What is a Blockchain?
A blockchain is a public ledger of information collected through a network that sits on top of the internet. It is how this information is recorded that gives blockchain its groundbreaking potential.
Blockchain technology is not a company, nor is it an app, but rather an entirely new way of documenting data on the internet. The technology can be used to develop blockchain applications, such as social networks, messengers, games, exchanges, storage platforms, voting systems, prediction markets, online shops and much more. In this sense, it is similar to the internet, which is why some have dubbed it “The Internet 3.0”.
Blockchain vs. crypto vs. web3
People often mix up blockchain technology and crypto; as time progresses Web3 is now also getting lost in the lexicon of blockchain. The truth is that it is not difficult to divide these concepts in your mind, but you do need to understand how they differ first.
- Blockchain: The underlying technology that keeps the financial and data driven software. At its core, blockchain is an unending decentralized ledger that is updated with each new transaction.
- Cryptocurrency: Not all blockchain systems incorporate a monetary feature to their chains, however, those that do, use cryptocurrency. You can use crypto for a variety of things, including voting within a network, opening smart contracts, and for transactions, among other things.
- Web3: Web3 is a continuation of Web2 and brings in many contemporary technologies including blockchain. Decentralization through the use of blockchain technology allows for true ownership of data and a greater freedom when operating on the web.
Why is it called blockchain?
The name of the technology is a compound word coming from the fact that data (including transactions) are all stored in blocks of data. Each block of data is connected to the last in a sequence not unlike a chain. The purpose of this structure is to have a continually verifiable line of information connecting back to the original data added, which is called the genesis block.
Characteristics of Blockchain
Blockchain technology is built on a particular set of principles:
- Monetary efficiency
The problems that brought about the development of blockchain were those of an outdated system for storing and handling money. From there developers began to experiment with ways we can have more control over our capital and use it more freely.
No one owns the blockchain, this is what is meant when we say that blockchain is decentralized. Anyone can use it and it is not overseen by any one person or company. Most chains are led by a dedicated developer team that continues to build and improve it. These improvements need to be approved by the community that uses the chain, those who hold the native currency of the chain.
Cryptography is another essential feature of the blockchain. Cryptography allows the security to hold and use assets without the fear of them being taken without the owner’s consent. Each wallet is protected by public and private key technology that encrypts the data inside the wallet. Equally, each time transactions are made, cryptographic puzzles are cracked by anonymous third parties called miners or validators to keep the network safe. This is done through each chain’s individual consensus algorithm.
Examples of Blockchains
Development and research into the technology has led to many different iterations of the technology being built. Some of these platforms are more crypto-focused, while others remove the monetary aspect altogether. Some focus more on digital ownership as in the case with NFTs and some are forming the basis for Web3 use and development.
- Ethereum: Ethereum was the first ever chain to implement the idea of smart contracts and Decentralized Applications (dApps) into its infrastructure, making exploring new concepts using blockchain technology simpler and more efficient.
- Enjin: This NFT focused chain allows game developers to incorporate NFT technology into their video games through their Software Development Kit (SDK).
- Acala: Built on the Polkadot network, Acala allows users to trade coins and tokens on the Polkadot network freely without leaving the decentralized space.