Simple Explanation of How Blockchain Works. How To Use Technology Today?

Every year the blockchain technology is becoming increasingly popular among a wide audience. But not everyone knows what it is. Many people associate it only with Bitcoin and cryptocurrencies. But in fact, the application sphere of this technology goes far beyond the financial sector. In this article we will tell you in simple words what blockchain is, where it can be used and what future waits for it.

1. What is blockchain in simple words?

How can you explain what blockchain is without using complex terms? Very simple. Basically, the blockchain is a registry (list) of certain data, that is contained in blocks. These blocks are connected between each other according to the certain rules and create a single chain. All this information is stored on different (unrelated) computers at the same time. This gives the blockchain its main feature – decentralization.

So, without going into the deep technical nuances, the work principle of this technology can be compared with the register, which is possessed by each network member. Once data gets into blockchain, it cannot be deleted or changed, since in order to do so, it`s necessary to upgrade the data on each individual computer that is connected to the network. Any attempt to deceive the system will end up with a failure, because the algorithm immediately detects a mismatch.

2. Briefly about how the blockchain technology works

The term “blockchain” speaks for itself, since the basic form of the system is a growing sequence of blocks. These blocks are distributed among all participants (miners) with the help of a peer-to-peer network (torrent`s work is built according to this principle).

Each individual block has its own unique identifier (hash sum and time stamp). Each block has exact place in the chain. Any attempt to change their sequence will end up with a failure, because a network will recognize hash sum mismatch and errors and will reject chain.

There are so-called consensus protocols used in the blockchain technology, they make it impossible to change the unique identifier of block. There are several of them, but the most common are two:

  • Proof of work. The greater miner`s computing power is, the greater is the probability that he will find a new block.
  • Proof of stake. The more coins a miner has in wallet, the greater is the probability he will get a new block.

3. What types of blockchain are there?

As we have mentioned before, the blockchain technology can be used in various fields. We will return to this topic in more detail in the next section, now we would like to discuss what types of blockchains are there:

  • Public blockchain. The exchange of data or transactions occurs freely and uncontrollably. (Bitcoin, Ethereum, etc.)
  • Public closed blockchain. The exchange of data or transactions takes place with the participation of specially selected nodes only. (Ripple)
  • Private blockchain. The exchange of data or transactions is fully controlled by the central site (private companies).

For the needs of the majority of companies the public blockchain is simply not suitable. Using private network is ideal to store commercial information.

4. Where can the blockchain technology be applied?

Well, it’s time to talk about the areas where the blockchain technology can be used. In fact, there are a lot of them. We simply cannot physically describe each of them in one article. So let`s focus on the most interesting and promising industries. Below, we are presenting not just abstract examples of how this technology can be implemented, but telling about actually working companies. So let’s get started.

  • Copyright

A number of different companies are already working in this area (Proof of Existence, Verisart, Monegraph, Bitproof, Ascribe, etc.). With the help of these services, people who create any intellectual property have the opportunity to retain copyright. How does it work? Each edition (song, picture, book, etc.) is assigned with a unique identifier and a digital certificate, which is used to verify the authenticity of copyright. Using these services, the author can easily transfer the ownership of his work to a buyer or any other person.

  • The exchange of various physical goods

With help of the Uphold company, you can easily exchange goods, raw materials or any kind of money. The Uphold service works with any banking operations and cryptocurrency wallets at the same time. You can add or withdraw funds to the Uphold by using: credit or debit card, BTC wallet or bank transfer.

The next company – “The Real Asset Company”, helps individuals to buy and sell precious metals. The company operates an international infrastructure of vaults and safes, that are available to their customers. Transparency of all operations with precious metals is provided by the internal cryptocurrency. The creators of The Real Asset Company are confident, that linking the gold to the digital coin will return this precious metal to the financial systems of different countries of the world.

  • Database storage and management

One of the most successful projects in this market segment is Factom. Due to this service, companies have the opportunity to transfer all their data to blockchain. It can be both private companies and non-profit organizations, and even government institutions. With the help of Factom, companies may not worry about safety and security of their data.

  • Internet of things

This direction is very promising and the blockchain technology can also be applied here. For example, an American company Chronicled launched a whole blockchain platform for the Internet of things, which allows you to track the location of physical objects using microchips.

  • Diamond industry

As is known, the largest diamond mining countries are the countries in Africa. It’s no secret that diamond mining is accompanied by a high level of crime and lawlessness. The fact is that gems have very small sizes, for this reason they are quite easy to smuggle.

In general, due to the lack of transparency this industry has a number of problems: starting from money laundering, ending with the financing of the international terrorism. The Everkedger company is trying to fix this situation. With blockchain`s help, this project will be able to have the data about each individual gemstone: its origin, history of movement and the current owner. Most importantly, all this data cannot be changed, forged or deleted. The Everkedger provides a “digital passport” to every diamond. The company creators are confident that such decision will provide transparency for diamond industry and reduce the number of crimes.

  • Energy industry

One of the main mankind problems is saving energy. One of the main tasks of the energy sector is the proper optimization and distribution of energy. In this area, the blockchain is also a good helper. For example, the Grid Singularity is the decentralized platform that helps: to share information, analyze data, conduct tests, manage intelligent power systems and much more.

  • Digital voting

No elections that have ever been held on the planet are 100% transparent so far. There would be no doubts in truthfulness of results, if the voting would be held with the blockchain help. So, the Follow My Vote company is working on creating the transparent blockchain platform for voting. The project is still on the development stage, but the creators have already put the source code of the future platform for an open access. Anyone can get acquainted with the technical details of this project.

  • The game world

The blockchain`s essence is it`s versatility, and it can be successfully used even in the video or gambling industry. Here are a few already working projects in this area:

  1. Etheria is a virtual world in which players must capture new cells of a playing field. They can do this with the help of mining, that is, mining new blocks. All information about players, virtual world and events that take place in it, are stored in the blockchain.
  2. Etheramid is a cryptocurrency pyramid simulator. The essence of the game is to invite new users (there are 7 levels), for which players get the internal coin ETHER.
  3. Here are some of the most popular gambling representatives (Etheroll, Rollin, CoinPalace, Ethereum Jackpot, etc.).
  4. Government structures

The Advocate platform is created to improve the interaction between the officials and citizens.

The Borderless company works worldwide in the economic field (various financial transactions) and legal services (registration of companies, notary, registration of marriages, etc.).

5. What future is expected for blockchain

Some experts believe that the blockchain technology is a hype, which will subside sooner or later, and that it simply does not have the future. But such statements are more concerned with Bitcoin and the cryptocurrency market. Based on all the above mentioned information, it can be concluded that the blockchain technology goes far beyond the digital coin industry. It is really capable for solving a number of fundamental problems in various sectors of the economy. Therefore, to speak about the uselessness of this technology is not logical at least.

The vast majority of experts are confident that now the blockchain technology is only at the very beginning of its development. It can fully reach its potential in the next decade.

6. Conclusion

In this article we talked about what blockchain is and where it is used. But we have given a far from complete list of those industries in which it can be implemented. For example, blockchain technology in education, real estate, social networks, the food industry, logistics, etc. Some people compare the significance of blockchain with the invention of the Internet and consider, that it will be able to change the world beyond the recognition in the near future.