Why blockchains matter
At its core, a blockchain is a decentralized, distributed ledger that records transactions across a network of computers. Unlike traditional databases controlled by a central authority, blockchains are maintained by a network of participants who collectively validate and store data in a secure, transparent, and immutable manner. Each transaction or record is grouped into blocks, linked sequentially, and secured using cryptographic techniques. Blockchains enable trustless interactions, meaning participants don’t need to rely on intermediaries or trust each other, making them a foundational technology for Web3.
Key features of blockchains
Decentralization
Blockchains distribute control across a network of participants, reducing the risk of single points of failure and censorship. Example: The Bitcoin blockchain operates without a central authority, allowing people worldwide to send and receive value directly. Its decentralized nature prevented governments from shutting it down despite regulatory resistance. To really shut it down, one probably has to shut down the entire Internet.
Trustlessness
Participants can interact without relying on intermediaries because smart contracts. Example: Uniswap, a decentralized exchange (DEX), allows users to trade cryptocurrencies directly from their wallets without trusting a centralized entity (CEX, like Binance and Coinbase).
Transparency
Transactions and operations are recorded on a public ledger, ensuring accountability. Anyone could monitor on-chain activity. Example: IBM Hyperledger uses blockchain to make supply chain transparent and traceable. Walmart uses blockchain to trace food supply chains, reducing contamination risks and ensuring transparency.
Ownership and Control
Users own their digital assets and data through cryptographic keys. Example: Artists selling NFTs on platforms like OpenSea maintain ownership of their creations, earning royalties every time their work is resold.
Programmable Money and Smart Contracts
Smart contracts automate processes and enable programmable money systems. Example: The Ethereum-based Aave protocol allows users to lend and borrow crypto assets automatically through smart contracts.
Censorship Resistance
Decentralized networks prevent external entities from blocking or altering transactions. Example: During political unrest in Nigeria, activists used Bitcoin to bypass government restrictions on traditional banking systems to fund protests.
Global and 24/7 Accessibility
Blockchain systems are borderless, enabling global participation without traditional financial barriers.
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