Blockchain for Dummies: The Beginner's Guide
Blockchain for Dummies: The Beginner's Guide
Are you looking for a Blockchain for Dummies beginner's guide? The blockchain space is arguably the space with the most innovation in the last several years. Since its debut in 2009, blockchain technology has transcended the limitations of being confined to strictly financial use cases. Projects such as Ethereum, Solana, and Cardano have enabled developers to create decentralized applications on top of blockchains without them having to create and maintain their own blockchain. With so much going on in the blockchain space, many in the blockchain space are eager to see what the future holds for blockchain technology and the space as a whole. In this article, we will take a look at some of the factors that could potentially influence the future of blockchain technology as well as some of the outcomes that are currently envisioned by community members within the space.
Blockchain for Dummies: What is a Blockchain?
To start off our blockchain for dummies guide, let’s take a quick refresher on what a blockchain is. A blockchain is a distributed digital ledger that does not require a middleman or central authority to facilitate transactions between users in a blockchain network. Instead, blockchains are completely community-powered in that the community is responsible for verifying transactions on the blockchain as well as maintaining the whole blockchain network. Since the inception of Bitcoin in 2009, blockchain technology has come a long way. Now blockchain technology is behind some of the most hyped innovations of the last several years.
Now that we have taken a brief look at what a blockchain is, let’s take a look at the current landscape of the blockchain technology space.
Snapshot of the Current Blockchain Space
The current trends in blockchain technology are non-fungible tokens (NFTs) and the metaverse. Both of these exciting technologies gained popularity during the Covid-19 pandemic and offered people around the world a way to generate a small income while some of them were left unemployed and everyone across the globe was stuck at home during the lockdown.
Non-Fungible Tokens Explained
A non-fungible token, or NFT for short, is a blockchain-backed digital representation of an item or asset. Unlike cryptocurrency, non-fungible tokens are unique and cannot be traded for something similar or be replicated. When we say a cryptocurrency coin is fungible, it means that one cryptocurrency coin can be replaced with another coin of the same cryptocurrency. This is not the case for NFTs since each non-fungible token is unique.
So what can be represented as an NFT? Well, anything that can be represented digitally can become an NFT. So this could be an artwork, a musical rhythm or beat, even certificates, and title deeds.
The first time people really started becoming aware of non-fungible tokens was when they took the art world by storm and one artist sold a piece of digital artwork for several million dollars. Since then, NFTs were incorporated in play-to-earn blockchain games in the form of virtual land, animated characters, and digital clothes, also known as wearables, for players’ avatars. NFTs also form the foundation for play-to-earn games as they make it possible to turn in-game assets into tangible assets that can be monetized and sold on NFT marketplaces.
As mentioned, another exciting innovation in the blockchain space is the metaverse. Let’s take a look at what a metaverse is.
What is a Metaverse?
So, what exactly is a metaverse? A metaverse is a type of blockchain-powered game. It is a virtual world where players can play, work, earn, and interact with other players. This is made possible with blockchain technology: a decentralized network of interconnected nodes. A blockchain enables people to perform actions, in the form of transactions, without the need for a 3rd party intermediary to facilitate these transactions. In the metaverse, these transactions can include mining, chatting, earning, etc. By utilizing blockchain technology, a metaverse allows players to interact, earn, and transact without jurisdictional limits.
There are a number of types of metaverses, where each type is a different game and, if players can earn from it, may require players to do different things to earn cryptocurrency. Most often in these games, a player is able to earn cryptocurrency by exchanging and transacting with various forms of assets that are represented as non-fungible tokens, or NFTs.
As mentioned, metaverses gained a lot of their popularity during the peak of the Covid-19 pandemic when people across the world were left jobless and isolated at home. The metaverse not only offered them a way to earn money while staying at home, it also opened an escape from the sad reality of the pandemic.
Both NFTs and metaverses are notable and exciting innovations in the blockchain space with a lot of potentials. However, in order to unlock the potential of these two innovations, and future blockchain innovations, the underlying technology (the blockchain itself) needs to be improved. This realization is leading to one of the main drives in the blockchain space, let’s take a look.
