What is Blockchain?

History of blockchain

Just 30 years ago, only cash was used for settlements between people and companies. The widespread introduction of the Internet has made it possible to switch to a new form of payment. The development of distributed computing technologies and autonomous systems increases the comfort and security of transferring funds on the World Wide Web.

The first mention of the blockchain occurred in 1991-1992, when American scientists Wakefield Scott Stornetta, Stuart Haber, and Dave Bayer described the technology of sequential creation of data blocks in which, using cryptographic algorithms and a hash tree, the certificate of authenticity and information about the date of generation are recorded. But at that time there was no technical possibility for the practical implementation of this idea.

In 2004, American programmer Harold Thomas Finney II developed the RPoW system, which is considered the prototype of cryptocurrency. However, for many, blockchain technology is associated with the name Satoshi Nakamoto. Bitcoin was invented in 2008 by a user or company under the pseudonym Satoshi Nakamoto. He published a document explaining a new way to transfer money from sender to recipient directly, without financial intermediaries.

Such a system is controlled by thousands of computers around the world, transactions are verified by network nodes using cryptographic methods and recorded in the blockchain, while participants receive bitcoins as a reward.

The appearance of Bitcoin was the reaction of a group of enthusiasts to the global economic crisis. The creators of the cryptocurrency believed that this was the best way to overcome the rules of the game imposed by the established financial system with its high level of corruption and numerous intermediaries.

The same document describes the concept of blockchain technology as the basis for Bitcoin. Blockchain uses the concepts of cryptography, so the new way of exchanging money was called cryptocurrency.

The basis of cryptocurrency blockchains is SHA (Secure Hash Algorithm) which hashes the data received. If users enter the same information, the hash remains unchanged, but if users enter different information, the hash automatically changes. It turns out that bitcoin or another cryptocurrency is not only an asset but also a fuel for the blockchain. This allows to maintain the stability of the crypto model even after new coins stop being issued.

Evolution of Blockchain

Blockchain technology is becoming more and more popular among millions of traders and researchers.

1991–2008 - the inception of blockchain.
2008 - Satoshi Nakamoto, a pseudonym for a person or group, publishes “Bitcoin: A Peer-to-Peer Electronic Cash System.” He used a hash cash PoW (Proof-of-Work) algorithm with software-based computing functions. Bitcoin introduces the concept of mining coins and ensures verifying the transactions among the decentralized nodes in the network.
2009 - On Jan 3, 2009, the foundation of Bitcoin settled. On Jan 12, 2009, the first successful Bitcoin (BTC) transaction occurred between computer scientist Hal Finney and the mysterious Satoshi Nakamoto. On Oct 31, 2009, the Bitcoin exchange marketplace launched publicly to trade bitcoins for actual money.
2010 - Florida-based programmer Laszlo Hanycez completes the first-ever purchase using Bitcoin — two Papa John’s pizzas.
2011 - 1 BTC = 1 USD, giving the cryptocurrency parity with the US dollar. Electronic Frontier Foundation, Wikileaks, and other organizations start accepting Bitcoin as donations.
2013 - 11 million Bitcoins traded with a total currency valuation of over $1 billion, and Bitcoin reached $100/BTC. Vitalik Buterin, co-founder of Bitcoin Magazine, publishes the “Ethereum Project” paper, suggesting that blockchain has other possibilities besides Bitcoin (like smart contracts). He stated a need for a scripting language to develop Decentralized applications and started building a new blockchain-powered distributed computing platform called Ethereum.
2014 - the first-known NFT is minted. The Ethereum Foundation was established by Vitalik Buterin. Ethereum became more than a cryptocurrency and a decentralized platform.
2015 - The number of merchants accepting the BTC exceeds 100,000. NASDAQ and San Francisco blockchain company Chain team up to test the technology for trading shares in private companies.
2016 - tech giant IBM announces a futuristic blockchain strategy for cloud-based business solutions into blockchain-as-a-service (BaaS) offerings. Bank of England started exploring blockchain for transaction settlements. The European Central Bank (ECB) and the Bank of Japan announced a joint research push into exploring use cases on the blockchain. R3 announced a new distributed technology called Corda - a permissioned distributed customizable platform exclusively for financial service needs.
2017 - blockchain was named “Foundational Technology” by Harward Business Review. Bitcoin reaches $1,000/BTC. Cryptocurrency market cap reaches $150 billion. Japan legalized Bitcoin as a currency.
2018 - IBM develops a blockchain-based banking platform with large banks like Citi and Barclays signing on. European Commission established the Blockchain Observatory and Forum.
2019 - China’s President Ji Xinping publicly embraces blockchain as China’s central bank announces it is working on its own cryptocurrency. The New York Stock Exchange (NYSE) announces the creation of Bakkt, a digital wallet company that includes crypto trading.
2020 - BTC almost reaches $30,000 by the end of 2020. FinTech giant PayPal announces it will allow users to buy, sell and hold cryptocurrencies. Ethereum announced the building of Ethereum 2.0. To resolve the gas issues and other significant limitations. The Bahamas becomes the world’s first country to launch its central bank digital currency.
2021 - Bitcoin surpasses $1 trillion in market value. Popularity for the implementation of Web3 rises. El Salvador became the first country to accept Bitcoin as a legal currency.
2022 - Cryptocurrency loses $2 trillion in market value, because of economic inflation and rising interest rates. The U.K. government proposes safeguards for stablecoin holders.
2024 - according to reports by Statista, worldwide expenditure on blockchain solutions will increase from $4.5B in 2020 to $19B in 2024.

