What Blockchain is and how is it working, prospects for future earnings

Blockchain: features, application of perspective

Today, more often you can hear such a thing as blockchain. What is it? Not every person knows the answer to this question. Then, as this concept has every chance to enter firmly in our life. Let’s take a closer look at what a blockchain is, as well as examples of using this technology, the main advantages and disadvantages of such a system. We promise that we will not overload the reader with technical terms and try to explain everything in simple words, we can even say that this manual is for dummies. We hope that our article will be useful to you.

Blockchain: the basic concept

A similar system appeared relatively recently. Blockchain is a structured, regularly checked database, where the chains of conducted transactions are built according to certain rules. Limited access to the system minimizes the possibility of unauthorized connections or various types of fraud, including theft of data. Information in such a database is not stored in any particular place. Records are stored simultaneously on a large number of computers connected via the Internet, they are provided with public access if they have rights, they can be checked at any time without much difficulty.

A feature of blockchain technology is that any transaction is fixed in the system as a separate chain of interconnected events. At the same time, only two parties take part in carrying out various types of operations. Absence of intermediaries provides high speed, transparency and simplicity when sending information or money. The transaction process is carried out in just a few minutes and will cost several tens of times cheaper than a bank transfer. The history of all the performed operations is safely stored in the memory of many thousands of computers around the world.

The principle of the technology based on the blockchain can be clearly illustrated by the example of Google Docs. When one working document is available for several users at once. This is something like a general log of all operations performed, where you can see every action. Such a technology is radically different from existing banking systems, where for the duration of the transaction the bank blocks access to the account.


Blockchain: how does it work?

blockchain world
blockchain world

Such platforms allow the exchange of information between its participants. It transmits two types of messages: transactions and blocks. Blocks unite distributed registers about the performed transactions. For greater clarity, the block can be presented in the form of a book, on the pages of which all information about the performed operations is stored. In turn, blockchain is a large book consisting of many books.



“Blockchain can act as an encryption process so that documents can be reliably separated, and also ensure that documents are not changed”

-Ben Mann, global practice specialist at DAI


The blocks are interconnected and united in a single chain. Between them, a consistent connection is clearly observed. It is the blockiness of the system that determines its most important principles:

  • full transparency – the data and information about the carried out operations are public. Changes or transactions can only be made by certain persons who have the right of access;
  • Equity of all participants in the platform – these systems can’t have administrators, or a single site for storing all data. Each participant has equal opportunities and status;
  • Security – a similar platform is almost impossible to destroy. To change one unit of information in a similar system, you will need huge computing power.
  • decentralization – the history of all operations and the schedule is stored on hard disks of computers for all participants of transactions;
  • anonymity – there are no requirements for the participants of the platform to disclose their identity.

Such networks are designed in such a way that it automatically checks the entire digital system. This procedure is carried out continuously with an interval of ten minutes. Platform security is provided by the following factors:

  • complex mathematical algorithms;
  • several thousand computers with high power;
  • special cryptography programs.




For the first time, the technology of distributed registries started to be spoken back in the 70s of the last century. Then it was still just a theory. However, for the first time such a system was implemented when Bitcoin appeared. It was during the maintenance of this self-regulating cryptocurrency (ico) that the blockchain platform was used for the first time. Today, many electronic online purses, for example, Qiwi wallet, follow a similar principle.



Cryptocurrency Bitcoin appeared in 2008. For the whole past period Bitcoin’s blockchain worked without significant violations or failures. All known problematic situations arising in this system have a human factor. This allows us to talk about broad prospects for the development of this technology.


Participants in the system

On the example of bitcoin, it is possible to consider in detail the main types of blockchain participants:

  • Miners – determine the operation of the platform. They collect transactions, verify them, merge data into a block and join to a chain. Miners provide platform security;
  • Auditors – network members responsible for storing the history of all committed transactions. For example, to store the amount of Bitcoin data, 122 gigabytes are required). Auditors check the activity of the miners and distribute the load across the network;
  • customers – participants involved in direct transactions.



There is such a thing as “51% attack”. The main essence of the term is that there is the possibility of changing the stored information in the system and hacking the blockchain. To do this, you need to combine 51% of all system miners. To say the true, such an outcome is very unlikely, because for the realization of such a goal, huge computing resources are needed.


