What is Blockchain Technology?: The definitive guide for dummies.

by Claudia Torres on
8 min 45 sec
Blockchain is one of the most important and disruptive technology of the 21st century. It allows decentralized and secure recording of information. But... When has the blockchain started? Which are the main functionalities? What are its advantages? In this article, we will tell you everything in great detail.
What is Blockchain Technology?: The definitive guide for dummies.


Solutions for vintage problems. What is Blockchain?

The concept of Blockchain was created in 2008 by a person or group of people who call themselves Satoshi Nakamoto.

The main idea was to develop a decentralized and secure digital currency that would not be under the control of any government or central entity.

There are different types of blockchain networks, which can be private, public, federated, and hybrid. Depending on the characteristics of each project or area, organizations will choose from the different types of blockchain the one that best suits their needs.

Blockchain is generally associated with Bitcoin and other cryptocurrencies, but these are just the tip of the iceberg.

Since its first implementation to create the Bitcoin cryptocurrency, Blockchain has not stopped. Generating a large number of advantages and benefits.

  • Security

Blockchain, as we have anticipated, is a decentralized database. There is no central entity that has control of the information, thus eliminating the "intermediaries", such as banks.

The information is stored in a network of nodes, each of which has a complete copy of the database.

Each transaction is verified and validated by the network of nodes, ensuring that the information is accurate and reliable.

In addition, each transaction is encrypted, meaning that only people with a private key can access the information.

  • Transparency

The network is highly transparent due to its decentralized nature. Anyone can view all the transactions on the blockchain, which eliminates trust issues and accountability.

  • Efficiency

It is a very efficient technology compared to traditional systems due to its nodal and automated nature.

The validation and verification of transactions are carried out automatically in the network of nodes, which eliminates the need for intermediaries and reduces costs and processing time.

  • Decentralization

Each node on the network has a complete copy of the database. This means that there is no centralized point of failure and the information is more resistant to attacks.

  • Immutability

It is immutable, it means that once a transaction has been recorded, it cannot be modified or deleted. This makes the network very useful for record management and document authentication.



Multinodal paradigm: How does Blockchain work?

Blockchain technology is a distributed data system that allows an online list of digital transactions. Through cryptographic processes, this list is simultaneously copied onto thousands of computers in what we call the distributed ledger system.

Each transaction is recorded in a data block that is linked to the previous block in the chain, creating an immutable sequence of data blocks.

Tokens and ledgers in the Blockchain are two different concepts with different functionalities. Tokens are used to represent digital assets, while ledgers are a way to maintain a decentralized and transparent record of transactions on the network.

Ledgers: Everything everywhere all at once.

Ledgers are also known as distributed ledgers or distributed accounting records.

The main feature of a ledger in blockchain is that it is a decentralized and distributed record that is maintained by a network of nodes.

Each node in the network has a complete and up-to-date copy of the ledger, ensuring the security and transparency of the information stored.

Records benefit from cryptography, meaning that transactions on the blockchain are encrypted and secured with public and private keys.

Ledgers are used for a wide variety of applications, from cryptocurrencies and financial transactions to smart contracts and electronic voting.

Transactions cannot be modified or deleted once they have been recorded on the blockchain. If their record includes an error, a new transaction will be added to reverse it, but both transactions will be visible.

This helps to prevent fraud and ensure the accuracy of the data.

Tokens: Preserving digital assets.

This is a key functionality. In general terms, a token is a unit of value that can be used to represent assets, rights, or anything else of value.

In the context of Blockchain, tokens are created as digital assets and can be exchanged between users of the network without the need for intermediaries, making them very attractive for the creation of new decentralized applications and the implementation of innovative business models.

They can be created and stored on different platforms, such as Ethereum. They can be used for a variety of purposes, from creating digital currencies to representing physical assets or property rights.

The Ethereum platform is a Blockchain network that allows the creation and execution of decentralized applications and smart contracts.

It is known for its ability to create and store tokens using the ERC-20 token standard, which allows the creation of custom tokens compatible with the Ethereum platform.

However, there are also other blockchain platforms that allow the same functionalities. For example, the Binance Smart Chain platform is also used to create and store custom tokens, and other platforms, such as EOS, Stellar, and TRON.

