As we’ve learned, the more computing power stabilizing the network, the more decentralized and, subsequently, secure it can be. This system of individual computers (nodes) supporting the network is known as a peer-to-peer network.
We can visualize the difference between a centralized network and a decentralized network by thinking of decentralization like a woven web between equal users, whereas a centralized network relies on one central authority or single point of failure.
In a decentralized blockchain network, all participants store a copy of the blockchain themselves. This makes everyone in the network equal and the network more decentralized and secure. If someone (a node) leaves the network, the network remains in-tact as no one participant acts as a single point of failure. Anyone can join a public blockchain, like the Bitcoin network, offer computing power, and begin earning the network’s native asset (like BTC) for their network participation.
It’s also worth noting that, while there are public blockchains that enjoy the majority of our attention, there are private blockchains uses by private organizations and companies to achieve their own goals. Private blockchains require nodes to be approved in some fashion before they are added to the network.
Prefer Watching Videos?
YouTube channel 3Blue1Brown created this video about Bitcoin that offers a digestible intro to the network, blocks, and the design of the network.
Tokenized assets and cryptocurrencies like Bitcoin, Ethereum, and thousands of others are able to be sent between users or across protocols via blockchain technology and smart contracts. The creating, verifying, listing, and storing of these transactions is what makes blockchain so important.
The concept and use of blockchain technology is exciting for a number of reasons. One of the most important, though, is the idea that anyone with an internet connection can leverage blockchain to send and store value without the need for a bank or other institutional middleman. There’s no barrier to entry, so anyone can participate in the network.
Additionally, today’s typical financial infrastructure involves multi-step processes that can put user identification at various levels of risk. With blockchain, users do not need to display or share personally identifiable information (PII); making the transactions easier, more secure, and – in many cases – faster and less expensive to execute.
Aside from financial transactions, blockchain technology has other emerging use cases, like:
- storing medical (etc.) records
- supply chain management
- gaming and entertainment
- voting and governance
- identity verification
- housing and ownership
Deploying Smart Contracts
Many of the exciting use cases for blockchain technology include the use of smart contracts. Essentially, a smart contract is code written to interact with a blockchain. As the name implies, it’s a contract; an agreement of pre-written conditions that, when met, execute whatever the terms of the code dictate.
A simple way to consider smart contracts: “if ____ happens, then ____ happens” written in code. We’ll look at smart contracts in more detail in a future article.
It’s important to keep in mind that blockchains range in size, use case(s), level of centralization/decentralization, functionality, and complexity. Generally, the Bitcoin blockchain is considered useful as a transactional chain for sending value (Bitcoin), although there are projects working on creating much more layered functionality and toolkits for developers to build and expand upon.
Other blockchains, like Ethereum, have created a larger suite of tools and opportunities for developers to create applications using blockchain technology. As the industry evolves, a bigger – and wider – range of tools are being conceptualized and created.