Blockchain in Spanish literally means blockchain. It is basically a system with which secure transactions can be made between people all over the world without the need for intermediaries.
Marc Andreessen, creator of Netscape and partner of Andreessen Horowitz, one of the most important venture Capital funds in Silicon Valley, has defined blockchain technology as a registry.
Blockchains can only be updated by the consensus of the majority of the system participants, who are called nodes and who are essentially a computer arranged for these transactions. This information can never be deleted or modified, so Blockchain is presented as an immutable and permanent record.
Blockchain was born out of the need to eliminate intermediaries such as banks, in the case of financial operations. These institutions are necessary to be able to make transactions of value, because they are responsible for certifying that we are who we say we are. In exchange for providing us with this service, banks or electronic platforms such as PayPal keep the users' data and trade with them. This restricts privacy and with it freedom.
Blockchains came to change this. And it is that with this technology it is not just one participant who has the information, but millions. It is a large database in which many nodes keep a copy of the information. Blockchain bases the certification of information on consensus, that is, if we all have the same information, it means that that information is true.
Each transaction that is made is added as a block to a chain. Therefore, it is said that the records are linked and also encrypted to protect both the security and privacy of transactions. This also means that these transactions are anonymous. That is, the system only knows that from one digital wallet you want to transfer a certain amount to another, but the data of the people are not known.
How Does Blockchain Work?:
Now that you know what technology is, you should know how it works. The process is not complicated, but it involves more people. It is no longer the bank where you will have to certify transactions, but a group of users.
Everything starts when A wants to make a transaction for B. In the network this transaction is represented as a block. This is transmitted to all parts of the network, that is, to the nodes that are connected, so that they approve its validity. Once this is done, the block can already be added to the chain, becoming a transparent and indelible record. Finally, the money moves from A to B.
In this process, the nodes what they do is confirm that in fact whoever wants to make the transfer has enough funds to do so. If so, everyone ‘notes down’ the transaction and certifies that it can become part of the transaction block. This block is going to get bigger and bigger to the point where it doesn't support any more transactions.
The capacity of the block will depend on the structure of the blockchain and the size of each transaction. Once you have reached your limit, it will be time to validate it, which is the process that is performed when users do mining. This work consists of performing a series of rather complex calculations that in addition to time require a lot of electricity.
Once this is done, the blocks will be permanently registered on the blockchain. This means that they will not be able to be modified without altering the other blocks that are linked to it, something practically impossible because to carry out such an operation it would take most of the nodes to validate it.
Blockchain and its Advantages:
Blockchain is a large ledger where all transactions are recorded. With the emergence of this technology, many fintechs were born, that is, startups that offer their clients innovative financial products and services through the use of ICT's, which are information and communication technologies.
These fintechs, especially financial ones, take advantage of Blockchain for their business. They have also started using regtech (technology regulation) solutions to reduce risks, increase security, protect their data, among other things. But beyond what has arisen with the arrival of blockchains, it is important to know what specific advantages their use offers.
It allows to make financial transactions in a safe and reliable way. One of the main advantages of blockchain is that it allows making financial transactions between two participants in a safe and reliable way. Intermediaries no longer participate, but it is the users themselves who have control of their information and the entire transaction. Such information is distributed in multiple nodes independent of each other. They register and validate it without having to know the other participants.
It is transparent and at the same time private:
With this technology, transactions are more reliable for two reasons: they are transparent and also private. And the fact is that the movements, although they cannot be modified, are integrated into the network as a whole and are public, that is, they can be seen without problems by each of the parties. At the same time, the data coming from the transactions made between the parties are private. The information flow does not exist since the design is based on a block of chained codes.
Impossible to Adulterate Data:
Another great advantage, which makes it even more reliable, is that once the transaction data has been recorded, they are impossible to falsify. They are immutable, that is, they cannot be modified or deleted. This is possible because it works with different forms of data verification, therefore, the alteration of transactions by third parties is practically impossible. In addition, the database has a history with each of the operations since the creation of the technology.
The Instant Process:
With banks you have to wait a while for a transaction to be completed. With Blockchain, as there are no intermediaries, the process is instantaneous. The computer system used for operations works 24 hours a day, every day. Since the information is transmitted and saved automatically, there is no need to wait.
Information is Never Lost:
Because many nodes participate in its validation, the information is safe. Even if the network went down, the service would never be lost and would still work. Why? Only one of the nodes needs to be active. This is achieved thanks to decentralized networks, which also makes it more resistant to malicious attacks since it does not have a central point of failure.
A System, which Does not Admit Errors:
Banks can get transactions wrong, but blockchain can't. The data recorded on a blockchain is always correct because it is constantly checked by a network of people. The information that is recorded is agreed by all participants and therefore, there are no errors.
Very Low Transaction Costs:
One of the big problems of banks and currency exchange platforms such as PayPal are the high commissions they charge. These are imposed and there is nothing that users can do against that if they want to use the service. With Blockchain, users can be freed from large commissions, since the exchange of assets with this technology usually has a lower cost.
