Blockchain technology is revolutionizing the way we do business. Traditionally, blockchains have just been the underpinning of cryptocurrencies like Bitcoin and other digital assets, but are now showing that they can have much bigger uses in the business world.
In this post series, which is written and published to the Hive blockchain, we are going to help you first understand what blockchains really are, and then how you can leverage them in your business to help it thrive!
With everything from finance, social media, email and affiliate marketing, ecommerce, and more, there are blockchain solutions either already built or in production that can help your business flourish in the future!
First, we are going to start out with an introduction to what blockchains are and why they exist!
An Introduction to Blockchains
Before we consider the different ways blockchain can help your business, it’s important you understand exactly what blockchain really is. Many of you already know because we have been around the space a bit, but for those who are new to the crypto world, this may be all new to you. Maybe this can help even those who have been around for a while... If anything, give you the wording to help others learn...
Simply put, a blockchain is a continuous ledger that records transactions and verifies them across different computers in different parts of the world.
Its job is to make records of each transaction which includes information like the date and time, dollar value of the transaction, and the participants involved. This data is all encrypted into a “block” that is linked to other blocks, forming that thing we call the blockchain.
So, you first have information, like a deal between people, which is then added to other records to make a block. The final product is all the blocks linked together in one long “chain.”
Let’s look at it more simply, with examples...
Suppose Mr. Brown is selling three coins to Mrs. Pink for $75. The computer record will list all these details, including digital signatures from both Mr. Brown and Mrs. Pink. The record is then checked by the computer network.
The computers in that network (called “nodes”) check the details of the transaction record to make sure that it’s valid. Records that are accepted by the nodes are added to a block. Each block also contains a unique code called a hash, as well as the hash of the previous block in the chain.
These hash codes allow the blocks to be linked together in order on the chain. This code is created by a mathematical function that takes digital information and creates a string of letters and numbers from it. No matter what size the original file may be, a hash function will always generate a code that is the same length as all the other codes.
For example, a tweet message is far shorter than a novel like 'The Lord of the Rings', yet they both would have a hash code of the same length.
A blockchain database is shared across a network of computers, so no one computer contains the information. That network is constantly checking the information to ensure that all the copies of the database are correct. This creates what we call decentralization, which is a fancy word that means there is no central point of failure. This ensures that the network cannot be shut down as long as computers somewhere in the world are running the blockchain.
Once a record has been added to the blockchain, it’s very hard to change it. Any changes to the record will generate a new hash code.
So, back to our example, if someone decided to edit 'The Lord of the Rings' and removed a single comma, the resulting edit would have a whole new hash code.
This is why it’s so hard to hack a blockchain. The blockchain will still have the original hash code embedded in it, so for a hacker to restore the chain, he or she would have to recalculate that—and the next hash code, and the next, and so on. Recalculating all those hash codes would take a hacker an enormous amount of computing power (not to mention the time).
Talking About Transparency Through Decentralization
One of the reasons cryptocurrencies are so fascinating is that there’s no central authority controlling the blockchain, at least in most cases. Each person in a blockchain has the capability to access the same information. This provides transparency and continual reconciliation.
And, since the blockchain exists on many different computers without a centralized version of the information, there’s no central database a hacker can attack. This means you no longer need a trusted third party to verify your information and process your transactions. You do, however, need some way to trust the other parties.
Members of a blockchain are anonymous and there’s no real way to tell if they’re trustworthy or not. To resolve this issue, blockchains set tests for the computers who try to join the network. These tests are called consensus models. The consensus model tests require a computer to “prove” themselves in one of two ways.
Proof of Work or Mining
Proof of work requires a computer to “work” an increasingly difficult computational puzzle in order to add a block to the chain.
This process, which is called mining, takes a lot of computer power. In return for this work, members may receive rewards like tokens or bitcoins. Many of the traditional blockchains use proof of work as their consensus model. Some examples are Bitcoin, Litecoin, Monero, and many others. Ethereum started out and is currently a proof of work blockchain, but is about to make a change over to a proof of stake model, which is the next type of consensus.
With proof of stake, instead of using a bunch of expensive computers and power, participants buy tokens that allow them to join the network. The more tokens they have, the more they can mine. When the user stakes the tokens, they are in many cases locking these coins up for a period of time. The act of staking is what helps run the blockchain and process transactions.
Proof Of Stake or Staking
There is a type of staking called delegated proof of stake, where people set up full nodes of the blockchain which are the ones that produce the blocks and verify the transactions. Token holders can stake their coins and then delegate them to these validators, which those with more delegations will be higher up the list and able to transact and create more blocks.
This generally gives a higher staking commission. Many of these validators earn transaction fees or commissions for running these nodes. Delegated proof of stake allows for stake holder governance models to be included. This is the case with the Hive blockchain and many others like the chains in the Cosmos Hub ecosystem.
Concluding The Introduction to Blockchains
So as you can see, a blockchain is really nothing but a big database that is stored on different computers all over the world making it extremely hard to hack and stop. The miners and validators keep the blockchain secure and safe by keeping these records on their computers and verifying it with the previous transactions to make sure bad actors aren't going to break anything. That's really it. They are essentially the most secure computer networks in the world.
As we go on to the next parts in the series, you will now have a better understanding of the language that we will be using going forward! This can also help you better understand the tech as a whole so you can find ways that you can change your business and bring it into the blockchain world!
