Bitcoin, cryptocurrencies, and blockchain are keywords repeated many times on social media, news, and the press. Just In 2021, in the United States, these keywords were searched more than 400,000 times in Google search engines, which shows a 100 percent increase compared to the last year. Perhaps in 2015, few could have predicted that blockchain would become one of the most published terms in cyberspace and social media, stimulating employment and reaching a total market cap of $ 2 trillion at a time in less than seven years. The question is: What does blockchain do with cryptocurrency? This article was prepared and edited in May 1401 by TOBTC’s content producer team under the management of Mr. Sina OsivandThis article helps to find out the answers to your questions regarding blockchain and cryptocurrency.
History of Blockchain
Blockchain dates back to the 1990s, when two physicists, Stuart Haber and W. Scott Stornetta, were trying to solve a big puzzle: What is the safest way to store digital data and how to prevent fraud over time. The article published in 1991, but at that time, they didn’t have any clue that their idea could lead to creation of new ecosystems and digital currencies around the world. In 1993, the scientific concept of “Proof of Work” was formed to find a solution to prevent the spread of spam and other network malware. Blockchain, on the other hand, was formed in 2008 when Satoshi Nakamoto published the article “Bitcoin, A Peer to Peer Electronic Cash System.” In 2015, Bitcoin received lots of attention from all around the world, and in 2016, blockchain emerged as a revolutionary idea in economics field and international finance. Finally, in 2017, Harvard University introduced blockchain as a technology to transform the world’s financial infrastructure.
What is a blockchain?
To understand blockchain, it is necessary to know the difference between centralized and decentralized networks. Decentralization means the transmission of power from a single entity to members. Instead, a centralized network is a network that operates with a single entity. In a centralized network, the origin of all the rules, data, or information comes from a particular unit or power.
Banks are examples of centralized systems. collaboration between customers and their banks is a matter of trust. This trust is broken when the centralized organization fails to maintain the critical information safe and secure. For example, if your banking data is stolen from the bank’s database, the centralization of your data in this bank could be used against you. Every year, millions of dollars are stolen through hackers infiltrating the centralized banking system. Managing a centralized financial system by a particular institution causes many problems such as inflation, inflationary stagnation, and an increasing unemployment rate. Problems of centralized international economic systems reached their peak during the 2008-2007 economic crisis. In 2008, Satoshi Nakamoto published a bitcoin article entitled A Peer-to-Peer Electronic Cash System.
This article explains the possibility of transferring and exchanging a new financial unit (Bitcoin) without the need for a centralized economic system (banks) to validate payments. For example, with any usual bank transfer with IBAN (International bank account number), the request for transferring money from one address to another should be approved by the banks. In 2009 Bitcoin attracted everyone’s attention because of its ability to create a platform for registering peer-to-peer transactions without a centralized intermediary. A decentralized system is more secure from attack than a centralized system. Blockchain as a decentralized system includes many nodes and in case of failure, the system continues to operate without any problem. For example, a blockchain network with 100 nodes operates even when five nodes are logged out, because the remaining nodes can easily continue to operate in the network. While, if the main server of centralized systems such as Facebook, shuts down, all users will be disconnected from Facebook. In another example, in 2018, when hackers accessed the main database of the UniCredit Bank of Italy, the financial confidential information of many users was stolen. In a decentralized system such as Bitcoin, however, all information and transactions are stored in a hash with decentralized private and public keys on the network. To better understand the issue, let’s talk a bit about the hash, block, and blockchain algorithm.
What is the hash function in blockchain?
The hash function is perhaps the most important concept helps you to understand how blockchain works. This article tries to deal specifically with Cryptographic Hash Function. To start, let’s see what function means. Function is a relation between a set of outputs depending on inputs (any change of inputs affects outputs). The final result of the hash function is similar to some numbers and symbols in a random form.
The input of a hash function can be any digital data, such as text, number, image or movie, or even a book, and the result is always a series of random characters and numbers that are generated uniquely. The minor change in the input data results in an entire change in output hash and the creation of a new hash. One of the advantages of hashes is an increase in the level of data security and privacy. For example, your email password will not be recorded as a text in the database, because in case of any network security problem, all the passwords can be stolen. While using the hash function, it is not possible to guess any password from the saved hash. In a blockchain network, all input data is converted to a hash using a special algorithm. Each transaction is stored as a hash in a block. The following paragraph is about the concept of block in the blockchain network.