What the blockchain consists of

As we have already said, the blockchain is a sequential chain of blocks. Each block consists of a header and a list of transactions. A hash connects the chain's links and ensures the integrity of data and transactions.

A hash is encrypted transaction data in the form of a unique set of characters. Each block in the blockchain contains its own hash and the previous block's hash. If you change some record, the hashes of the blocks will not match.

Who creates the new blocks? Bitcoin is considered an asset similar to gold, silver, or other metal. Being a digital currency, Bitcoin requires a process called mining. Miners select a unique hash for the transaction, combine it with the hash of the previous one, and create a new block. They also find and eliminate the inconsistencies found. To turn a transaction into a block, you need a lot of computing power, and accordingly resources, namely electricity.

This is what a typical day in the life of an ordinary miner looks like:

Take a transaction from the shared queue.
Choose a unique hash for it.
Connect it to the hash of the previous transaction.
The whole thing is to hash again and make a new block.
Miners receive a reward for their work - bitcoins.

But do not think that mining is a gold mine. To earn at least something from mining digital currency, resources are needed - mainly electricity and graphics processors. The computer that will be the first to calculate the correct nonce hash or lock-key pair will receive a commission from all transactions extracted in a particular block. This will help the owner of a computer or an entire farm of computers to compensate for equipment costs and earn money.

If earlier it was possible to mine bitcoins on a regular computer, now they are building entire hash calculation plants - mining farms.

How to build a mining farm

A mining farm is a cryptocurrency mining equipment. There are three main types of farms:

Type 1: Mining on video cards (GPU). A simple and understandable option that is accessible to most. Conventional video cards for computers are used as equipment.

Type 2: FPGA modules. FPGA modules ("field-programmable gate array") are programmable devices designed specifically for cryptocurrency mining. Such modules can be manually adjusted to perform a specific task. The performance of FPGA modules is almost the same as that of video adapters, but they do not need to be cooled.

Type 3: ASIC Mining. In such farms, special chips are used to solve problems, not video adapters. ASIC chips ("application-specific integrated circuit") are designed specifically for mining cryptocurrency, so that the farm consumes less electricity and its productivity increases. In fact, this is a set of chips in a not-very-large box. It is used for mining bitcoins (BTC), litecoins (LTC), and other ASIC coins. It has high computing power according to a specific algorithm.

What is needed for a mining farm?