The Current Development Drive In the Blockchain Space
The race to create a blockchain solution that addresses the 3 main problems of blockchain technology simultaneously is currently the main focus of blockchain projects in the space. These 3 problems are the interoperability of blockchain technology, its throughput, and its scalability.
Blockchain interoperability refers to the ability for blockchains to seamlessly share information and data with each other. With all of the blockchain projects currently in the space, it would be beneficial to the whole community if members were able to leverage the functionality of all these blockchains. This is why there is a large number of projects that are looking to create protocols that make blockchain interoperability possible.
A blockchain’s throughput refers to how many transactions a blockchain can process per second. If a blockchain has a high throughput, it will be able to process more transactions before a backlog occurs. This will also decrease the transaction times on the blockchain.
Before blockchain technology can be adopted by the masses, it must be able to scale to the necessary degree to cope with mainstream adoption. The key here is for a blockchain to be able to process the increased volume of transactions. It is for this reason that blockchain scalability is linked to blockchain throughput as the two go hand in hand.
To date, these problems have not been solved simultaneously in the same blockchain project. Solving all 3 of these problems would unlock the technology’s potential and open up a multitude of new use cases.
Another key focus in the blockchain space is the multichain debate. Let’s take a look at what this debate is in more detail.
The Multichain Debate
There are quite a few blockchain projects in the blockchain space. Each project focuses on a unique use case and may focus on the same use case as another project. With all of these projects in the blockchain space, some members of the blockchain community feel that it would be beneficial to the whole community if the features of all of these blockchains could be combined into one large blockchain ecosystem. This belief has led to the multichain movement. However, not everyone in the blockchain space feels that combining all of these blockchains into one solution is a good idea, and instead feels that each blockchain should coexist with all the other blockchains in the space.
The Future of Blockchain Technology
Multiple factors influence the future of blockchain technology. Factors such as:
- Whether or not the sustainability of blockchains is addressed.
- If the blockchain trilemma is solved.
- The blockchain community’s decision regarding the multichain movement.
These are some of the main factors that influence how the future of blockchain technology will look. Only time will tell what the future holds for technology. If the blockchain trilemma is solved, then blockchains will have the required functionality and capabilities for mainstream adoption and usage. This is one of the biggest concerns around blockchain technology as it will remove the majority of arguments that are not in favor of blockchain adoption, giving blockchains the required throughput and scalability for global mainstream adoption.
The sustainability of blockchains refers to whether or not blockchains will have the necessary capabilities to play a bigger role in the future, and the environmental impact of blockchain technology. If the blockchain trilemma is solved, then blockchains have better throughput and are then also more scalable which will allow them to be used in a plethora of new use cases; forming the backbone of a lot of the technological systems in the future. Furthermore, with the majority of blockchains shifting to a more environmentally-friendly consensus protocol, the environmental impact of blockchain technology will not be a topic of discussion in the blockchain space for much longer.
Lastly, the decision around the multichain movement could also change how the future of blockchain technology looks as it will either lead to a future where we have one large, interconnected blockchain ecosystem, or a future where individual blockchain projects compete with each other in the race to own the largest market share. Of course, by promoting the multichain movement, addressing the blockchain trilemma will be a lot easier because the functionality of each blockchain could be leveraged to overcome all of blockchain technology’s current limitations and restrictions. It really depends on whether or not the members of the blockchain community can mutually agree on one outcome for the movement.
Blockchain for Dummies: Recap
The future of blockchain technology depends on a number of factors, mainly the sustainability of blockchains, whether or not the blockchain trilemma is solved, and the blockchain community’s decision around the multichain movement. Only time can really tell what the future holds for blockchains. However, the future is looking bright for the technology as more and more use cases are unlocked for blockchain technology on almost a daily basis. Furthermore, the current adoption rate of blockchain-based digital currencies is also a promising sign that blockchains will play a substantial role in the future.
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