set up by the protocol.
Staking rewards and interest – These benefits are not paid to miners, as rewards for securing the network go directly into token holders’ accounts. In some cases, Proof of Stake allows users to earn passive income (in the form of airdrops or interest) simply by staking their assets.
Disadvantages of Proof of Stake
Relatively untested – Proof-of-stake protocols have not been tested at scale. There may be some unknown vulnerabilities in the execution process or in the cryptoeconomics.
Plutocratic – Some users worry that Proof-of-Stake encourages a “rich get richer” ecosystem, where validators receive more rewards the more they stake.
No-Stake Problem – In proof-of-work, miners can only “stake” on one chain, so they tend to mine on the chain with the highest success rate. During the hard fork, they were unable to bet on multiple chains while maintaining the same hash power. However, under the proof-of-stake mechanism, validators can mine on multiple chains at the same time with only a small additional cost, so it is likely to cause economic problems.
Other consensus algorithms
Proof-of-work and proof-of-stake are the two most common consensus algorithms. In addition, there are many other algorithms. Some algorithms combine elements of both systems, while others are completely different algorithms.
I won’t discuss it this time. If you are interested, you can check out the following articles:
Can a blockchain transaction be reversed?
从设计角度来看，区块链是运行极为稳健的数据库。其固有属性使得区块链数据一经记录之后便很难删除或修改。 而且在比特币和其他大型网络领域，发生这种事故的概率微乎其微。因此，你在区块链进行交易时，请三思，因为没有回旋的余地。
话虽如此，但是市面上存在许多实施区块链的方式，这些方式最本质的区别在于如何达成网络内部共识。这意味着，在某些实施方式中，尽管某个群组参与人数相对较少，但可以在网络内获得足够的权力来有效撤回交易。因此在某些小型网络上流通山寨币（挖矿竞争小，导致哈希率低）的情况才尤其令人担忧。
What is blockchain scalability?
Blockchain scalability is often used as an umbrella term to refer to the ability of a blockchain system to meet growing demand. Although blockchain combines many desirable attributes (such as decentralization, censorship resistance, and immutability), it is not perfect.
Centralized databases run faster and have higher throughput than decentralized systems. The latter exists for its own reasons, such as not having to synchronize with the network through thousands of nodes distributed around the world every time something changes. Blockchain is exactly the opposite. As such, scalability has been a hotly debated topic among blockchain developers for years.
To address some of the performance shortcomings of blockchain, a variety of solutions have long been proposed or implemented. However, to this day, no perfect solution has been reached. It may take countless solutions to be tried before you finally find a clear answer to your scalability problem.
At a macro level, a fundamental question about scalability remains to be solved: Should we improve the performance of the blockchain itself (on-chain scaling), or should we allow multiple transactions to proceed simultaneously without bloating the main blockchain (on-chain scaling) extension)?
Both research directions have obvious advantages. On-chain scaling solutions can reduce transaction size and even optimize how data is stored in blocks. Off-chain solutions, on the other hand, may require transactions on the main blockchain to be processed in batches and only added to the blockchain later. In addition, side chains and payment channels are also off-chain solutions worthy of in-depth study.
To learn more about this topic, see Blockchain Scalability: Sidechains and Payment Channels.
Why does blockchain need to expand?
If a blockchain system is to compete with centralized systems, it needs to have at least as good performance. In actual situations, the former must have better performance to motivate developers and users to lean towards blockchain platforms and applications.
This means that blockchain must provide developers and users with a better experience than centralized systems, such as being faster, more affordable, and easier to operate. However, it is actually not easy to maintain the basic characteristics of the blockchain discussed above while ensuring these premise.
What is a blockchain fork?
All software needs to be upgraded, and blockchain software is no exception. Only through upgrades can problems be solved, new rules added, or old rules removed. Since most blockchain software is open source, every user theoretically has the power to add updates to the software that governs the network.
