WHAT ARE THE BLOCKCHAINS?

A blockchain is a set of data or records, which are grouped into blocks, hence its name "chain of blocks in English".

This data set is very resistant to malicious alteration because each block has a hash of the previous block, in such a way that to alter a data or record of a specific block, it would be necessary to alter all the blocks that have been added to the blockchain after this block.

This does not seem too difficult in principle, in fact it is, because most of the blockchains that exist use cryptographic algorithms to calculate the hash of each block, and the difficulty of performing this calculation is usually directly related to power total of all miners, or computers that are using this blockchain at that moment, and this is called "proof of work" or Proof of Work (PoW).

In practice and for example, if someone wanted to alter a data from a Bitcoin blockchain transaction, and the block that contains the data is now 30 blocks above it, this person would have to change the data they want to modify ( the amount of a bitcoin transfer for example), and then calculate the next 30 blocks with a difficulty equal to or greater than that originally used, until the blockchain is closed at the point where it is currently being calculated.

In practice, this would have a gigantic cost in computing power, and economically speaking it would be close to or greater than the rewards given to miners within the Bitcoin network for solving each of the blocks. As currently the reward is 12.5 bitcoins per block, the total cost would be about:

30 blocks * 6.25 BTC * 11,000 USD = 2,062,500 USD.

But it would have to be done quickly, because on average 144 new blocks are generated every day on the bitcoin blockchain, so for each day of delay about 10 million US dollars in computing power would be added.

Furthermore, this would not assure the counterfeiter that he could keep the false chain active, as it could be overtaken and canceled by the original at any time, once the previous chain would have surpassed the chain in computing power (proof of work). of newly created blocks to falsify a data or record.

Thanks to this feature, a blockchain can contain data in a safe and reliable way in a decentralized network in which no person or company has the power or responsibility to decide what data is valid or not.

Uses of blockchains

Initially, the blockchain was only used as an accounting record for bitcoin and other cryptocurrencies that were later created called altcoins, such as Litecoin, Dash, Monero, etc.

However, today there are many blockchains that are not related to a cryptocurrency, or at least it is not their main function.

Below we will detail some of the uses that are currently being given to blockchains:

Cryptocurrencies

As we have indicated previously, this was the initial use, and the most widespread in the first years. The blockchain is used to keep an accounting of the amount of cryptocurrency that each wallet has, and each and every operation that is carried out is recorded.

Smart contracts

Users of this type of blockchains can register a contract that will be executed automatically when the conditions agreed in it are met. This is achieved using a programming language that has generally been created by the creators of the blockchain. Examples of this type of blockchain are Ethereum, Enigma, Qtum, etc.

Video games and related digital assets

Video game players often trade or sell assets obtained in a video game (swords, armor, magic potions, etc.).

Before the blockchain, there were companies that act as intermediaries between the players to carry out the secure exchange (this operation is called “escrow”), but thanks to the blockchain, now specialized blockchains can be created in this type of operations between players without requiring a third party.

A notable example of this type of use of blockchains is the game CryptoKitties, which was created on November 28, 2017 by the company Axiom Zen Innovation Studio, and which, as its name suggests, is about cryptographic virtual pets.

However, CryptoKitties did not create its own blockchain and use Ethereum (currently the most famous blockchain of smart contracts).

The success of the game was such that at its peak, it greatly slowed down operations on the Ethereum blockchain and also significantly increased the cost of executing a trade called "Gas Price" (Gwei).

To get an idea of how popular CryptoKitties was, it can be taken into account that it registered 30% of all daily operations registered in the Ethereum blockchain, and it delayed by 6 the time necessary for a transaction to be executed, significantly increasing the operations pending confirmation.

Financial services

Another use of blockchains is to support loans, credits, mortgages, and other financial services without the need for a third person or company. Along the same lines, blockchains have been used to launch and manage ICOs (initial coin offerings), and in this way no trust was required between the creator of the ICO and the initial buyers, the coins or tokens were automatically distributed on day established between buyers.