Blockchain and Other Trends:
With Blockchain globalization takes another step. And is that with this technology there will no longer be borders for transactions. Tedious paperwork and even export procedures can be avoided, regardless of the currency, goods and services can be transacted in another country without so many intermediaries being involved.
Applications of the Blockchain:
The financial sector and the world of cryptocurrencies are not the only ones that can benefit from blockchain technology. Many sectors are seeing the potential that this technology has, which added to others, can be very useful.
In fact, according to a study conducted by IBM's Institute for Business Value in 2017, by that time 33% of companies were already using Blockchain or were considering its use soon. In addition, 78% of respondents said that they were exploring its use to develop new business models or as a response to changes occurring in their sector.
As far as the financial sector is concerned, banks are already using this technology to streamline payments, transfers and remittances, and to lower the costs associated with these processes. Stock markets such as Nasdaq also use it.
But as we have said, blockchain applications are not limited to the financial system. These are the areas in which this technology is also being used.
Distributed Storage in the Cloud:
Blockchain makes it possible to distribute data storage. That is, instead of relying on services such as Google Drive or Dropbox, which are centralized cloud storages, files can be saved on a P2P (peer-to-peer) network, which means that they will be saved by several users.
In this way, since the information is not stored in the same space, it is more difficult, if not impossible, for it to be attacked by hackers or lost due to technical problems or natural disasters, for example. An identical copy of the data will be stored on each node of the network, which makes the system more secure.
Decentralization of the Internet of Things (IoT):
Most Internet of Things platforms are based on centralized models, that is, a single company is the one that controls the connected devices. However, it is not a very functional system, since as the popularity of this technology increases, it becomes more necessary for teams to be able to exchange data with each other quickly and autonomously.
The solution is in the development of decentralized IoT platforms and Blockchain allows it. With the blockchain, the exchange of data is carried out in a secure and reliable way and, in addition, an unalterable record of all the messages that have been exchanged by the different connected smart devices is created.
Some companies are already betting on this solution, such as IBM, which has created the ADEPT (Autonomous Decentralized Peer To Peer Telemetry) platform in collaboration with Samsung. Using Blockchain technology, this system is capable of generating a distributed network of devices.
Identity Management:
Another great application of blockchain is in identity management. With this technology, users can create their own digital identity, which is safe and reliable because it is tamper-proof. Experts say that this kind of blockchain-based ID could replace the increasingly vulnerable online usernames and passwords in the near future.
People will be able to use their Blockchain identity for many things, from simple actions such as accessing websites and apps to signing digital documents. In fact, there are already companies that have services of this style such as Keybase, Onename or ShoCard.
Registration and Data Verification:
This technology can not only be used to store financial transactions securely and immutably. It can also be used to store any other type of information, thus generating an incorruptible distributed registry, which also stands out for being more secure than traditional databases.
This application can be used in various sectors. In clinics and hospitals, for example, it can be used to create a record with the medical history of patients. It can also be useful for the protection of intellectual property and creative digital products such as electronic books, music, photos, etc. It can also be used for vehicle or property registration.
How to Invest in Blockchain:
If you are wondering why it is worth investing in blockchain, the answer is only one: it is the technology of the future. It is a technology that is revolutionizing the world, and every successful investor knows that the key to succeeding in business is to invest in projects with good future prospects, since they are the ones that bring the most benefits in the long run.
So, if you are thinking about investing in blockchain, you should know that there are many ways to do it. These are the most used options.
Crowdfunding:
Through crowdfunding, a crowdfunding network, it is possible to invest in Blockchain. And there are a lot of entrepreneurs wanting to make their technological ideas a reality and for this, they usually start a financing campaign. Many startups use Blockchain for their project, so you can decide to invest in this way. Of course, you should keep in mind that there is a high risk, since many times these new companies do not achieve the expected success.
Stocks:
One of the most common ways to invest in this technology is by buying shares in startups that use Blockchain. It is a fairly reliable option, although it is important to know how to choose the right company to make the investment. Companies that do not rely exclusively on Blockchain are recommended, because otherwise you run a higher risk of losing your investment.
A good example of an investment would be in IBM, since it is a technology company with a long history and with other business initiatives. That is, if the Blockchain succeeds as expected, IBM investors will win, but if this does not happen, other technologies such as the cloud computing service could be profitable.
ICO's:
This is another form of investment that could be beneficial, but one that you should be aware of when investing. An ICO is basically an event created to sell a series of new tokens (cryptocurrencies) that are part of a blockchain-based project. The investment is made with other well-known cryptocurrencies such as Bitcoin or Ether and the objective is to raise money to complete the development of the project in question.
To carry out the investment you must have the cryptocurrencies in a Bitcoin wallet, MyEtherWallet or in any other wallet that you use. Once you have registered for an ICO and have the funds available, you will need to send your cryptocurrency to the address of the campaign. Make sure you have the correct address, as they might encounter phishers or scammers posting fake addresses. In that case you will never get your money back.
Once you have your tokens you will be able to keep them and receive dividends for them once the company successfully passes the ICO stage or trade them.
Alejandro O. Asharabed Trucido