After the decision to assemble the mining farm has been made, it is necessary to prepare for the placement of equipment. Key points:

Electricity supply. Mining farms on the GPU do not consume very much in comparison with farms from ASICs, but when scaling, the issue becomes relevant. The available power must be in reserve. We also look at the wiring, fire safety is above all.
Possibility of cooling. Just imagine that a heater with the power of our farm is running in a room since all the power consumed goes into heat. If there is a need to place the equipment compactly, then in this case some use either forced ventilation of the room or install air conditioners. By the way, these are additional costs and electricity consumption.
The location of the equipment. The farm consists of rigs - separate sets of video cards connected in most cases to the same power supply and located on the same stand or enclosure.
Select all the necessary components - motherboards, processors, RAM, power supplies, risers, and, finally, the video cards themselves. We are not trying to save money, but it is not worth overpaying, we carefully study as much information and real user reviews as possible. It is also advisable to purchase special equipment for remote restart of rigs. A power outage will lead to a loss of time and, as a result, money.
Provide access to the Internet. Communication must be uninterrupted, otherwise, you will face equipment downtime and lost profits.
Choose a coin for mining. Most often it is Ether (ETH).

How the blockchain technology works

Let's look at how international money transfers work - on the basis of blockchain technology and without it. Let's say we need to send money to another country. Usually, for this purpose, we contact the bank, which will become an intermediary in this transfer:

1. We send to the bank information about the recipient and the amount of the transfer.

2. The Bank verifies the sender's data.

3. If the data is correct, the bank informs the payment system that the money can be transferred to another account.

Now imagine that you need to transfer money to another country but with the help of a blockchain. In this case, the bank is not needed - the security of the transfer is provided by the blockchain network itself. That's what's going to make it happen:

Digital Wallet. The Internet is an insecure space, so it is risky to disclose your bank details for transferring money. A digital wallet is a great alternative to a bank account. It can be as an application or a USB flash drive. Such digital wallets use cryptocurrencies instead of the traditional (fiat) currency. Digital wallets make it easier to send and receive payments. At the same time, the owner remains anonymous to everyone on the network. When a user creates a wallet, they receive unique addresses where they can send and receive cryptocurrency. To send money, you need to specify the recipient's wallet address, the transfer amount, and the commission for the transaction to be included in the blockchain.
Transaction signature is an alternative to PIN code. After sending the transfer data, you need to sign the transaction using a private key. This is a unique secret phrase that connects the wallet and the user's assets. The signature ensures that only the person who owns the private key or knows it can start the transaction.
A smart contract instead of a payment gateway. Payment gateways are services through which traditional payments are made, for example, from a customer to an online store. In the blockchain, the role of such intermediaries is performed by smart contracts. These are different versions of the program code that contain logic and rules for the automatic execution of payments and transactions. All computers on the blockchain contain a copy of the smart contract. When a user sends money, the smart contract checks whether there are enough funds in the account, and in case of an error, simply cancels the transaction.
Hash function used for the protection against intruders. The encryption algorithm uses information about our translation and converts it into a set of characters - this is the hash. The main principle of its operation is that any change in the initial data leads to a change in the calculated hash value. The original data from the hash cannot be restored - you need an encryption key or significant computing power and time to decrypt. Therefore, the only thing that can be seen in the transaction is the recipient's wallet address. However, the blockchain would not be a blockchain if it did not link all the previous hashes. This increases the reliability of the entire system and complicates the life of attackers. In the blockchain, each encrypted record is supplemented along with a hash from the previous ones. Thus, all the following entries depend on those that have already been added to the system. If you change at least one, you will have to recalculate the hashes of all previous transactions in the blockchain network, and this requires resources.
The consensus mechanism is an alternative to trusting the bank. The consensus algorithm is a mechanism in the blockchain system by which network participants coordinate all changes. It is an important part of the blockchain, is used to verify transactions, provides security, and ensures that no one will arbitrarily change the data in the registry. Consensus is needed to confirm the correctness of the transaction. Banks are usually responsible for this, while mathematics is used in the blockchain instead.
There are two main types of consensus mechanisms: proof of work and proof of stake.

Proof-of-Work (PoW) – that is the very first consensus algorithm used in the Bitcoin blockchain. In PoW, miners compete for the right to add the next block to the blockchain by solving complex computational puzzles. High resource and energy costs, as well as environmental impacts, have led to the emergence of new algorithms.

Proof of Stake (PoS) — this method is based on the staking process. The system selects validators to create new blocks and confirm transactions from those who deposit digital currency. The decision depends on the share of cryptocurrency in the account, the reward in this case is the transaction fee. Learn what is Proof-of-Stake and how it works from our article here.

