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Blockchain 101

Blockchain infrastructure is the underlying technology behind the potential of the crypto industry. Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a network. Blockchain technology allows for the creation of digital assets and their commercialization by exchanging a digital currency with an underlying value without an intermediator.

Previously, digital assets were only valuable in a closed or private network with limited use cases, no transferability outside of the network, and, therefore, a lack of intrinsic value. We could call them digital consumables, as they certainly had none of the characteristics of an asset. Some of the main features of a blockchain that allow for the innovation:

  • Recorded data
    Every transaction executed in the blockchain is recorded and can be revisited. All network participants have access to the historical data written on the ledger.
  • Immutable
    As all blockchain transactions are built on top of each other, the history of the ledger cannot be rewritten by any actor. No participant can change or tamper with a transaction after being recorded in the shared ledger.
  • Smart Contracts
    This is where the importance of cryptocurrency comes into play; coded contracts can be embedded on the blockchain. Meaning, that one actor can create a set of rules that, given another’s actor action, triggers an automatic transaction in the blockchain (crypto for crypto, acquisition of a digital asset for crypto, sending money between wallets…). This is important because it’s what allows for disintermediation.
  • Digital currency
    The exchange medium for disintermediated transactions is native digital currencies with value in themselves that users can transact within the blockchain without a third party validating their worth.

There is a certain level of abstraction in today’s understanding of the true potential of the blockchain, as very few non-native crypto consumer-facing applications with traction have been developed yet. The main reason behind it has been the opportunity cost of doing so.

Building solutions with mainstream use cases outside of crypto leveraging blockchain technology was not as profitable as building for a niche community of crypto-native individuals. See Defi & signaling NFTs, which, on paper, have much less societal value as building towards having a more efficient global payments network. However, as with every technological or healthcare innovation, early niche use cases finance further development, and crypto follows the same pattern.

On top of it, scaling the blockchain technology for mainstream applications is very complex. A couple of issues must be tackled, most notably; security, UX, network reliability, KYC issues, and transaction speed. Different blockchain networks have various problems today: BTC Layer 1 is slow, ETH is expensive, and Solana is unreliable…

What is important for us is that the industry seems to be at a tipping point. Liquidity in the markets is compressing, driven by higher interest rates, which may mean investors in crypto projects will be more focused on the underlying capabilities of the technology vs. speculation.

We see money flowing into the solutions bridging the gap for crypto to become mainstream. Improving existing infrastructure to solve the current security, speed, and reliability issues will be essential for further developments and applications to be built on top of it. Final users care about what they get out of the technology at convenience, not how it is made. Cloud, Data analytics, and biometrics drive most of the capabilities of modern applications without consumers realizing it, we believe the same will hold for crypto.

If you want to learn further, we recommend continuing your exploration through the following paths: