Introduction

Blockchain is one of the biggest innovations of our lifetime. It was created as the underlying technology for cryptocurrencies(like Bitcoin), and it has evolved beyond this use case. Blockchain has the potential to massively improve industries, enhance security, and revolutionize how we store and share data on a global scale. In this post, we will dive into some core fundamentals of blockchain technology itself – exploring core concepts, how it works, and real-world applications. We are working on building a place for Hive to congregate, but for now always feel free to reach out via Twitter, Insta, Farcaster or community@hive-finance.com if you have any questions or feedback - or just want to say hello! 

What the **** is Blockchain..?

I am asked this at almost every family holiday, and it’s such a great question. Most people start to learn about blockchain through the speculative crypto prices they see on the news, and no one wants to talk about the nerdy (revolutionary) tech that makes the magic happen.

A blockchain records transactions across a global network of computers (everyone has the same copy) and, when new transactions are submitted to the existing records, that same network of computers need to ‘approve’ the new transaction and the entire history of transactions prior.

Whew. How did I do with that 1.5 line explanation? There’s an amazing demo/walkthrough here:

These transactions are grouped into blocks, with each new block is linked to the previous one – forming a chain of blocks & hence the name "blockchain." It is designed to be transparent, secure, and tamper-resistant… so no one can rewrite the history of the transactions (and claim that instead of being sent $10 they were sent $10,000,000).

Decentralization FTW

You probably hear this all the time from folks who are obsessed with blockchain (I know Dr. Hive is sick of hearing me rant about it). Traditional centralized systems, such as banks or government institutions, have a single point of control and can be vulnerable to corruption, fraud, or hacking. A perfect example is X (I still call it Twitter) being able to take the accounts from customers without any notice, explanation, or process. In contrast, a decentralized network of computers makes it resistant to single points of failure and unauthorized manipulation. There are decentralized social media apps that would make it impossible for the owners of a social media platform to take away your handle, and even empower you to take your following from one platform to another.

Cooperation of All Types Leads to Consensus

To maintain the integrity of the blockchain, people all need a process to agree on the contents of the blockchain (record of transactions). The most common consensus mechanisms are Proof of Work (PoW) and Proof of Stake (PoS). PoW, used in Bitcoin, requires miners to solve complex mathematical puzzles to add anew block to the chain. PoS, used in Ethereum 2.0, involves validators who lockup a certain amount of cryptocurrency as collateral – they lose this collateral if they try to ‘fool’ their peers. This topic quickly becomes very confusing and technical so I think we should leave this for a podcast or YouTube video. Definitely feel free to reach out if you are interested though! Would really like to hear from you at community@hive-finance.com.

Once Confirmed, it’s Written in Stone (folks like to use the word 'Immutability')

Transactions written onchain are extremely difficult to alter or delete. This immutability is achieved through cryptographic hashing, where each block contains a unique code (hash) that depends on the data within it and the hash of the previous block. This is an overly fancy way of saying that any change in history would require changing every single block after it, which is not technologically possible at the moment.

Arguably the Biggest Upgrade: Transparency

All transactions on public blockchains are visible to every participant in the network. While individual transactions are pseudonymous, meaning they are linked to wallet addresses rather than real names, the entire transaction history is public and can be audited by anyone. This is exactly what companies like Chainalysis do, and while the wallet addresses are gibberish – they are able to develop extremely accurate profiles on the individuals behind the transactions. Upgrades to know-your-customer requirements for companies like Coinbase that enable us to swap dollars for crypto also help with identifying people.

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Smart Contracts: The Code is the Law

Blockchain technology enables the creation of self-executing contracts known as smart contracts. These are computer programs that automatically execute contract terms when predefined conditions are met. They are a cornerstone of blockchain platforms like Ethereum and open up a wide range of applications, from decentralized finance (DeFi) to supply chain management. This is a massive part of the magic – imagine being able to book a home as if you were using Airbnb, without paying all the fees Airbnb charges. The code that is executed is also publicly available for anyone considering using it to review before transacting. There is no need for the EXTREMELY slow and inefficient court system when the marketplace fails - the agreement is etched in stone for all to read and interact with.

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Blockchain is Coming for Legacy Institutions

Some applications for the tech in various industries:

- Cryptocurrencies: New digital currency, with Bitcoin being the pioneer and most popular

- Supply Chain Management: Blockchain can enhance transparency and traceability in supply chains, reducing fraud and ensuring the authenticity of products (really cool work being done here with farms and certifying the source of their products)

- Finance: Decentralized finance (DeFi) platforms are creating decentralized alternatives to traditional financial services, and unlocking amazing opportunities for individuals who do not meet accredited investor status here in the USA (aka, they aren’t already rich)

- Voting: Blockchain can provide secure and transparent voting systems, reducing the risk of electoral fraud by allowing code to execute election logistics instead of humans

- Healthcare: Patient records can be securely stored and shared among healthcare providers, improving data accuracy and patient care

- Artists: Whether they create albums or art collections, creators are empowered by tapping into this tech to scale their outreach and self-funding capabilities. No more 80% to a record label!

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Headwinds be Damned

Despite its potential, blockchain technology faces challenges like scalability, energy consumption (in PoW systems), and regulatory concerns. Ongoing research and development aim to address these issues and unlock the technology's full potential. For example, Ethereum recently celebrated the one-year anniversary of switching to Proof of Stake – reducing energy consumption by something like99%. There have been a string of wins for the crypto ecosystem in US courts recently, and regulators have been checked by the court system, but this is going to be an extremely long road and it's important that we all work together to build 'legitimate' use cases of this amazing technology that empowers individuals.

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Conclusion

Blockchain technology will transform the way we conduct business, secure data, and interact with our existing apps and companies. Its decentralized, transparent, and tamper-resistant nature makes it a disruptive force in various industries. Understanding some of the fundamentals of blockchain is the first step towards harnessing its capabilities and staying informed about its evolving applications in the modern world. As blockchain technology continues to mature, it promises to usher in a new era of trust and efficiency in our digital lives. With your support, Hive will spearhead this effort... and we couldn’t be more excited about doing so. Let's keep the conversation going onTwitter, Insta, Farcaster or feel free to reach out to community@hive-finance.com!!