Bitcoin, Ethereum, Litecoin, Dogecoin, Monero and Ripple are cryptocurrencies that use the blockchain.
Blockchain is a term in the English language that refers to a chain of blocks . Although the word is not part of the dictionary of the Royal Spanish Academy ( RAE ), its use has been frequent in our language for several years.
The idea of blockchain can be understood in different ways. In a general sense, the concept refers to the model that makes it possible to transfer an asset or value from one point to another without requiring the intervention of a bank or other institution .
With blockchain, the users themselves are responsible for the control and verification of the processes. Each block added to the chain is a record containing the transaction data, which is stored in encrypted form to ensure security.
Blockchain and cryptocurrencies
The blockchain is used for the transaction of cryptocurrencies . In this area it works like a large accounting book in which the income and expenditure of money from the accounts are detailed.
These transactions are recorded in blocks that are linked. There is no third party in charge of certifying the data, but rather it is examined by multiple users ( nodes ) that are equal to each other, do not know each other and maintain independence.
Cryptography is key to blockchain security . It must be considered that the information already incorporated cannot be deleted and that the blocks, in the chain, are interconnected through cryptographic encryption . It is therefore not possible to change the data of the previous block because all previous blocks would also have to be modified.
The so-called DeFi (decentralized finance) uses smart contracts on the blockchain.
An example
Suppose that Juan wants to send 1 bitcoin to Carlos . This transaction, in blockchain, is recorded in a block that is transmitted to all parties in the network.
Users review the transaction and, if valid, approve it. In this way, the block is added to the blockchain as a transparent and unmodifiable record of the operation. Only there, the bitcoin leaves Juan 's cryptocurrency wallet and is credited to Carlos .
It is important to indicate that, in this process, no user knows who is behind each operation (in our example, Juan or Carlos cannot be identified). What transcends is that from one wallet you want to send a certain amount to another.
In this way, the review consists of checking that the source account has enough money for the transfer to be made. Once this check is done, network users effectively record the data in a block (which also contains information about other transactions). Over time, more and more operations are added until the capacity of the block is complete and it must be sealed or validated .
This process, as you can see, presents notable differences compared to a bank transfer . If Juan wants to send money from his bank account to Carlos , what he does is ask his bank to withdraw the amount from his account and send it to Carlos 's bank account. There is, thus, communication between both entities for the operation to be carried out.
Ultimately, users cannot control the process. The power is in the banks, who impose the conditions and charge for their service.
An NFT (non-fungible token) is an asset whose properties are certified with the blockchain.
The role of mining in the blockchain
The so-called cryptocurrency mining is the procedure that makes it possible to seal or validate the blocks that are incorporated into a chain. This requires the resolution of highly complex calculations, something that demands time and electricity (due to the use of computing power of computers). Only when this task is completed is the block recorded definitively.
Those who dedicate themselves to this activity are called miners . When there is a new transaction, the notice reaches the miners that are part of the network and a competition then arises between them: the one who is the first to solve the calculations and generate a valid block, receives cryptocurrencies for their service.
Since a common chain of blocks is used with synchronization between nodes, transactions are irreversible . No user can alter the account book without others becoming aware of that intention.
For mining to be effective and secure, the linking of blocks in the chain is carried out with an encrypted pointer (with a hash function). In addition, the transfer data (which is public, except for the identity of the users) and a time stamp are included. This promotes traceability control.
Other applications
The applications of blockchain technology go beyond cryptocurrencies. According to various specialists, the system could be applied in electoral processes to avoid a centralized audit in the vote counting.
Another use of the blockchain is in a supply chain . With this method, the final consumer could see the history of a product step by step, knowing its entire journey.
The creation of an electricity market that works without intermediaries so that those who generate their own electrical energy (with solar panels, for example) can market the surplus that they do not consume is another potential use of the blockchain.