There are also other algorithms used for the network consensus protocol:

PoS + PoW - a hybrid protocol in which the identification of blocks occurs both through calculated PoS criteria and PoW-brute force. This option is used to complicate the recalculation of the chain from the first block, which is possible when using PoS in its pure form.

PBFT (Practical Byzantine Fault Tolerance), Paxos, RAFT - those are algorithms that establish network consensus in several stages. Thanks to them, the blockchain operates at low cost and with significant bandwidth, but is poorly adapted to the growth of the number of users.

Non-BFT (Non Byzantine Fault Tolerance) - algorithms that poorly resist behavior in which some users work against the blockchain. This protocol can be used in closed networks with full identification.

Besides, there are also many other algorithms like:

Delegated Proof of Stake (Pos), which relies on a voting system.
Proof of Capacity (Pc) which is based on the amount of free space on the miner's hard drive.
Proof of Burn (PoB), in which it is required to "burn" a small number of tokens by sending them to a special wallet.

Blockchain Layer-1 vs Blockchain Layer-2

Layer-1 refers to the most distributed database, a network that unites all the nodes of the blockchain into a single system with underlying consensus mechanisms. For example, Layer-1 in Bitcoin is the Bitcoin network, and Layer-1 in Ethereum is the Ethereum network.

Layer-2, however, is an overlay network that sits on top of the blockchain. Lightning Network is a Layer-2 solution for Bitcoin. Plasma, Polygon, Optimism, and Arbitrium are just some of the second-tier networks created on Ethereum.

Currently, Ethereum is one of the most advanced blockchains in terms of network security and stability. Most individuals and companies prefer to use this blockchain for transactions or project creation. However, as the number of transactions increases, the network becomes more and more congested.

To solve this problem, validators prefer to confirm transactions with higher gas prices. But these higher costs are borne by the user, increasing the minimum gas fee, which can sometimes exceed the cost of the transaction itself.

When using Layer-2, the basic network (mainnet) does not need to process such large amounts of data, since it sends this data through various processing channels (to third parties), recording only the final result in the Layer-1 blockchain.

Advantages of Layer-2 solutions:

Increasing the number of transactions per second (TPS) improves the user experience and reduces network congestion.
Transactions are consolidated into a single package before being recorded on the main network, which reduces gas charges.
Any updates to the Layer-2 solution do not change the underlying blockchain, as Layer-2 is built on top of the blockchain, which helps ensure network security.
Allows you to create Layer-2 networks for specific applications that are specifically designed to optimize certain functions.

Disadvantages of Layer-2 solutions:

The outflow of liquidity from the main blockchain is likely.
Potential security and privacy vulnerabilities; users should conduct their own research (DYOR) before using Layer-2 solutions.
It may make it difficult to interact with other Ethereum-based applications (for example, when using L-2).

What types of Layer-2 solutions are there? Layer-2 solutions are mainly aimed at transferring most transactions from the main network to sidechains. In a short period of time, many Layer-2 projects have appeared aimed at solving this problem. You can read more about how Layer 2 Scaling Solutions are accelerating blockchain transactions here.

Is the blockchain technology reliable

One of the factors that make blockchain popular is its data protection mechanism, which includes cryptography, decentralization, and consensus. As the number of Internet users and the level of consumption continues to grow, the number of cyber-attacks and malicious actions is also constantly growing, and reliable security is necessary for all computer and network systems in their current form.

Blockchain technology is relatively reliable, but of course, it is not devoid of vulnerabilities. Despite the decentralization and distribution, there is a risk of hacker attacks. There is also the possibility of collusion by users with large computing capacities in order to make changes to the blockchain.

In addition, there is a risk of loss of assets due to online fraud. The loss of a private hash key to access the blockchain wallet actually leads to the loss of assets, a direct loss of funds.

As blockchain technology develops in many new sectors (such as GameFi, NFT, DeFi, etc.), solutions for functional interaction (such as bridges between chains) are rapidly becoming the subject of the blockchain landscape. Many new because of online projects are working to create reliable interoperable solutions for optimal communication between disparate blockchain networks. For example, users will be able to exchange an asset in one chain for another asset in a separate chain, as well as take assets in one chain by placing tokens or NFT as collateral in another chain.

