HomeCryptoUnderstanding the blockchain and its utilities in different projects

Understanding the blockchain and its utilities in different projects

In general terms, blockchain is a P2P (Peer-to-Peer) distributed information registry where the different participants do not have to trust each other since there is a consensus protocol that guarantees the security and veracity of data. Another of the main characteristics, and without a doubt one of the most relevant, is the immutability of the chain; in blockchain, it is not possible to edit or delete information.


In general terms, blockchain is a P2P (Peer-to-Peer) distributed information registry where the different participants do not have to trust each other since there is a consensus protocol that guarantees the security and veracity of data. Another of the main characteristics, and without a doubt one of the most relevant, is the immutability of the chain; in blockchain, it is not possible to edit or delete information.

Regarding its application outside the world of cryptocurrencies, since 2008 the use of blockchain development has been studied and explored as a tool with multiple applications in many different fields. Some of the most attractive are decentralized document registration, medical records, property registration, organization and distribution of energy resources, customs control, voting systems, digital identity, or monitoring of production processes.

Although it could be defined as such, technically a blockchain is not a database since its main purpose is not to store data but to record transactions. In fact, many times a database is needed as a complement to the blockchain to house heavy documents that may exist, for reasons of efficiency. Otherwise, the copies of the blockchain held by each authorized participant would become very large.

How does blockchain technology work?

Step 0. Any person or group of people who want to be part of the network have two options depending on the type of blockchain being used; download the corresponding application that makes them a node with the same rights as all the others or access via a web interface that the administrator nodes have provided for the rest of the authorized users.

Step 1. Once the participants are connected to the chain, the first step is to send information in the form of transactions that will eventually end up constituting the blocks of the chain. A first protocol acts here in such a way that each node automatically checks that the transactions it “hears” are valid and if the transaction is correct, each node adds it to its list of transactions.

Step 2. Each node fills its list or pool with the transactions it listens to.

Step 3. In each round -which, depending on the blockchain, takes place after a time that can vary, on average, from a few seconds to several minutes-, a node is randomly chosen to propose a block.

Step 4. The chosen person proposes a new block with the transactions that he has been “listening to” and registering in his pool. Before being sent to the other nodes, this block must be validated with a hash -which is the alphanumeric code obtained from all the information in the block-.

Step 5. The system -the internal protocols of the blockchain- only accepts the block if it has a valid hash. In the positive case, the rest of the nodes verify that all the transactions are also correct and update their copy of the chain with this new version that contains the new block.

Blockchain features and applications

Among the features that make blockchain a useful tool, transparency, decentralization, and no need for intermediaries can be highlighted.

– The concept of transparency, or the way in which it is achieved, varies depending on the type of network that we are using. In public networks, in general, transparency is total since any user who registers in the chain is provided with a copy of the entire blockchain, being able to see in it the current state of the assets and the history of transactions. In private and federated networks, access is restricted and via the web for the majority of users. For these users, the level of transparency is the one that the network administrators decide to offer them through this web interface.

– Decentralization is a determining requirement when deciding whether or not a blockchain is a good tool for a specific case. To the extent that decentralization is desired, blockchain wins integers. If instead, you want to have a centralized database, then blockchain is generally not going to be the best option at all.

– Regarding the non-necessity of intermediaries, it is convenient to emphasize the words “no need”. Blockchain was born with Bitcoin to avoid the need for financial institutions to intervene or verify monetary -or cryptomonetary- transactions between individuals, so that here the elimination of their intermediation was desired and achieved the objective.

Blockchain technology makes it possible to build solutions that range from a centralized registry without transparency to a decentralized network, with complex validation rules and a high level of transparency. That is why it is important to highlight the need to understand blockchain not as the solution to any problem but as a tool that will be useful if used properly, which implies studying each particular case individually.

How to identify when a blockchain is a useful tool?

Blockchain is a technological tool that must be surrounded by a strategic plan that understands the needs of the project, identifies the degree of transparency and decentralization, determines the members that will act as nodes, and establishes the appropriate blockchain structure, defining how the transactions and/or Smart Contracts to execute.

Blockchain is software that allows you to create things that are very different from each other, so the specific implementation that is carried out will be decisive when deciding whether it adds value or not.

One way to see if blockchain is necessary and useful is to ask yourself a series of questions:

What issue are you attempting to resolve?

This avoids starting with “I want to use blockchain for something but I don’t know what yet”. It is impossible to find a good solution if a problem is not well defined, and it is impossible to know if and how to use blockchain without knowing why.

Who will have access to the blockchain network? Who will manage the permissions?

It is important to establish well who is going to participate in the network and how. If it is a private or federated network, the structure of nodes and the transactions that each one can carry out and/or validate will have to be carefully designed. Regarding web access for ordinary users, if there is one, it will also be important to study what is going to be shown to them and how it is going to be shown. It is not necessary for the user to know that behind the web interface that he is using there is a blockchain network.

What is the budget?

Since the technology is not intended for small-scale solutions and the possible implementations make up a very large and diverse range, it is impossible to estimate a general budget on how much a solution using blockchain can cost.


In recent years, blockchain has become one of the technologies that arouses the most interest globally. Government institutions, international organizations, or large companies are trying to build solutions using these blockchains.

Although the technology, although ingenious, is not excessively complex, building a large-scale solution where each participant understands, respects, and fulfills their role is. That is why, as a project grows in size, the challenges are not only technological but the difficulty also lies in bringing all the actors together under the same consensus and the same rules.

Blockchain is not a solution but a tool that, consequently, like a hammer is good for driving nails but not for driving screws, it is not always the best option.

As for the challenges that blockchain will face in the future, it is necessary to talk about the arrival of new quantum technologies. These will completely change encryption and cybersecurity techniques in the next decade.

While blockchain technology may continue to be secure and useful, it will have to undergo certain changes to adapt to this new era. Undoubtedly, in the coming years, it will be seen if blockchain is here to stay or if it has simply been a passing fad. In any case, it is a clever idea worth explaining, understanding, and exploring.

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