We’ve been talking about NFTs, smart contracts and the blockchain, but we haven’t looked too much at what blockchain technology is yet. Learn about the network that crypto is built on, in terms that you can actually understand.
Blockchain technology can sound a bit scary and complicated. But, you don’t need to be a computer scientist to understand how it works!
Since Fractis is built on blockchain technology, we thought it would be a great idea to help everyone get to grips with what that really means. After all, if you’re interested in a better way to invest in music, you ought to know the ins and outs of things, right?
We’ll keep things simple and accessible here. So, if you’re a total blockchain whizz already, you can probably just go and grab a cup of tea, maybe even a biscuit if you’re feeling fancy.
Table of Contents
What Is Blockchain Technology?
You’ll often see blockchain technology referred to as “the blockchain”. This can be slightly confusing and misleading. It makes it sound like there is just one enormous blockchain that everything crypto-related runs on. In actual fact, there are a whole array of blockchains.
So, what is a blockchain? It’s distributed ledger technology (DLT), that stores data securely and immutably. Don’t worry, we are going to break it down further.
Let’s start with the block element of the blockchain. A block is just a load of data – which could represent almost anything, from currency to supply chain records.
In terms of cryptocurrencies, a block is a list of transactions that have taken place. A block could also be filled with smart contracts, which you can learn more about here!
Blocks can only hold so many transactions or so much data before they’re full. This is why more blocks need to be added to the chain.
The chain element links all the blocks together. Arguably, the chain part is the more confusing part of blockchain technology.
The chain is actually a hashing function. This is a complex mathematical process, where you put something into it, and it outputs a hash. A hash is a string of code made up of numbers and letters. Some blockchains use different hashing functions to others, and this results in the code of a hash looking different.
Hashing functions are complex, but there are three key things to note.
- You can’t just find the input of a hash – you have to guess the input in order to get the output. This is where consensus mechanisms come into play.
- Changing the input a bit changes the output a lot
- Working out the hash takes some time – guessing the hash in order to verify a block and add it to the network requires lots of computing power, thanks to a process called “mining”.
This animation from Whiteboard Crypto explains all of this clearly and simply.
Qualities of the Blockchain
Now you’ve got a basic understanding of blockchain technology, we’re going to look at its qualities and how it’s used in the real world.
People will argue that some blockchain networks are more or less decentralised than others. Ethereum is the largest network in the world, and the question of how decentralised it is hangs on a few factors. Largely, it has to do with how the tokens on the network are distributed, as this represents who has the most control – but don’t worry too much about that now.
Let’s look at what decentralised means.
If something is decentralised, it means that rather than one person or company having all the power and making decisions, the power is given to everyone involved. This means that changes can’t be made or decisions passed without everyone being aware and agreeing to it.
A good example of this is the transfer of money.
If you want to send a large sum of money to your friend on the other side of the world, your bank would act as an intermediary. They would have requirements that must be met and regulations that must be followed. This means that the sending of the money could take a long time, and cost a lot in fees. Or, it could be denied altogether. Nobody else gets to see into the process of the decision-making, and don’t get a say in it. This is centralised.
The decentralised version of sending currency on the blockchain would be faster, result in lower fees, and be visible for all to see. The mining process that was briefly mentioned earlier would be undertaken by participants on the network, until a consensus is met. The block containing your transaction (the large sum you want to send to your friend) will be added to the blockchain, and that’s it.
Not every blockchain is publicly visible, but lots are. This means that everyone can see what transactions have taken place.
This means that it’s far more difficult for fraudulent activity to take place, like double spending. Because numerous participants will be able to spot something fishy, they can stop it going through.
If you’re worried about protecting your identity, don’t panic. Blockchains are pseudonymous. When you participate in transactions on the blockchain, you will be doing so using a wallet. Your wallet will have a public address and a private key. Only the public address is visible to others, and will not give your identity away. So, it’s easy to track who sent what transaction to whom in terms of wallets, but nobody will know whose wallet it is.
Open to Everyone
Anyone can use blockchain technology, and pretty much anyone can mine or validate on the blockchain. We say “pretty much” because, whilst it’s open to anyone, it helps to have a good knowledge of computers as well as a powerful computing setup.
Users are encouraged to validate transactions on the blockchain in order to keep it ticking along by being rewarded with cryptocurrency. Every time they correctly guess the complex cryptographic puzzle and generate a hash, they essentially get paid.
Uses of Blockchain Technology
We’ll go into this in more depth here, but there are a number of ways the blockchain can be used in the real world.
Finance and banking has already been covered. People can send money more quickly, securely, and affordably using the blockchain and cryptocurrency.
Another area that the blockchain is incredibly useful in is supply chain and logistics. Blockchain technology can speed up slow manual processes, as well as improve traceability and accountability.
For example, if a product keeps showing up to stores broken, its journey can be traced on the blockchain, with its quality and state recorded at each step. This allows companies to see at what point along the supply chain the damage is occurring, and fix it.
Because the blockchain is immutable, it means that data cannot be changed or tampered with after it’s been added. That means there’s no room for passing the buck or avoiding accountability.
Because blocks on the blockchain can be data of any kind, this makes the technology perfect for storing medical records. In some countries, these records are currently held by private organisations. That means it can be difficult to get hold of someone’s medical history quickly, in order to give them the most effective treatment.
If medical data was stored on a DLT, it would be possible to retrieve it much faster. This is true no matter where in the world you are as well.
There are some concerns around privacy, though. If a network was publicly visible, there would need to be systems in place to protect individuals’ identities.
People using the blockchain do so by spending cryptocurrency and trading tokens. One type of token that you’ve almost certainly heard of is an NFT (non-fungible token). These are tokens that cannot be swapped, like a regular dollar could. Often, they’re linked to digital art, like a bored ape JPEG.
Fractis uses blockchain technology to benefit musicians and music lovers by offering a music streaming royalties NFT marketplace.
By attaching a percentage of streaming royalties for a musical project to an NFT, artists can sell shares in their music for instant revenue. Fans benefit by getting to support their favourite musicians, as well as building a lucrative NFT portfolio that will provide them with passive income.
Solana is the blockchain we’ve opted for, due to its lower transaction fees and minimal environmental impact. It’s thought of as the up-and-coming network that could rival Ethereum. There have been concerns around just how decentralised Solana is, but, a new network still in beta, there’s plenty of room for development.
Sign up to Fractis now, and become part of the music royalties revolution!