Tokens can also be used to reward users for their participation in the network, which can encourage the adoption and growth of a specific blockchain platform.

Bitcoin is a cryptocurrency and therefore is a type of digital token stored on the blockchain. In this case, tokens represent units of value in the form of bitcoins.

Each Bitcoin token is linked to a unique Bitcoin address. This is a string of characters that acts as a kind of account number. Users can send and receive Bitcoin tokens through their Bitcoin addresses, allowing them to conduct transactions securely and without the need for intermediaries.


Using the network of nodes: What is Blockchain for?

Its application is very broad in various sectors, and it is expected to have a significant impact on a wide range of industries in the future.

Some of the existing Blockchain functionalities that can improve various industries and daily transactional life are:

  • Smart Contracts

A smart contract is a program, a type of digital contract that automatically executes when certain pre-established operability conditions are met.

Instead of having to rely on a third party to validate the contract, such as a notary or lawyer, smart contracts run on a decentralized network of nodes within the blockchain. This implies that these contracts are transparent, secure, and do not require the intervention of third parties. They cannot be altered without the knowledge of all parties involved.

Digital contracts are developed using specific programming languages that allow encoding the necessary conditions for their execution. For example, it can be set that a payment is made automatically when a certain product or service is delivered.

Smart contracts can be used in a wide variety of situations, from automatic payments to intellectual property agreements.

The application of smart contracts automates and simplifies a large number of processes. Also, they are useful in situations where high transparency and security are required, such as in the finance sector.

A significant example of the application of smart contracts is in the sale of a house. Instead of having to rely on intermediaries to make the payment and transfer the property, a smart contract can set the conditions for the transfer and carry out the transaction automatically when all requirements are met.

  • Fundraising

In the case of charity organizations, donations can be favored through the transparency offered by blockchain transactions.

Organizations often face challenges in ensuring that the public has confidence that funds are directed to the intended destination.

Using the Blockchain network means that information about the allocation of funds is visible to financiers.

  • Internet of Things

The Internet of Things (IoT) and blockchain technology are two of the most promising innovations of the last decade.

Blockchain can be used to add security and transparency to IoT devices. For example, IoT devices can generate a large amount of data used to improve the efficiency and automation of business processes. However, this data can also be vulnerable to malicious attacks if not handled properly.

It can be used to securely and transparently record and verify data from IoT devices.

Moreover, it can also be used to ensure the authenticity and privacy of the data generated by the devices.

Another example of how blockchain and IoT can work together is in the creation of automated payment systems.

IoT devices can generate financial transactions that can be securely and transparently recorded in the network of nodes. It can also be used to automatically verify and validate these transactions, which facilitates payments and reduces the possibility of fraud.

  • Healthcare

Blockchain technology has demonstrated its potential to improve healthcare and the health industry in general. It can favor the management of medical records, improve data security, and make healthcare processes more efficient.

One of the main advantages of the network of nodes in healthcare is the ability to store and share records usefully and securely. Medical records are one of the most important assets of any patient and must be kept safe and confidential.

Additionally, blockchain can help improve the interoperability of care systems. By connecting different health network systems through the network, medical professionals can access a variety of records and medical data in real time. This can be particularly useful in emergency situations where access to information can be crucial.

  • Supply Chain Management

Blockchain technology has transformed supply chain management, making records immutable and transparent.

The technology in question allows for real-time recording and complete traceability of all processes within the chain.

The ability to access a complete record of transactions and processes increases trust and transparency in the chain. This prevents third parties from modifying information, which in turn contributes to the security of the chain.

It also enables process automation through smart contracts, which can reduce errors and administrative costs while improving process speed.

  • Cryptocurrencies

A cryptocurrency is a form of digital currency that uses blockchain technology to ensure security, privacy, and decentralization in its creation, storage, and transactions.

They use cryptography to ensure the security of transactions and to prevent the counterfeiting or duplication of these coins. Currently, they are mainly used as a form of investment, store of value, and as an online payment method, although they are also used in the financial sector for the creation and trading of security tokens.

Blockchain technology offers a wide variety of benefits and functionalities. Undoubtedly, they constitute a reality based on the predictability of mathematics that allows us to verify, validate, track, and store everything from logistics and messaging services, digital certificates, smart contracts, voting systems, to money and financial transactions that improve our day-to-day experiences.

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