A long list of encrypted values: blockchain is still a relatively new method of data storage and processing, but it is already having a major impact on the internet. The popularity of cryptocurrencies such as Bitcoin is just one sign of how blockchain is finding its way into many people's everyday lives.
Blockchain
A long list of encrypted values: the blockchain is still a relatively young method of data storage and dissemination, but it is already having a major impact on the Internet. The popularity of cryptocurrencies like Bitcoin are just one sign of how the blockchain is making its way into many people's everyday lives.
What is a blockchain?
For a simple blockchain explanation, one must first start with a description of the ledger - the basic principle of blockchain technology. The ledger behaves like a kind of cash book. Each transaction is listed here one after the other. This means that it is always possible to trace who performed which action. The data records inserted into the ledger after a transaction are called blocks. This gives rise to the name of the technology and a simple blockchain definition: it is a chain of blocks.
The ledger is decentrally organized. It is therefore not located on one server alone, but is made available via many nodes. This ensures that it is difficult to manipulate the data. Even if someone were to change the chain of blocks, this would only be the case with the copy. By comparing it with the other data sets, the fraud is quickly noticed.
Another important basis of blockchain technology is encryption. A cryptographic algorithm is used to calculate a checksum for each block, which is also entered into the blockchain. Since the previous checksum is also included in these so-called hash values, an inseparable connection is created between the blocks.
To understand the blockchain, one more info is important: There is not just one blockchain. Each application has its own Blockchain, which are not linked to each other and partly have their specific peculiarities.
Benefits of Blockchain
The innovative ideas used in blockchain technology bring numerous benefits.
- Independence: In the blockchain, the dissemination of data does not work solely through a server controlled by a particular person or organization. Instead, each participant in the blockchain owns its own copy of the ledger. This decentralized approach ensures that the blockchain cannot be arbitrarily changed or even shut down.
- Security: It is practically impossible to manipulate the blockchain data without detection. On the one hand, this is related to the decentralized distribution, because a comparison of the copies reveals the forgery. On the other hand, it is also due to the cryptographic hash values. These can be used to check whether values have been manipulated.
- Transparency: Due to the distribution of the ledger, all transactions and actions of each user are visible to everyone else. As a result, no one can hide what they are doing. Some may see this as a disadvantage, but it ensures trust within the blockchain.
The power consumption is repeatedly cited in the media as a major disadvantage. However, this has nothing to do with blockchain technology per se, but is due to the so-called mining of some cryptocurrencies. In this security function, some users perform very complex computing tasks that cost a lot of energy. However, this is not the case with all blockchain applications.
Blockchain in Practice
Blockchain technology can be used in a variety of scenarios.
Cryptocurrencies
The blockchain first became known through Bitcoin and the many cryptocurrencies that came after it and are still coming. Currencies based on the blockchain have the advantage that transactions no longer have to go through banks and are decoupled from states. Everything is regulated by algorithms and the distributed ledgers.
Cryptocurrencies are still not very present in most people's everyday lives. Attempts to use Bitcoin as a means of payment away from the Internet (in restaurants or cafés, for example) have hardly taken place so far. However, Bitcoin & Co. are very popular as speculative objects in the context of foreign exchange trading.
NFTs
Non-fungible tokens (NFTs) can be used to clearly assign ownership rights to digital works. This has a major impact on the art market, for example, which is increasingly interested in digital works. For example, a smart contract stored in the NFT can be used to regulate ownership of a graphic file. The resale of the work is also secure thanks to the stored rules.
NFTs are not only present in the art market. NFTs are also becoming increasingly popular in the marketing sector (e.g. digital sneakers) or in ticketing. In the latter case, for example, NFT technology is helping to curb the black market.
Other use cases
At IT-Kompass, we are convinced of the blockchain and use it, among other things, in our products such as Quality Circle for the tamper-proof collection and storage of qualifications and resources, as well as the VisitorApp to ensure the tamper-proof purchase of tickets, coupons and vouchers. We also already regularly use the blockchain for purchase processing in various self-developed online shop systems.
In addition to these uses of blockchain, which have also been discussed in the media, there are still many industry-specific scenarios in which the technology is already being used:
- Logistics
- Internet of Things
- Certificate creation
- Health Care
- ...