Main applications

For a long time, blockchains were associated with currency transactions. So, this technology is firmly connected with the bitcoin cryptocurrency. And this is not accidental. The matter is that at first the blockchain was used exclusively for this cryptocurrency. After that, the technology aroused the interest of many banking structures. A number of financial institutions and large companies announced the development of their own platforms based on blockchain.

However, in recent years, other options for using such a technology have been actively discussed. In addition to currency operations, this platform can be responsible for many other functions. For example, with the help of such systems, a logistic service can be organized in companies engaged in trucking, buying or selling real estate, verifying the authenticity of various documents and certificates.



A number of specialists distinguish a separate classification for blockchains. They are divided by generations: first and second. The first generation is referred to a platform where only financial transactions are carried out. The second generation system is called Ethereum. The platform was created by the Canadian programmer Vitalik Buterin.

Vitalik Buterin
Vitalik Buterin

The peculiarity of the Ethereum is that so-called smart contracts are used here. In order for all agreements to be fulfilled, it is necessary to comply with all stipulated conditions. Protection of a smart contract is provided by means of a special mathematical algorithm. Fame also acquired another platform Waves.



“The main goal of Blockchain applications is to create a decentralized system that is free of absolute control with only one object. Thus, for one company it does not make much sense to work with Blockchain, however, if a number of companies establish a partnership, the results will not take long to wait ”

-Vitalik Buterin, creator of Ethereum


Today, the blockchain penetrate deeper and deeper into our lives. So, this technology is successfully used to create platforms for various business applications that provide control over the observance of copyright, for the conformity of production processes to accepted standards and for all financial operations performed.

Similar applications are designed for:

  • secure network administration;
  • fixing the time period when placing documents;
  • the safe conduct of bilateral transactions without the involvement of a third party;
  • Confirmation of the right to property;
  • creating a DNS system that is resistant to DDOS attacks;
  • Confirmation of the authenticity of the product.

Future projects, which will be based on such a platform, may appear primarily in the organization of the services, where it is necessary to ensure the safety of the transmitted data and exclude the possibility of violations and fraud. Such systems can appear in the following areas:

  • micropayments;
  • Banking operations;
  • medicine;
  • law;
  • logistics.

Of course, the opportunities for using such technologies are really wide. Prospects for such systems are primarily associated with the Internet of things. This platform can contain information about loans granted, marriages concluded, transfers of property rights, violations of traffic rules. One of the ideas for implementing such a system is the creation of a decentralized Internet, which will be distinguished by higher reliability and security in work.

However, with all the prospects for the alternative use of blockchains in the financial sphere such systems show excellent results. But even in this area, such platforms have not yet been fully explored.



“Blockchain software is a field of experiments, and now, according to world market estimates, one billion dollars was invested in blockchain technology only in 2016”

-Jan Khan , TEDx speaker


Attitude towards the blockchain

In general, the attitude towards such systems in the world remains tense. Many countries negatively relate to the blockchain technology. First of all, this is due to the bitcoin cryptocurrency. This currency is actively used in the commission of many illegal transactions, for example, the purchase of weapons, drugs, secret documents and data.

So, in the USA such technologies cause serious concern of the authorities. According to the published report, such systems can jeopardize the security of the country and its citizens.

Attitude towards the blockchain


“Blockchain is the leader of the future … They actually create the whole ecosystem one more time”

-The New York Times


But on the other hand, many financial institutions are fairly loyal to these platforms. In 2016 more than 40 largest banks created their own association R3. The main goal of the consortium is the joint study of blockchain technology. Financial institutions thus try to use modern tools in their work, reduce operating costs. In the near future, the implementation of a new system of interbank payments, based entirely on such platforms. Such a product will help to create a single information base of banking institutions.


Attitude in Russia

The official structures in Russia are also cautious about such technologies. Reviews from various financial institutions are quite contradictory. So, according to one of the initiatives of the Ministry of Finance of the Russian Federation, even the introduction of criminal responsibility and imprisonment for a period of seven years for operations with cryptocurrencies was offered. The project was approved by the Investigative Committee.

