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Everything about Blockchain technology - how it works, what it is all about

Everything about Blockchain technology - how it works, what it is all about

created Michał SielskiJuly 21 2020

All cryptocurrencies are based on blockchain technology, which the world heard about after its famous price rally Bitcoin. Today, however, it is entering new places. Its enthusiasts argue that it can help not only revolutionize the payment system, but also prevent counterfeiting, hunger and many other problems of the modern world.

What is blockchain and how does it work? For the first time public awareness, this term broke through with cryptocurrencies, which thanks to this technology have an advantage over traditional payment methods. Today we know that blockchain is much more than "just" cryptocurrencies.


Where did blockchain come from?

In order to fully understand the foundations of this technology, it is necessary to go back to the financial crisis of 2007-2008. It was then in the USA that practically the entire - seemingly stable - traditional financial system collapsed. It was the beginning of the global crisis, unemployment in the millions in many countries of the world and negative GDP.

The commission set up to investigate the causes of the crisis quickly proved that the reason was investing in overly risky assets. The funds that were supposed to be collateral and financial cushion for worse times were invested in debt instruments that brought considerable profits, but very risky in the long run. Of course, virtually no one was aware of it, because the world's greatest investors were not going to inform their clients about it, busy counting additional profits and zeros on their accounts. The level of crediting investments was so high that practically everything on the market was bought with borrowed money. And when they started to be lacking, subsequent businesses crumbled like dominoes and houses of cards.

It is worth remembering that since 1971 the dollar is no longer convertible into gold. So the US government can print as many dollars as it wants. And it is no problem to use this option very regularly. No wonder then that crises occur cyclically - the value of money is really conventional. The strongest currencies - like the US dollar - most often benefit from it, but as you can see, always until the time.

And here comes the fundamental issue related to blockchain technology. Digital coins based on its assumptions cannot be forged, and can not be printed with impunity or secretly.

The principle of the blockchain

Blockchain finally deals with the problem of counterfeiting, which is such a big problem for global economies that in most countries it is treated as a crime, not a crime, and is punishable by much higher penalties than common vices. Thanks to blockchain technology, each coin has its own history, recorded on the blockchain after each transaction. So you can follow it all the way from the uprising. Each end of the block is also the beginning of the next one. So some data is duplicated, somehow overlapping, which is why it is called a blockchain. So you cannot fake the last block, because you have to change the previous one, and then the earlier one, etc. Each change, however, requires approval by the network, so it's simply impossible.

We can track the currently created blocks and the last Bitcoin transactions, e.g. on the website blockcypher.

In addition, information is stored in multiple copies. Copies are placed in the cloud, i.e. in many places at the same time, and not, for example, on one central server. The data is cryptographically secured in such a complex way that today it is possible to break the security only by using the computing power ... of all the computers in the world.


Blockchain is also an open network - everyone can see what wallets have exchanged funds, how many there were and when. The data is saved forever - it cannot be modified or deleted. They are an integral part of every coin. For the same reason, transactions cannot be rolled back.

Blockchain is not only about cryptocurrencies

Blockchain technology is mostly associated with cryptocurrencies, but today it is used in virtually every industry. Due to the fact that it omits intermediaries, it is used, among others, for loans. Bypassing the middlemen, the cost of money is lower. Even the world's largest investment banks benefit from this, as they already have their dedicated networks and even tokens facilitating international exchange.

In the future, blockchain can manage entire logistics chains, coordinating transport and delivery, as well as the sale of energy from alternative sources. Already today, blockchain technology allows identity verification as well as checking the originality of products, services and works.

The real breakthrough for its application, however, will be the fledgling Internet of Things. But that's a topic for a completely different story ...

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About the Author
Michał Sielski
Professional journalist for over 20 years. He worked, among others, in Gazeta Wyborcza, recently associated with the largest regional portal - He has been present on the financial market for 18 years, he started on the Warsaw Stock Exchange when the shares of PKN Orlen and TP SA were just being introduced to the market. Recently, his investment focus has been exclusively on the Forex market. Privately, he is a parachutist, a lover of Polish mountains and a Polish karate champion.