BlockChain 101 - Part 1

Hi friends, I have been learning about blockchain and teaching myself on programming related applications e.g. Smart Contracts, NFT, DeFi for a year now. I’m also taking formal courses as well to revise and deepen my skills on this so I can get certified as a blockchain developer :)

So, you might ask why the interests in blockchain? Well, for one, I love to learn new IT technologies and have been using them to create products in my career to solve real life problems such as NFC, QR, tokenisation for digital wallets and payment platforms as well as telco mobile VAS such as P-IMAP for push mobile emails on J2ME phones or LBS for traffic routing apps. But the most important reason is that I believe Blockchain is the ‘Future of Money’ and I hope to apply my past 12 years of payment experience into building payment products using it i.e. crypto & stable coins - especially now that regulators and central banks across the world are taking a serious view on it such as introducing various regulations, creation of CDBC etc.

Ok, much for the background and lets get back to the original intent of my post which is to share some of the useful knowledge I have gathered with hope of helping those who are also interested to learn this technology as well. Lets kick-off this series starting with 3 key basic concepts:

What is a blockchain?

In simple term, it is a distributed ledger of all transactions across a P2P network which allows the participants to confirm transactions without a need for a central clearing authority. It stores data in blocks which are linked together via cryptography in a chronological order. It also referred to as DLT (Distributed Ledger Technology). Examples of use-cases are fund transfer, trade settlement, voting etc.

What are its key benefits?

1. It’s decentralised: No single entity has control or exclusive access to it. This means that it’s open to everyone and there is no need to pay a middle man to get access to it i.e. cheaper cost.
2. It’s immutable: Data cannot be changed due to the distributed nature. If anyone tampers with the data in a node, all other nodes would cross-reference each other and pinpoint the node with the incorrect information i.e. secure / unhackable.
3. It’s transparent: Transactions can be confirmed without a need for a trusted 3rd party and are all records can be viewed on the network (using a blockchain explorer) i.e. traceability
4. It’s super efficient: Because of the way it’s designed and structured, transactions done on a blockchain typically takes a few seconds to complete! This enables use-case such as low-cost, secure & near-instant payments without a bank account e.g. BitPesa

What are its applications?

1. Non-Fungible Tokens (NFT): Unique cryptographic tokens which can be used to represent physical assets like passport, artwork & real-estate which allows them to be traded more efficiently while reducing risks of fraud.
2. Decentralized Finance (DeFi): A system by which financial products become available on a public blockchain network for anyone to access without a middlemen like banks or brokers. Components of DeFi are stablecoins, use cases, and a software stack that enables the development of applications.
3. Smart contracts: Self-executing digital agreement between buyer and seller on a public blockchain network which render transactions traceable, transparent, and irreversible. It also remove counterparty risks via trust-less agreement.

That’s all for now and hope you enjoy this quick article! I will follow up with another one with high-level technical views of blockchain and how it works and a last one on its application in payment space. Watch out for them, cheers!