Remember, blockchain is a distributed network. Once the software is updated, thousands of nodes scattered around the world need to communicate and implement the new version. But what happens if participants cannot agree on implementing the update? As there is no organization, no detailed decision-making process can be provided. This ultimately results in soft and hard forks.
soft fork
If all users can agree on the upgrade, everyone is happy. But in this case, the software is updated with backward-compatible changes, meaning updated nodes can still interact with non-updated nodes. But in reality, it is expected that almost all nodes will be upgraded over time. This is a soft fork.
hard fork
Hard forks are relatively complex. Once new rules are implemented, they are incompatible with old rules. Therefore, if a node running a new rule attempts to interact with a node running an old rule, communication will not be possible. This situation would result in the blockchain splitting in two, with the original software continuing to run on the old chain while the new chain would implement new rules.
After a hard fork, there will basically be two different networks running two protocols in parallel. It’s worth noting that at the time of the fork, the balance of the blockchain’s native units were cloned tokens from the old network. Therefore, after the fork, there will still be balances on the old chain in the new chain.
Please refer to "Hard Fork and Soft Fork" for details.
Chapter 3 - What is blockchain used for?
Table of contents
Blockchain applied to supply chain
Blockchain and gaming industry
Blockchain used in healthcare
Blockchain remittance
Blockchain and digital identity
Blockchain and Internet of Things (IoT)
Blockchain applied in governance
Blockchain used in charity
Blockchain used in speculation
Crowdfunding and Blockchain
Blockchain and distributed file system
Blockchain technology can be applied to a wide range of use cases. Let’s take a look at some of these types.
Blockchain applied to supply chain
An efficient supply chain is a core foundation for the success of many businesses and involves the handling of goods from supplier to consumer. It has always been difficult for the many stakeholders in a given industry to agree. However, blockchain technology could allow many industries to reach a whole new level of transparency. Establishing an interoperable supply chain ecosystem equipped with an immutable database is the basis for the robust, safe and reliable operation of many industries.
To learn more, see Blockchain Use Cases: Supply Chain.
Blockchain and gaming industry
The gaming industry has become one of the largest entertainment industries in the world and can benefit greatly from blockchain technology. Generally speaking, players are always at the mercy of game developers. In most online games, players are forced to use the developer's server space and abide by their ever-changing rules. In this case, blockchain can help decentralize the ownership, management, and maintenance of online games.
Perhaps the most significant of these, however, is that game items cannot exist apart from ownership, as this would eliminate true ownership and secondary market opportunities. By adopting a blockchain-based approach, games will be more sustainable in the long term if in-game items are issued as crypto collectibles that have value in the real world.
For more information, please refer to "Blockchain Use Cases: Games".
Blockchain used in healthcare
Medical systems must store medical records in a reliable way. However, the system's reliance on centralized servers makes sensitive information vulnerable to theft. However, the transparency and security of blockchain technology make it an ideal platform for storing medical records.
Using encryption to protect patient medical history in the blockchain can effectively protect patient privacy, and at the same time, major medical institutions can share patients' medical information. The current medical system is relatively decentralized, and if all participants had access to a secure global database, the flow of information between them would be much faster.
To learn more, see Blockchain Use Cases: Healthcare.
Blockchain remittance
When it comes to making international transfers, traditional banking processes are often complex. This is mainly due to the complex intermediary network, and the need to pay handling fees and wait for settlement. A series of factors lead to high costs and low reliability when using traditional business processes for emergency transactions.
Cryptocurrency and blockchain eliminate the middleman ecosystem, making money transfers affordable and efficient around the world. While blockchain will undoubtedly sacrifice performance for certain desirable attributes, there are already a number of projects leveraging the technology to enable affordable, instantaneous transactions.
To learn more, see Blockchain Use Case: Remittances.
Want to start your cryptocurrency journey? Go to Binance and buy Bitcoin now!
Blockchain and digital identity
Everyone wants to be able to securely manage identity information on the Internet, so a quick solution is urgently needed. Today, vast amounts of personal data are stored on centralized servers and analyzed using machine learning algorithms without the person’s knowledge or consent.
Blockchain technology allows users to have ownership of their own data and selectively disclose information to third parties only when needed. This type of encryption allows people to have a smoother online experience without sacrificing privacy.
For more information, see Blockchain Use Case: Digital Identity.