Blockchain technology can transform key industries as it continues to evolve. Because of the high level of security, there will be more solutions for optimizing transactions, regardless of their cost.

Advantages and disadvantages of blockchain technology

Like all other technologies, blockchain also has its advantages and disadvantages.

Advantages of the blockchain technology:

Immutability. After entering the data into the block, they can no longer be changed. Subsequent blocks only consolidate this immutability. At the same time, anyone can view the information.
Decentralization. The blockchain works on the basis of a network where there is no single control center. This provides greater security and resistance to attacks.
Data security. The blockchain uses cryptographic methods to protect data. Each transaction or record in the blockchain is stored as a hash. This makes the blockchain reliable and protected from unauthorized modification or fraud and access by intruders.
Transparency. It is useful in areas where it is important to trace and confirm the transaction history. For example, in the field of supply and logistics, blockchain technology can help track the path of goods from the manufacturer to the consumer.
Low fees. Due to the absence of intermediaries, total costs and commissions are reduced.
Speed. Direct transactions without intermediaries take place in minutes.

Disadvantages of the blockchain technology:

Scalability issues. In the case of public blockchains like Bitcoin, the load on the network may increase, and the transaction processing time may increase. So far, processing a single Bitcoin transaction takes about ten minutes, and the blockchain itself can process only 4.6 transactions per second. In comparison, payment in the Visa system takes only a few seconds, and the network can process more than 1,700 transactions per second.
Energy consumption. Mining and processing transactions on the blockchain require a significant amount of computing power and energy. For example, Bitcoin mining consumes a huge amount of electricity - which can negatively affect the environment.
The immobility of the data. Once the data is recorded on the network, it is difficult to change it and almost impossible to delete it. For example, if incorrect information about real estate ownership is stored in the blockchain, it will be difficult to correct it without the intervention of most network participants.
Lack of standards. Blockchain projects are developed in different languages and consensuses. At the same time, they are all separate from each other. Transferring assets from one blockchain to another is much more difficult than transferring money between deposits in different banks.
The risk of a "majority attack" (51% attack). Blockchains suffer from what is called a 51% attack or majority attack. If a group of scammers is still able to take over 51% of any blockchain, they will control it. Fraud with assets in such a network will take place under the guise of ordinary transactions. The probability that this will happen is low - attackers will need a lot of resources and well-coordinated work. But this flaw in the system cannot be fixed.
Decentralization and distribution. Decentralization and distribution are both advantages and disadvantages of blockchain technology. Information is stored simultaneously on all network devices, there is no single data management and storage center. Data changes on each individual device occur independently but are recorded by the rest of the system participants. All transactions are almost instantaneous, but their confirmation may take some time, which depends on the algorithm of the blockchain network. All transactions with assets are confidential, only the wallet number is indicated, and commissions are minimal, since instead of centralized intermediaries, transactions are registered by miners. The disadvantages of decentralization are the need for multiple network participants to maintain its integrity and stability, as well as the cost in terms of computing power.

Types of blockchains

It is customary to distinguish between public and private blockchains, as well as consortium blockchains.

Public blockchains are considered to be as decentralized as possible. They allow everyone to confirm transactions and create new blocks. Most blockchains are public, including Bitcoin and Ethereum.
The private blockchains. A private blockchain is usually managed by a single organization and access to participation in it is limited.
The consortium's blockchains. That is a hybrid of a public and private blockchain. Management is distributed among several organizations. Access to such a network can be either open or closed.

What is a blockchain platform?

In the case of blockchain, if you don't want to write code from scratch, you can take a ready-made platform and customize it for your tasks. You think over the general idea, name, and logo, prescribe some chips, and the platform takes care of all the technical things: logic, security, and transactions.

The most famous blockchain platforms are:

Ethereum allows you to create applications based on smart contracts in various fields: finance, insurance, investment funds, and online games.
Bitcoin is a financial platform for issuing a cryptocurrency of the same name. Other currencies also work on Bitcoin mechanisms - the same Dogecoin, which is actively supported by Elon Musk.
Hyperledger is a blockchain platform from the Linux Foundation. There are frameworks for creating digital passports, cloud services, and ledgers.
Corda is a system for storing and transferring assets between financial institutions: stocks, bonds, loans, and other liabilities.
Solana is a blockchain framework aimed at speed: it can conduct 65,000 transactions per second (for comparison, Ethereum is only 30). The disadvantages are not always stable work and limited decentralization.
Polkadot allows you to combine several blockchains into one ecosystem. A project from Ethereum creator, Gavin Wood.

Not all blockchains have their own platforms, for example, the Litecoin cryptocurrency works on the Bitcoin blockchain network.

Areas of application of the blockchain

Blockchain technology can be used wherever you need to store and transmit data openly and transparently, and you can be sure that everyone who works with that data is honest. The most common areas that are already difficult to imagine without the use of the blockchain technology are:

Cryptocurrencies. Any cryptocurrency operates on the basis of blockchain technology. The technology is used both in the issue of new cryptocurrencies and the generation of new tokens, as well as in the calculations of existing ones. There are now more than 300 cryptocurrency projects in the world. The most popular besides Bitcoin are Ethereum, Ripple, Tether, Litecoin, and Dogecoin. Payments in cryptocurrencies are used by PayPal and Square payment systems and JP Morgan, one of the largest international banks. Cryptocurrencies tend to have high volatility. There are specialized cryptocurrency exchanges for investing in cryptocurrencies.
Digital currency. Some countries are launching pilot projects to create national digital currencies powered by blockchain technology. For example, China has achieved good results in this regard -the digital yuan has become the first digital currency adopted in a major global economy. The Central Bank's digital currencies (CBDC) have also been launched by the Central Bank of the Bahamas (sand dollar), the Eastern Caribbean Central Bank (DCash), and the Central Bank of Nigeria (e-naira). Read more about the Central Bank's digital currencies here.
Smart contracts. With the help of blockchain technology, you can conclude a secure contract with any counterparty - for example, an apartment tenant. Such a contract can be configured for some kind of action and added to the firmware of a smart device. Let's say someone has not paid interest on a loan for a car for a long time - the blockchain transmits this data to the server, and access to the car is blocked until the debt is paid.
Public administration. After the Bitcoin price jumped, blockchain ceased to be fun for geeks and technocrats - now it is being implemented by banks, state-owned companies, and even some states. For example, the government of Taiwan uses the Ethereum-based blockchain to protect against cyber-attacks from China.
Voting and elections. An electronic voting system can be created on the blockchain, where every vote will be securely recorded, and the election results cannot be changed or forged.
Medicine. Health data attracts scammers, hackers, and pharmaceutical companies. To avoid leaks, many clinics transfer patients' medical records to the blockchain - so they cannot be stolen, hacked, or forged. It is also convenient to fill out such cards and transfer them between institutions.
NFT. NFT is a type of token where each instance is unique, it cannot be replaced or exchanged for another token. NFT indicates the ownership of an asset in the blockchain and allows you to sell and buy virtual objects: music, photos, paintings, and drawings. We encourage you to explore the fascinating world of Non-Fungible Tokens in our article.
The gaming industry. Another area of blockchain application is the gaming industry. Based on cryptocurrency technologies, GameFi projects (stands for "game" and "finance") are being implemented, combining game mechanics and NFT. These are online games that record everything that happens in the game in transactions on the blockchain and allow players to earn real money. With the help of the blockchain, you can purchase and sell virtual characters and artifacts.
Decentralized applications. Smart contracts open the door to the development of decentralized applications (DApps) that run on the blockchain and offer new ways to organize economic and social interactions.
DeFi. Blockchain technology is being used in the emerging decentralized finance (DeFi) market. Investors are also starting to invest in new types of digital assets, such as security tokens.
Supply and logistics. The blockchain technology allows you to track and register every stage of the delivery process - from the manufacturer to the consumer. For example, the famous American multinational retail corporation Walmart uses blockchain to track and confirm the path of products from the farm to the store. This helps to quickly identify and fix problems in the supply chain.

