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What Is a Blockchain?

What is Blockchain – Olymp Trade Official Blog – 30.07.2022

In these times of lack of trust with traditional third parties, blockchain technology, which proposes the guarantee of disintermediation and transparency, attracts new users daily and fascinates millions of transactions.

Considered the biggest economic revolution since the internet, the blockchain is a technology that will change our way of thinking, but only a few know how a blockchain works.

In this article, you will learn what a blockchain is, how it works, and how can you profit from it? 😉

Contents:

Interact with the underlined words and green dots to get additional details and explanations.

What Is a Blockchain in Simple Terms?

A blockchain is a method of storing and transmitting information. They are protected by cryptography, unfalsifiable, and completely transparent because its data is decentralized and verified by a network of its users.

In other words, it is a sort of worldwide data ledger containing the record of all the transactions ever made.

Blockchain is a distributed ledger technology, or DLT, combining digital systems that simultaneously track asset transactions and their details in several locations.

The essential characteristics of blockchain technology are:

  • Disintermediation
  • Transparency
  • Safety and security
  • Independence

The different classes of blockchains:

  • Public blockchain
  • Private blockchain

1️⃣ Public blockchain

Like the Bitcoin blockchain, public blockchains are unrestricted with no particular entry requirements. Which means that anyone with a strong enough computer can become a functioning part of the network.

2️⃣ Private blockchain

On the other hand, private blockchains are blockchains with centralized block creation in which all rights of performing these operations belong to a single entity. The public is limited to reading the information. Only trusted nodes can audit and manage databases and other applications.

How Does a Blockchain Work?

A blockchain works as a chain of blocks that stores all types of information; we can refer to it as a database containing the history of every transaction. It is basically a ledger.

One of its main characteristics is that it is unchangeable; several innovative cryptographic processes protect those blocks from modifications.

Let us see a real example:

A Transaction initiated between two parties, X and Y

A new transaction request certified by the digital signature of X.

Transmission of the transaction on all the blockchain network nodes

All blockchain verifiers receive a copy of the transaction on their personal computers, called nodes. They verify and validate the transaction details using automatic processing algorithms.

Placing the transaction in a block

Transactions, once validated, are compiled in blocks. Voluntary blockchain builders called miners forge these blocks. Each block has a digital marker (a code, called a hash) from the previous block in the chain, which certifies its validity.

Finding the correct hash

The goal of hashing is to find and validate the specific code or has connected to the block. The miner who discovers the correct hash is «rewarded», with cryptocurrency, for example.

Sending the updated blockchain

Copies of the ledger are held on all network nodes assure the blockchain’s sustainability. Anyone can verify the entire blockchain at any moment.

What Is a Blockchain Used For?

The blockchain has an the possibility of changing the global economy and revolutionizing many sectors, like finance, health, art, and the music industry. Its primary purpose is to facilitate digital information to be stored and shared with clarity and safety.

Fields of application:

  • Smart contracts
  • Cryptocurrencies
  • NFT (Non-fungible Token)
  • Electronic voting
  • Copyright certification
  • Optimize tracking and supply chain

Pros and Cons of the Blockchain

Pros:

  • Decentralization
  • Provides a higher level of transparency
  • Speed of transactions
  • Data reliability
  • Remove third-party requirement

Cons:

  • It requires energy
  • Technological complexity
  • Unclear regulatory status

How Can Traders Benefit From the Blockchain?

There are several ways traders could get the best out of blockchain technology.

First, you can use cryptocurrencies to deposit on your Olymp Trade account.

Second, you can get benefits from blockchain by using different assets such as:

  • Cryptocurrency
  • Company stocks
  • ETFs (Exchange-Traded Funds)

1️⃣ Cryptocurrency

Bitcoin or  Ethereum are among the most widespread cryptocurrencies powered by the blockchain.

You can trade both on the Olymp Trade platform.

Bitcoin Chart – Olymp Trade – 30.07.2022
Fig. 1. Bitcoin on the Olymp Trade platform

2️⃣ Company stocks

Big corporations are investing in blockchain or already using it; they all know the blockchain is the future. We have IBM, Coinbase, and Robinhood among the top blockchain companies. You can trade on these stocks on Olymp Trade.

Robinhood Chart – Olymp Trade – 30.07.2022
Fig. 2. Robinhood stocks on the Olymp Trade platform

3️⃣ ETFs

ETFs or Exchange-Traded Funds are a great way to invest passively for the long term; while the blockchain is booming, Trading ETFs allows you to profit from several blockchain-based projects.

For example, the SPDR S&P 500 ETF trust invests in companies like Nvidia (which supports crypto mining) or  Tesla (which uses two blockchain solutions). You can trade on the SPDR S&P 500 ETF on the Olymp Trade Platform.

SPDR S&P 500 ETF Charts – Olymp Trade – 30.07.2022
Fig. 3. SPDR S& P 500 ETF on Olymp Trade platform

Conclusion: Is Blockchain an Opportunity?

Indeed, the blockchain provides us with countless opportunities. If you have the patience and the time to understand it, you will be able to profit from it.

That said, choosing the right platform will give you an edge over other traders, with the opportunity to take full advantage of this technology.

Start immediately by making your first deposit using cryptocurrencies on the Olymp Trade Platform.

Get Started

Risk warning: The contents of this article do not constitute investment advice, and you bear sole responsibility for your trading activity and/or trading results.