A smart contract is a digital protocol that ensures that a contract is automatically executed when the agreed conditions are met. Smart contracts allow you to process transactions without requiring a third party to verify or enforce the agreement. Agreements are traceable and irreversible.
Since the advent of personal computers, and then the Internet, innovative resources have been developed steadily. And one day, when it was combined correctly, all these techs have led to the creation of a revolutionary technology such as blockchain:
In the 90s of the last century, various works appeared on decentralized solutions for electronic payments, which do not depend on the intervention of any central supervisory or regulatory body. In 1991, the first work on the secure blockchain using cryptography appeared, which developed until Wei Dai described in 1998 a decentralized solution for electronic payments based on public-key cryptography. Other authors produced this work till 2008.
Meanwhile, someone under the pseudonym Satoshi Nakamoto published an article that defines the mechanism for implementing digital currency:
It was based on the use of the blockchain for recording transactions on a peer-to-peer network. While blockchain use, bitcoin became the first digital currency that has managed to overcome double-spending. The words “block” and “chain” were used separately in Satoshi’s original article, published by Nakamoto, but in the end, it was popularized as a single word “blockchain” in 2016.
How does it work?
Blockchain is a digital transmission system based on the distribution of information in a variety of independent nodes (user computers) that register and verify the specified data anonymously, excluding intermediaries and preventing their transmission to attackers. The basis of this technology is consensus because all nodes have to share the same information, which has to be accepted as reliable. Simple, fast, and without intermediaries. The transmission is grouped into blocks generated in a particular time and transmitted. Each block is uniquely associated with the previous one, and so on. It actually looks like a company ledger, which shows income and expenses and which are compared with the data of the companies that receive them.
Why do we need it?
For example, if I transfer the amount of money, I must do this through traditional financial intermediaries, such as a bank or PayPal. These intermediaries certify and confirm one’s identity to be able to complete transactions, and add a record with data to their archives, which subsequently increase the thousands and thousands of data of all of us. Yes, they always talk about confidentiality, but at the same time, the truth is not at all like that. If we look at everything in more detail, then we can find out that at the request of the intelligence services data is issued, hackers break into databases. Also, they continuously analyze information about us to know our preferences better and sell products that they develop. Blockchain technology eliminates all these intermediaries, and you become entirely faceless in front of corporations and the government.
How secure is it?
Through the use of cryptographic keys and their distribution on many computers (people), it provides security benefits from manipulation and fraud. A change in one of the copies would not help, but a change should be made in all copies because the database is open and public.
Registered operations, in fact, transfers made in bitcoins, are not returned. Once they are added, they couldn’t ever be deleted. Also, it is complicated to make changes, because the information is replicated to all nodes, and changing it in any of them can be extremely suspicious. If necessary, changes can be made, but with the consensus of most nodes. It is a system that is very resistant to attacks or failures.
An example illustrating the importance of a distributed network is a social network. With this system, the Blockchain will eliminate the centralization imposed by social media such as Facebook or Twitter when identifying or verifying the origin of our messages, and a network of nodes will guarantee their integrity.
- Higher speed. The absence of a central authority or intermediaries makes information available to all participants in the local network. Simplification of the data transfer process entails a higher speed inherent in the management of any information that allows companies to act more quickly
- Lower cost. It is cheap, not only because it reduces the overload process by eliminating intermediaries, but also because it makes it possible to optimize processes and communications. Thanks to this technology, direct communication between systems and devices of companies allow automating the execution of operations
- Transparency. A significant advantage is that it is more transparent than any other system. It offers a clearer picture of the origin of transactions. Moreover, anyone can check any deal in the registry
- Tracking. Blockchain makes it easier for organizations to track information and continuously process history. This creates a tracking mechanism that can help organizations track any transaction
- Greater security and confidence. The Blockchain creates a trusted environment in which data exchange is carried out through encrypted operations, which allows you to protect the data and ensure the safety of all participants. Also, the decentralization of information ensures its immutability
Blockchain Application Example
- Bitcoin: this is the “father” of the Blockchain. It is conceived as the “gold” of cryptocurrencies
- Ethereum. It is widely known for the concept of smart contracts (programs running on the Ethereum virtual machine EVM), which allow you to add functionality in addition to transferring cryptocurrencies to the Blockchain
- Hyperledger: This is the Business Blockchain platform promoted by the Linux Foundation
In any case, it seems that it has a promising future. Blockchain represents the most important technological breakthrough in recent times. Thanks to the development of devices and software, it has now become possible to link transactions, their processing, and device intelligence through a system distributed around the world. Although there are still problems in terms of adaptability, security, law, intellectual property, management, and privacy. This technology, one day, will undoubtedly become one of the fastest-growing and developing digital technologies in the near future. Blockchain will undoubtedly be one of the main trends in digital transformation in the coming years and will play a key role in many sectors.
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