The concept of Block in the blockchain network
When The set of generated blocks in the network is placed together based on their hash and timestamp, it forms a blockchain. A very important question here is: what exactly is stored in each block? The primary purpose of generating blocks in the system is to record transactions. The list of transactions is stored in the block. In this example, only 7 transactions are registered in the system, while in one block in the Bitcoin network up to 2000 transactions are stored in just one block. Each block contains its own number, which is written as the height of the block, which is unique for each block. Blocks also have a specific timestamp, a nonce, and a hash and are identified by them. Checking all these characteristics in a block and generating a new block by maintaining the order of the previous blocks is called validation. The Proof Of Work algorithm is to find a new block respecting the order of all the previous blocks. In the Bitcoin network, this is done by network miners.
As shown in the image above, each block contains its own block data as well as all the previous blocks’ data which is stored as a hash. Blockchain as a decentralized network has a very high level of security because, in case of changing any number, having your data stolen, or deleting any data, a new hash is created that contradicts the previous hash. Recognizing this defect, the system does not allow the formation of a new block to store the distorted data.
Application of blockchain
In this part, we discuss the applications of blockchain and then how to make money by blockchain. Perhaps the first and most important application of blockchain is in the financial and banking fields. Nowadays, with just a few clicks, you can transfer millions of dollars of money from one account to another and from one country to another, with the lowest transaction fee, without intermediaries and restrictions. Based on one of the most recent articles published by ComputerWorld, the transfer of money and assets using blockchain, due to the elimination of bureaucracy and banking intermediaries, prevents the loss of more than 8 to 12 billion dollars annually. Another application of blockchain is in the medical industry. Where, by using smart contracts, important and sensitive medical data is stored or informed to the patient without intermediaries and with the highest security. They can also record all patient data in the blockchain network and expedite the treatment process by tracking.
Art and music are other areas in which blockchain has made a dramatic change. Artists, painters, and singers can convert their artwork into non-fungible tokens, or NFTs. It is also possible to buy or sell these non-fungible tokens in NFT MarketPlace. This way, artists can introduce their artworks to millions of people with just a few simple clicks at the lowest cost, and interact with their audiences and customers without any intermediaries. In May 2022, The market value of NFTs reached more than $ 840 million.
Blockchain is used in many other industries, such as in the mining industry to track the supply and demand of important minerals, in the tourism industry to better manage foreign tourists and even to prevent money laundering in legal cases. These are just some of the thousands of basic uses of blockchain in today’s world.
Blockchain also is used in many other industries, such as the mining industry to track the supply and demand of critical raw materials, the tourism industry to increase the efficiency of tourism management, and even to prevent money laundering in legal cases. All these examples are just some of the thousands of blockchain applications in today’s world.
How to make money using blockchain?
Blockchain science along with the opportunities that come with it improves the lives of thousands of people around the world.
The cryptocurrency market was worth just $ 7 billion in 2015, compared to about $ 1.2 trillion in May 2022. It has grown more than 170 times in just 7 years. The dramatic growth of the blockchain industry, followed by cryptocurrencies, has attracted the attention of everyone around the world. The market is expected to reach $ 10 trillion by 2030.
2. Nft Marketplace
A Market for Minting, buying, and selling non-fungible tokens is another opportunity to earn money in this area. Every day, thousands of artists, painters, photographers, musicians, and singers sell their artwork through the NFT marketplace. This platform has been an opportunity for famous and non-famous artists. They can communicate with millions of audiences around the world and show their art without intermediaries.
One of the best and most famous NFT MarketPlace for non-fungible tokens is the Laqira Protocol NFT Marketplace. You can convert your art product to NFT and sell or buy it if you are interested in art products.
3. Play To Earn
Until three years ago, gaming was the only way to spend your free time, but with the help of blockchain, today, thousands of gamers are earning money by Play2Earn games. The spread of blockchain games around the world brought up the terms GameFi or Play2Earn. This means that by using decentralized financial platforms, players can withdraw their profits or rewards after playing. For example, Laqirace, the world’s first Drive2earn game, has made it possible for its audience to earn money in different ways. Players can earn money by winning various tournaments and enjoying the game.
In this method, unlike the traditional advertising system, the audience receives money for watching the ads. For example, if you use the Brave browser, you can get BAT tokens by watching ads.
These are just a few of the dozens of ways to make money from this fascinating and innovative field.
Undoubtedly, blockchain, cryptocurrencies, and related industries are one of the most important human inventions of the new century. An invention that has affected many lives so far and has brought many opportunities. TOBTC’s content producer team, led by Mr. Sina Osivand, is honored to introduce all the opportunities and information in this field to raise your awareness and knowledge.