Blockchain is a decentralized digital database. Information is stored in blocks that are interconnected. Blockchain means that each block contains transaction data, time, and a unique code – a hash – that links it to the previous block. This structure forms a chain of blocks, or blockchain.

Blockchain – what is it in simple terms? It’s a large folder where the recorded data cannot be changed or deleted without the consent of the network participants. This provides a high level of security and transparency.

Blockchain is used to store and transmit data in various systems, the most famous of which is cryptocurrency. However, the application of the technology goes far beyond the financial sector - from supply chain management to healthcare and public administration.

The blockchain revolution is gaining momentum due to a number of key features that distinguish blockchain from traditional databases and information storage systems:

• Decentralization. There is no central controlling body or server in the blockchain. Each network member has its own copy of the entire registry, and changes can be made only with the consent of the majority. This significantly reduces the risks of fraud and cyberattacks.
• Security. Thanks to cryptographic protection, the data recorded in the blockchain is almost impossible to fake or change. Each block is linked to the previous one using a unique hash, and any attempt to change the data will disrupt the entire chain.
• Transparency. Every blockchain transaction can be verified by network participants. This ensures a high level of trust and makes the system ideal for applications that require honesty and openness.
• Permanence. Information cannot be changed or deleted. This ensures the accuracy of the data and its historical reliability.
• Efficiency. Smart contracts are programs that execute automatically when certain conditions are met. This reduces the time of operations and reduces costs.
• Cryptography. All data is protected by sophisticated encryption algorithms, which ensure the security and integrity of information.

How blockchain works

In order for a new block to be added to the chain, it must go through a verification process called consensus.

There are several mechanisms for achieving consensus, the most popular of which are:

• Proof-of-Work (PoW). It is used in the Bitcoin blockchain. Miner computers solve complex mathematical problems. The first one to find the right solution is rewarded, and a new block is added to the chain. This process requires a lot of computing power.
• Proof-of-Stake (PoS). Instead of solving complex problems, users “freeze” a certain amount of their coins as collateral. The more coins, the higher the chances of getting the right to add a new block. This method is much more energy efficient than PoW.
• Delegated Proof-of-Stake (DPoS). Users choose representatives to verify blocks on their behalf. This is a faster way to verify trades but may be less decentralized.

Blockchain scheme

1. A trade is created and signed using a private key.
2. The trade is sent to the entire network.
3. All nodes verify the trade using a consensus algorithm.
4. The verified trade is added to a new block.
5. The block receives its own hash and includes the hash of the previous block.
6. The new block is added to the chain, and copies of the chain are updated on all nodes.

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Decentralization and its importance in blockchain technology

For many, blockchain technology is synonymous with security and impartiality.

One of the main aspects of blockchain is decentralization. Unlike traditional databases, blockchains and cryptocurrencies are not controlled by any central organization or server. Instead, data is stored on many computers (nodes) around the world.

Why is this important?

• Resistance to attacks. A hacker will have to hack most nodes at the same time, which is almost impossible.
• Transparency. All network participants have access to the same information.
• Independence. No one can change or delete data without the approval of the majority of participants.

Application of blockchain technologies

Blockchain has already proven its effectiveness in various fields, from cryptocurrencies to logistics and healthcare. Its capabilities are growing, and the technology is becoming a part of not only financial markets but also many other industries. Let's take a look at where blockchain is used and why it is considered revolutionary.

Cryptocurrencies have become the first and most famous blockchain application. In 2009, Bitcoin was created, the first cryptocurrency to operate on a public blockchain. Since then, hundreds of other cryptocurrencies have emerged that use this technology.

How blockchain works in crypto:

• Each trade is recorded in a block.
• Once a block is full, it is added to the chain of blocks (blockchain).
• The information is stored on many computers at the same time (nodes), which makes it unchangeable and secure.

Smart contracts are programs that automatically fulfill the terms of an agreement when certain criteria are met. Here are some use cases:

• Financial transactions. Automatic payments or transfers of funds when conditions are met.
• NFT (non-fungible tokens). Sale and confirmation of ownership of digital assets.
• Logistics. Automated cargo tracking.

Blockchain technology in Ukraine: development and prospects

According to Chainalysis, Ukraine is among the top 10 countries in the world in terms of cryptocurrency use. It is clear that there are many areas of use if we try to define blockchain.

First of all, Ukrainian companies use blockchain to protect confidential information and create digital identification systems. They also use it to protect goods. This helps fight counterfeit products and improves the quality of service.

The banking sector is also interested in blockchain solutions, especially in the context of fast trades and reduced payment processing costs. Well, where can we go without culture? Ukraine is developing NFT projects related to art, music, and other digital assets.

Legislative regulation: how blockchain is controlled in Ukraine

The issue of regulating technologies blockchain and cryptocurrencies in Ukraine is still in its infancy. However, there are already some achievements:

• Law on Virtual Assets

  In 2022, the Verkhovna Rada adopted a law that defines the rights and obligations of market participants, as well as the principles of state supervision over the digital currency market. This includes blockchain crypto.

• National Bank of Ukraine (NBU)

  The NBU is actively exploring the possibility of creating its own digital currency (CBDC), the electronic hryvnia. The project is currently at the testing stage.

• Tax issues

  The Tax Code of Ukraine does not have a clear regulation of cryptocurrencies, but some initiatives are aimed at establishing rules for taxation of income from crypto assets.

Ukraine is moving towards creating clear rules for the use of blockchain, although many aspects need to be further developed.

Books about blockchain: what to read to understand

• Blockchain Revolution by Don and Alex Tapscott

  A manifesto of the blockchain revolution that shows how this technology can transform business, the economy, and even government.

• Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond by Chris Burniske and Jack Tatar

  The perfect guide for investors that breaks down cryptoassets and teaches how to invest wisely.

• The Basics of Bitcoins and Blockchains by Antony Lewis

  A friendly introduction to the world of blockchain and cryptocurrencies, explaining complex topics in simple terms. Understand what are blockchain technologies and what is blockchain software used by market participants.

• Mastering Bitcoin by Andreas Antonopoulos

  A technical masterpiece for those who want to understand the codes and protocols of Bitcoin in the finest detail in technology blockchain.

• The Book of Satoshi by Phil Champagne

  All the writings of pne of the mysterious blockchain developers Satoshi Nakamoto in one place — it’s like opening an ancient manuscript of cryptocurrencies.

• Blockchain Basics: A Non-Technical Introduction in 25 Steps by Daniel Drescher

  A step-by-step guide to the blockchain in technology world that breaks down complex concepts for beginners.

• Bitcoin Standard by Saifedean Ammous

  A deep analysis of why Bitcoin could become the new global monetary standard.

• Digital Gold by Nathaniel Popper

  The story of Bitcoin's creation reads like a thrilling novel with real-life heroes and intrigue.

• Blockchain: Blueprint for a New Economy by Melanie Swan

  A vision of blockchain as a universal tool for social and economic change.

• Ethereum: The Definitive Guide to Smart Contracts and Dapps by Andreas Antonopoulos and Gavin Wood

  Everything about Ethereum and smart contracts from one of the best-known blockchain technology advocates.

That's all we wanted to say today, explaining what blockchain is. Study at Bikotrading Academy – we will help you get blockchain tech explained, make your first steps in the world of crypto with our blockchain course, whether you are a beginner or a professional. Join the blockchain revolution with us!