Which large companies use blockchain technology and how

Since blockchain is difficult to crack or forge, it is often used to protect digital assets: files, documents, transactions, or transactions. For example, you can draw up and certify a mortgage agreement without contacting a notary. Or to issue ownership rights to land and real estate.

This is what large companies use blockchain for:

Maersk - to track shipping.
Renault - for certification of car parts.
IBM - to develop an interbank transfer system (equivalent to Swift).

The future of blockchain technology

Today, several years after the creation of the blockchain, attempts have begun to use the technology to carry out processes unrelated to the exchange of funds. Statistics on the use of blockchain technology in different businesses show that it will be used more often in the near future. Such world-famous companies like IBM, Walmart, Maersk, and JPMorgan Chase have already implemented blockchain solutions into their processes.

Blockchain development enthusiasts are looking for new ways to apply it. For example, digital distributors will be able to license films, music, and books through NFT tokens. The states will completely transfer elections, purchases, real estate registration, and other procedures to the blockchain.

The system also can connect the owners of rented housing and tourists who are willing to pay for living in it. Or become a platform for storing and reproducing digital content, while serving as a means of settlement between users and copyright holders. Or take over the function of automatically checking flights and transferring compensation to passengers whose plane took off later than the scheduled time.

If the assumptions of the creators of the blockchain are confirmed, the technology will compete with various intermediary services, such as Netflix, and Uber, as well as insurance companies.

Positive results have already been obtained in the listed areas of application of the Ethereum blockchain platform. It remotely hosts software on the Ethereum Virtual Machine distributed computer system. Ethereum, which serves as the base for the ether cryptocurrency, is today the most suitable for conducting experiments to expand the functionality of the blockchain.

The prospects of the technology were also appreciated by the largest technical corporations, so new blockchain schemes appear almost daily. Microsoft has developed tools that allow users to experiment with cryptocurrency in their Azure cloud.

IBM, Intel, and other corporations have started collaborating with the Hyperledger hub, which develops blockchains for businesses. And even the big banks, whose weapon was originally bitcoin, are creating their own versions of the technology to keep up with the trend.

The downside of the blockchain technology is its disadvantages. Because of them, blockchain technology can spread more slowly. Here are the problems that will have to be dealt with in order for there to be more blockchain projects:

1. Scalability. To solve this problem, that is necessary to develop new consensus algorithms and solutions that will help speed up network processes and reduce the cost of using blockchain technology.

2. Regulatory environment. Data protection, confidentiality, and identification issues need to be described and standards drawn up so that there is more trust in blockchain solutions. Want to know more? Navigate the Global Crypto Landscape with PwC study: 2024 Outlook.

3. Integration of blockchains. Develop standards and protocols that will help different blockchains exchange data and interact with each other.

4. The "grey" image. Blockchain and cryptocurrencies are often associated with high-risk investments and underground transactions. It is important to tell people and companies about the advantages and opportunities of technology.

5. Environmental issues. Cryptocurrencies that work on the principle of Proof of Work spend a lot of electricity for mining. To reduce the harm from such a blockchain, you will have to choose alternative consensuses like Proof of Stake.

Conclusion

Blockchain is a technology for encrypting and storing data distributed across multiple computers connected to a common network. The records in the blockchain are presented in the form of blocks connected by special keys.

The blockchain technology is used to store and transfer digital assets and can work on both a public network and a private one. Blockchain can be used in many areas where the speed of information transfer with a high degree of protection is necessary. Any cryptocurrency operates on the basis of blockchain technology. Blockchain also allows you to enter into smart contracts and issue NFTs.

Blocks in the blockchain, for example, when issuing cryptocurrencies, are created using the mining procedure. The creation of blocks in large networks is carried out by special persons — miners.

For accounting, storage, and other actions with digital assets, a blockchain wallet is used - a special program that stores records of the account status of its owner and the entire transaction history.

The features of the blockchain are decentralization and distribution: information is stored simultaneously on all network devices, and there is no single data management center.

Blockchain is a powerful tool with organizational perspectives. Today it is used in finance, medicine, logistics, banking, investing, etc. And this is just the beginning of his journey, technology continues to evolve and the future of the blockchain looks promising.