Blockchain and Internet of Things (IoT)
A huge number of physical devices are now connected to the Internet, and the number is only increasing. Some speculate that blockchain technology will greatly enhance communication and cooperation between devices. Automated machine-to-machine (M2M) micropayments can create a new economic environment, but rely on a secure, high-throughput database solution.
To learn more, read Blockchain Use Cases: Internet of Things (IoL).
Blockchain applied in governance
Distributed networks can define and enforce their own forms of governance in the form of computer code. It is therefore not surprising that blockchain may have the opportunity to decentralize and bypass various governance processes at local, national and even international levels.
More importantly, it could solve one of the biggest problems currently facing open source development environments, which is the lack of a reliable mechanism for allocating funds. Blockchain governance ensures that all participants can participate in decision-making and can provide a transparent overview of which specific policies are implemented.
To learn more, read Blockchain Use Cases: Governance.
Blockchain used in charity
Charitable organizations are often hampered in their efforts because of restrictions on how they receive funding. Even more frustrating is the fact that the final destination of donated funds is sometimes difficult to track with precision, which undoubtedly dissuades many people from supporting these organizations.
The focus of “cryptophilanthropy” is to use blockchain technology to circumvent these restrictions. This model relies on the inherent properties of technology to ensure greater transparency, global engagement and reduced expenses. This emerging field is looking for a way to maximize the impact of charities. The Blockchain Charitable Foundation is just such an organization.
To learn more, read "Blockchain Use Cases: Charity."
Blockchain used in speculation
There is no doubt that blockchain technology is highly sought after by the speculative community. Frictionless transfers between trading platforms, non-custodial trading solutions, and a growing derivatives ecosystem make it an ideal playing field for speculators of all types.
Due to its inherent characteristics, those willing to take the risk involved in investing in this emerging asset class will see blockchain as an excellent tool. Some people even believe that once the technology and surrounding regulatory measures mature, the global speculative market is very likely to adopt a tokenization model on the blockchain.
To learn more, please read "Blockchain Use Cases: Prediction Markets".
Crowdfunding and Blockchain
Online crowdfunding platforms have been developing for decades and have laid a solid foundation for the peer-to-peer economy. The success of these sites shows that there is real interest in the development of crowdfunding products. However, as custodians of funds, these platforms may extract a considerable portion of the fees as handling fees. Additionally, they will develop their own set of rules to facilitate agreement between the different actors.
Blockchain technology, and more specifically smart contracts, can enable a more secure and automated crowdfunding model, where computer code defines the terms of the agreement.
Other applications for crowdfunding using blockchain technology include initial coin offerings (ICOs) and initial exchange offerings (IEOs). In a similar token sale process, investors raise funds with the expectation that the network will succeed in the future and they will receive a corresponding return on their investment.
Blockchain and distributed file system
Compared with traditional centralized storage methods, Internet distributed file storage has more advantages. A large amount of data stored in the cloud relies on centralized servers and service providers, which are often more vulnerable to attacks or data loss. In some cases, users sometimes face inaccessibility as centralized servers are subject to censorship.
From a user perspective, blockchain file storage solutions work on the same principles as other cloud storage solutions, you can upload, store and access files. However, what happens behind the scenes varies widely.
If you upload files to a blockchain repository, they are spread across several nodes and replicated. In some cases, each node will store part of the file contents. Parts of the data are not of much use to them, but you can always ask these nodes to provide individual parts, so that you can break them into whole parts and get a complete file.
Storage space comes from participants who provide their storage space and bandwidth to the network. Typically, participants will receive financial rewards if they provide these resources, but will be subject to financial penalties if they do not comply with the rules or fail to store and provide documents.
You can think of this type of network as similar to Bitcoin. In this case, however, the main goal of the network is not to support the transfer of monetary value, but to enable censorship-resistant, decentralized file storage.
Other open source protocols such as the InterPlanetary File System (IPFS) have paved the way for this new, persistent, distributed network. In fact, IPFS is just a protocol and a peer-to-peer network. To be precise, it is not a blockchain. However, it applies some principles of blockchain technology to improve security and efficiency.