The official position of the Russian Central Bank is neutral so far. According to the head of Elvira Nabiullina, it is still necessary to distinguish between two concepts of cryptocurrency and platforms based on blockchain technology. Supports such innovative systems and Chairman of the Board of Sberbank German Gref and Prime Minister Dmitry Medvedev. Yandex is also looking to such systems. This year has changed to the opposite opinion and official authorities. According to Deputy Prime Minister Igor Shuvalov, Russia is considering the option of building a new economic system based on digital technologies and blockchain. The interest of the official authorities in such developments is also evidenced by the meeting between Russian President Vladimir Putin and the founder of the Ethereum platform, Vitalik Buterin, at a conference in St. Petersburg.

The use of such technologies can become an effective financial tool in the face of sanctions from Western countries. Among other initiatives in this area, we can note the fact that Qiwi, which already has an electronic wallet and an exchanger based on the block-based municipal, is planning to issue its own cryptocurrency. However, the introduction of a call to the bit-money will require a change in the current legislation of the Russian Federation. After all, today cryptocurrencies in Russia are out of the right field, they are not officially allowed, but they are not forbidden. The operations and mining are not regulated. Therefore, a draft law is currently being drafted, which should determine the legal regulation of circulation of cryptocurrencies. However, a fully detailed regulation can only appear in the perspective of four to five years. The introduction of economic and technical standards is also necessary in the field of blockchain technology. It is necessary that such systems applied in the sphere of rendering services and industry.

But, in general, the opinion of many experts and experts converges on one thing: investing in cryptomoney or a stock token is extremely risky. Cryptocurrency is not controlled at the state level and is not supported by anything. All this can open a wide field of activity for fraud, so the risk of leaving your money remains very high.


What will the implementation of the blockchain technology be?


The legalization of platforms based on blockchain first of all will provide an opportunity to digitize documents protected by special authentication marks, but continue to remain on paper. Training such technologies to carry out transactions without an intermediary, for example, a notary when changing ownership. Broad prospects for such platforms are being opened in the field of insurance and medicine. But this technology will be the most widespread in the banking sector.

According to a number of experts, the blockchain is capable of creating a new economic system that will become a real economy of joint consumption. This will save participants in the market transaction from the intermediary commission. By the way such systems will provide anonymity of users in the worldwide network.



“We will see very soon how the pressure of the economy will grow in the banking industry … There will be massive changes, and this will be unpredictable”

-The Wall Street Journal


Investments in technology

Several venture funds and companies are actively investing in the development of blockchain technology. Among them are Blockchain Capital, Boost VC, Pantera Capital and several others. So, according to official data, in 2016 the amount of investment in similar projects exceeded 1.4 billion US dollars. However, for ordinary investors this type of investment is an extremely risky undertaking. They are associated with enormous risks. A more reliable alternative may be shares of financial institutions, participants of the consortium R3.



“Personally I really like what is happening among start-ups, and I really hope for innovations that occur in this space”

-William Moghayar, venture advisor, blockchain specialist.


Pros and cons of the system

Undoubtedly, the benefits of blockchain technology are clearly pronounced. One of the main advantages is high reliability and complete safety. But the debate around the widespread use of such system still does not abate. Representatives of financial institutions from the shortcomings note the low speed of such platforms, completely dependent on traffic, but give due of security and reliability. For ordinary buyers, the introduction of technology will allow to check the quality of the purchased goods, will enable the trace of entire chain from the production conveyor to the delivery to the store.



“Bitcoin is one solid, basically undeniable success story of the blockchain, but there are many obstacles, and we still do not know if it can withstand the test of time. We are still in the search, wild phase of the blockchain, but I hope this can serve the purpose ”

-Ben Mann, global practice specialist at DAI


Although many experts, for example, Melanie Swan note the huge role of the emergence of such systems, comparing globally with the emergence of the World Wide Web. However, it is quite early to talk about the widespread introduction of blockchain technology. The market has a limited number of applications running on these platforms. In the coming years, technology is waiting for time verification, which will change the attitude towards it. But many predict a great future for such systems. After all, they are quite capable of changing the world, wiping out boundaries.

One of the variants of the development of the event is that the blockchain will find application in a completely different sphere. And, as history shows, it’s really possible. Suffice it to recall how many discoveries were made, to which a truly revolutionary future was foreseen. For example, penicillin, laser technology, a smartphone and even the World Wide Web. But there are, of course, the opposite examples, which were waiting for oblivion.

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