Introduction
Blockchain technology is famously used in the realm of “Digital Assets,” including cryptocurrencies. To think it is limited to just that is overly simplistic. Before delving into some of the most significant possibilities, let’s explain what this technology is.
Blockchain technology seems to have first appeared in 2008, credited to Satoshi Nakamoto. Little is known about this brilliant figure. It is presumed to be a pseudonym representing a general collective. In truth, blockchain existed before but within a broader framework called Distributed Ledger Technologies (DLT).
This aforementioned technology represented a more general version of blockchain, sharing only its functionality with the current iteration. As the name suggests, it essentially consists of a network where certain individuals hold “ledgers,” which are nothing more than a collection of transactions, operations of various kinds, data, etc.
Blockchain can be imagined as a “chain of blocks” where each block is a set of codes composed of these ledgers. Thanks to this characteristic, blockchain is defined as a transparent technology, where anyone can see everything that happens within certain limits. This latter aspect is very important but often underestimated.
The key points of DLTs and therefore of blockchain itself are the “Nodes,” which are structures, companies, or individuals that have sufficient resources and meet certain requirements (such as having various servers and, above all, being approved by the network’s moderators). Here we encounter one of the most important questions of blockchain: Does this technology come under the control of those with the most money? The answer is not unique; it depends on the type of blockchain in question.
A Technology for Every Need
The Nodes at the core of blockchain are computers that enable the creation and validation of various blocks. To better explain this topic, let’s analyze how a transaction works on the BTC blockchain, the most famous one: when a transaction occurs, the request is sent to the Node that will create a block or insert that transaction into an existing block. The process is not as easy as it sounds because each transaction has an encrypted key that the Node must recognize and insert correctly. Without going into specifics, suffice it to say that these transactions require a lot of time from the Node, which will charge fees for the transaction. It’s important to remember that each transaction takes approximately the same amount of time, so larger transactions are favored to increase fee earnings.
The importance of Nodes is vital for any blockchain. BTC uses a technology based on Proof-Of-Work while ETH relies on Proof-Of-Stake, for example. The different use of Nodes is due to the needs that particular blockchain aims to fulfill. In general, anyone can do what a Node does, provided they are approved by the majority of existing Nodes or meet certain conditions. Nonetheless, it remains a technology true to the reason it was created: to give freedom to those who participate in it.
When it comes to possibilities, blockchain never ceases to amaze. When some blockchains, like BTC, lead to slower transactions, others that optimize transaction speed to the fullest emerge immediately, like “Solana.” However, it’s worth remembering that nothing is perfect, and even such a unique technology cannot have it all. In the industry, there’s reference to a “triangle” with three qualities at its vertices: Scalability, Security, and Decentralization. Any type of blockchain can have only two of these three qualities as strengths.
The Infinite Possibilities of a New Web
The word “blockchain” is often associated with “cryptocurrency,” but in truth, that’s just the tip of the iceberg. Blockchain is the underlying technology of Web3.0, a type of web where creation knows no bounds.
Regarding search engines, “Brave” is one of the most important and widely used browsers programmed on the blockchain. However, it doesn’t stop there. On this technology are based “apps” called DApps (Decentralized Apps) that have revolutionized conventional applications. Some examples include:
- Status, a messaging app where you can send transfers, videos, images, etc., in complete security and privacy;
- PancakeSwap, an exchange of various Digital Assets and NFTs
Over the years, DApps have become increasingly diverse, ranging from simple games to trading apps on Digital Assets. The unique characteristic of this technology is that, in addition to top-notch privacy and security, the app can finance itself through its own token, which will be purchased if the app is deemed useful and well-built, thereby increasing its value. The use of tokens, NFTs, and other Digital Assets is full of possibilities thanks to blockchain. It’s worth noting that to create an app on this technology, one needs certain programming systems different from the usual ones, leading to an evolution of programming languages as well.
In recent years, companies different from the usual have also been developed; these are called DAOs (Decentralized Autonomous Organizations).
The characteristic of these companies is that there is no CEO, but everything is based on the democracy within the company, where a certain number of individuals vote for any change and implement it without the help of third parties or a manager. The importance of such a company lies in transparency and, above all, security; both guaranteed by the blockchain itself and its functioning. Some examples include: Nouns DAO, where a transaction is automatically executed upon reaching a quorum of votes, namely a majority of affirmative votes, provided there are no vetoes from the founders; ENS holders can delegate their votes to committed members of the community to represent them. Also crucial is the use of DAO funds; in some cases, there could be thousands of voting members, and funds may reside in a wallet shared by 5-20 active members of the community, deemed reliable and usually doxxed (publicly known identities within the community). After a vote, signatories execute the will of the community.
These decentralized organizations perfectly reflect their name and represent an important change in organizational structure. Joining a DAO can be possible in three different ways:
- Token membership: by obtaining the token of the respective DAO, one automatically holds the right to vote; however, there may be conditions for obtaining the token (MakerDAO is a famous example of a token membership DAO).
- Share membership: those who want to be part of these DAOs must submit a membership proposal, offering a tribute in the form of tokens or work; members can then exit at any time with their proportional share of the assets (MolochDAO is a famous example of a share membership DAO).
- Reputation membership: reputation represents the voting right in the DAO. In this type, ownership is not divided among all members, but increasing reputation through active participation in the DAO rewards one with the tokens of the latter (DXdao is a famous example of a reputation membership DAO).
This way, there is a concrete possibility of being part of it, avoiding the creation of a DAO managed only by a small, predefined group of people.
The Structure of a Continuously Growing Technology
The benefits of operating on the blockchain are many; however, over the years, some problems have arisen. The main problem was that the increasing influx of users led to a slowdown in the blockchain, considering that Nodes must not only validate transactions but also keep track of all blocks present in the chain.
The problem was solved very quickly, leading this technology to evolve further; a Layer 2 (a second “layer”) was created. The particularity of this Layer is that, being new, transactions were much faster since there were very
few blocks compared to the now saturated Layer 1. However, as we’ve already explained, this technology, like everything else, not being perfect, while it accelerated transactions on one hand, it had some issues with “security,” a crucial aspect. The Layer 1 of the blockchain is extremely secure because to damage the entire chain, one must cause problems for every single block present on the Layer, a practically impossible operation on Layer 1. It’s a different story with Layer 2, which being created recently, had very few blocks within it. Only “time” has managed to strengthen security: in fact, with the continuous flow of transactions, chains of blocks were created sufficient to provide a good level of security for transactions themselves. At that moment, Layer 1 was the safest layer to operate with large amounts of funds, although with a longer time frame compared to Layer 2, which was considered the fastest layer for microtransactions, apps, and much more.
These events are the reason why blockchain is a true “new continent,” where every problem is solved through an entire community and where there is no single company that monopolizes everything.
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