Blockchain & Web3

Cryptocurrency, smart contracts, decentralized applications

A blockchain is a digital ledger that does not rely on a central authority, and instead securely records transactions across a peer-to-peer network. Its goal is to allow users to safely transfer assets and track data in a transparent way but without risk of unauthorised alteration, and without the involvement of a central authority like a bank.

It works by grouping transactions into ‘blocks’ after they are verified by the network. Each new block permanently references the cryptographic hash of the block that came straight before it, and this locks them together in chronological order, forming a ‘chain’. It relies on consensus, where network participants or nodes use consensus mechanisms to validate entries. This means the majority must agree before any new data can be added.

This consensus is a key factor in the decentralisation of the blockchain: data is shared and updated by independent validators and it does not rest on a single central server for validation. It is also immutable, and once data is entered into a block it is irreversible: this means it can’t be altered or deleted, which aims to prevent fraud. It also offers transparency, so users can verify the authenticity of transactions.

In terms of its applications, it acts as the backbone of digital currencies such as Bitcoin and Ethereum, but also operates as part of smart contracts. These are self-executing digital programs which are stored on a blockchain, and automatically execute predefined actions only when specific conditions are met. The fact they operate on a decentralised ledger eliminates the need for third-party intermediaries.

Blockchain also allows for decentralised applications, also known as dApps. These apps run autonomously on a peer-to-peer blockchain instead of a single central server. They use smart contracts to automate these operations and eliminate intermediaries.