Blockchain has become well known in association with cryptocurrencies and, more recently, NFTs. However, this technology has the potential to transform markets and revolutionize economic models.
Currently, the biggest impact of blockchain is on the financial market. To understand the possibilities with this decentralized network format, it's important to understand what blockchain is and how it works.
Check out the text below!
What is blockchain?
The literal translation of the word "blockchain" means "chain of blocks". The name comes precisely from the operating model of this technology: the data of blockchain transactions is stored in blocks, recorded through a chain that forms a decentralized network.
In simpler terms, it can be said that the blockchain system it's like a ledgerAn accounting ledger, which facilitates transactions and asset tracking in a virtual, shared and immutable way.
Decentralization is one of the central characteristics of blockchain technology.
Data is not controlled by a single entity, such as a financial institution, a company or a government; the blockchain network is shared, allowing all participants access to transaction records.
The validation of transactionssions is done autonomously by miners who verify and record them on the blockchain, eliminating the involvement of third parties to protect or authenticate the data.
By creating a collective model, blockchain creates more transparent, reliable and impossible records from being modified. No network participant can alter or corrupt a transaction once it has been registered on the blockchain.
There is a consensus that there are three pillars of the blockchain:
- Decentralization
- Transparency
- Immutability
See below for more details on how blockchain technology works.
How blockchain works
As already mentioned, the blockchain structure is made up of a sequence of chained blocks of information.
Each block carries a hash, a kind of fingerprint or unique ID, which contains the date and time of recent valid transactions plus the hash of the previous block; this link between two sequential blocks prevents them from being altered or another block of information from being inserted between them. New transactionsions The incorporated data is added to the previous data and makes the system larger and more complex.
What is a hash?
It is an algorithm whose function is to converting and summarizing files into a code that is as unique as possible. This representation of the data forms a kind of fingerprint that cannot be reverted to its original state, making it easier to verify the integrity of the information and increasing the security of transactions.
Analysis and officialization of transitions
The decentralized blockchain model takes the responsibility for validating operations out of the hands of a single authority. Instead of relying on third-party control, the users of the shared network themselves protect and guarantee the integrity of the blockchain.
As soon as they are created, the transactions have a "pending" status in a temporary storage space. The validation of the transactions and, consequently, their conversion into a hashed block is done by the miners (miners).
After that, there is still the "consensus of the blockchain network": the miner can only add a transaction to the block if the majority of the network (50% + 1) agrees that it is legitimate. The users who audit these operations are nodes (us).
A block is made up of a group of transactions that take place within an average of 10 minutes. In other words, every ten minutes, recent transactions go through a validation process and are recorded on the blockchain.
Immutability of transactions
Once analyzed by the minersvalidated by the nodes and included in the blockchain, transactions are irreversibleYou can.
In order to change or delete a transaction, it would be necessary to modify the hashes throughout the chain. The computing power and processing volume required for an operation at this level is incalculable.
That's why transactions made by Blockchain is considered so secure.
Privacy and transparency
There is an important detail about how blockchain works: while the model guarantees privacy, it also allows for transparency of operations.
This is because, in transactions, the identification is not made nominally; it does not appear who or which company made that transfer of assets. What is visible is the adress, a form of identity that can be generated from a private key.
The same private key can generate several addresses, making it possible to use a different "identity" for each transaction.
Transparency is associated with the fact that this address is public to all participants in the network. blockchain. This technology also ensures that transactions are stored forever, which is not the case in the traditional model, where histThe record can be easily deleted or changed.
The blockchain is maintained by a network peer-to-peer (P2P)
This means that the blockchain network is structured in such a way as to divide the workload among the participants (the peers). There are several distributed and decentralized peers that keep the system running.
If there is an incident with one of these peers or it leaves the network, there are still other participants performing their functions. There is no loss of data or services as there would be in the event of damage or an attack on a central server.
For miners, with the function of formalizing transactions, there is an incentive in virtual assets for the work done. It is, in a way, a sharing economy.
What is blockchain for?
The concept and functionção of the blockchain are often associated with Bitcoin, since the creation of this virtual currency and the first network with this technology were made by the same person, Satoshi Nakamoto (pseudonym).
However, although the blockchain that supports Bitcoin transactions is the best known, it is not the only one. And the functionalities of this system go far beyond the transfer of virtual currencies.
Generally speaking, any valuable asset can be traded and tracked on a blockchain network. More recently, other names have come to the fore, such as the NFTs and the Smart Contracts; both have their records on blockchain.
Here are some examples of blockchain applications:
International payment systems
Payments and transfers across borders usually involve a lot of bureaucracy, intermediaries and long deadlines. With blockchainIt is possible to facilitate these processes, removing the need for intermediaries in various regions and speeding up compensation time.
Some companies in the technology sector already have their own blockchains, creating a decentralized network for clearing and settling transactions practically in real time through digital assets.
Health records
Although it is very different from a traditional database, blockchain can also be used as a space for recording data for the most varied sectors.
In the United States, a health insurance company has implemented a blockchain system to create a medical information sharing network to provide patients with access to data in a more secure and agile way.
Tokenization of any financial asset
Tokenize is to use encrypted assets to represent ownership of an asset in digital form. Tokens can representntar any private property, such as real estate, land, precious metals, etc.
NFTs are also tokens: the acronym refers to Non-Fungible Token (non-fungible token). However, they represent non-substitutable, i.e. exclusive, goods.
Blockchain projections for the future
Despite the popularity and constant growth in interest in the segment, there is still a lack of confidence associated with blockchain. Nevertheless, we already know that it is towards this technology thatwill be the advances in the financial market.
In fact, the disruptive power of the blockchain model could transform the way companies, NGOs and even governments organize themselves.
Possibilities for business
Even though blockchain is still somewhat in the testing phase for most companies, its model has the potential to bring numerous benefits to day-to-day business, such as, to name a few, cost reduction, more agility in financial transactions, new growth opportunities and more competitive advantages in the market.
To make the most of these possibilities, however, the company must have already started its Digital Transformation journey.
Innovation goes hand in hand with digital transformation!
To be able to implement innovative solutions and services that add value to your business, have an impact on your customers and make your company stand out from the competitionit is essential to re-evaluate the models traditional.
And on this path to making a general assessment of the company's Information Technology environment and starting to transform processes, what makes the difference for more assertive investments and more agile results is specialized support.
Conversys offers highly qualified support, with customized solutions to help you implement the innovations that will make all the difference to your business!
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