When people are first introduced to the concepts of blockchain and crypto ecosystem, they often think that it's solely related to digital currencies. While it's true that cryptocurrencies play a significant role in the blockchain ecosystem, there's much more to it. This article aims to highlight the differences between the economic and technical aspects of blockchain, as well as why a drop of cryptocurrency prices on the stock market shouldn't discourage professionals from working with blockchain.

Let's start with the economic aspects of the blockchain.

Economic Aspects

Blockchain is a technology that introduced cryptocurrencies. In recent years, it has been making an impact on various industries and sectors. It has huge potential to change business models and introduce significant transformations in all kinds of world sectors such as financial services, banks, industries, and governments. Blockchain has the potential to impact worldwide economic problems. Blockchain addresses several worldwide economic problems.

International transactions

There are 195 countries on Earth. Most of these countries have different currencies, exchange rates, and legalities. With all these regulatives it can sometimes be difficult and slow to transfer money from one country to another. With all this, there are up to 20% fees for transferring money to some nations.

Blockchain and cryptocurrency have the potential to revolutionize international transactions by improving speed while reducing costs. For traders in developing countries, the use of blockchain can provide full participation in the global economy by offering a secure and affordable option for cross-border transactions. It could also enable access to financial services for those who may not have been able to afford them previously.

Bankings systems in underdeveloped countries

Although we live in 21.st century there are still countries that don’t have stable internet, banking systems or electronic systems required to consume today’s digital revolution benefits. In these nations with underdeveloped financial systems, cryptocurrencies such as Bitcoin can be decisive in digital revolutions of their financial systems, excluding the need for heavy investment in banking infrastructure.

Transferring value beyond money

Blockchain technology has the potential to create new ways of transferring value beyond just money. Industries such as art and media can benefit greatly from this resulting artists, and musicians to be able to directly transfer value to their clients or consumers. It can also provide more transparency and control over their work.

In conclusion, we can see that blockchain from an economical perspective has the potential to change business models and introduce significant transformations in all kinds of world sectors and on top of that solve some of the worldwide economic problems. Let’s see now what are some of the most important technical aspects of blockchain and how it introduces revolution in technology as well.

Technical aspects

From a technical view blockchain is a network that is not controlled by a single entity. Instead, it is shared among all the computers in the network. Originally designed to transact money between parties without the need for a bank or other intermediary, it can be thought of as a public database that stores information about transactions that anyone can access at any time. However, it is important to note that a blockchain is not a traditional database where data is organized into tables or collections.

Key technical aspects that blockchain introduces in the world of technology are cryptography, decentralization, consensus mechanism and immutability.

Cryptography

To ensure the security and integrity of stored data, blockchain technology relies on cryptographic algorithms. This involves encrypting and decrypting data in a way that makes it virtually impossible to tamper with. When a user wants to send a transaction on the blockchain, they first sign it with a digital signature and then send it to the network of computers. The network then validates the transaction and approves it, verifying both the identity of the sender and the data being sent.

Decentralization

As mentioned above, blockchain is a distributed ledger. This means that there is no single entity in charge of managing it. Instead, management is handled by the network of computers that work together to keep the network safe and secure. This is a critical feature that makes the blockchain less vulnerable to attacks, as it ensures there is no single point of failure.

Consensus Mechanism

The way computers cooperate to maintain a secure network is through agreement mechanisms called consensus. This means that more than half of the computers in the network must agree on a decision for a transaction to be executed. There are different consensus mechanisms, but two popular ones are Proof-of-Work (PoW) and Proof-of-Stake (PoS). In PoW, a user needs to invest their computer power and time to solve a complicated math problem to change the network state. This ensures that someone cannot add an invalid state to the network without owning more than half of the network's computer power. In PoS, users do not perform any computations but instead stake or lock some of their funds in the network to prove their honesty. To add an invalid state in PoS, a user must own more than half of the staked or locked funds in the network.

Immutability

Any data that is stored on the blockchain cannot be modified or tampered with. Once data is added to the blockchain, it becomes a permanent and unalterable part of the network's history. The reason for this is because each block in the chain is connected to the previous one through a series of data, and any attempt to modify one block would make it invalid, which in turn would also make all subsequent blocks invalid. This creates a cascading effect, ultimately resulting in the entire network becoming invalid.

Web3 Ecosystem

Blockchain has also revolutionized the way we design and build software applications. With its decentralized nature, applications that run on the blockchain are designed to operate independently of any central entity or control. When compared to centralized or web2 applications, DApps are much more flexible and adaptable.

Dapps are integrated in various industries around the world such as financial services, gaming, art marketplaces.

Art NFT marketplaces

Blockchain technology has introduced a revolutionary concept of digital ownership, known as Non-Fungible Tokens (NFTs). NFTs are digital certificates of ownership that can be used for any underlying asset, making them ideal for platforms that provide unique collectibles, concert tickets, and ballots, where ownership uniqueness is required.

NFTs are becoming increasingly popular worldwide, particularly in the form of unique image collections and marketplaces where these collections are sold. Each image has a digital certificate of ownership that is stored and tracked on the blockchain. Because of the immutable nature of blockchain technology, it is impossible to falsify ownership or tamper with any data related to digital art. This means that NFTs provide a secure and transparent way for artists to sell their digital art and for collectors to acquire and prove ownership of these unique pieces.

Financial services

They provide a new way for money lenders and borrowers to conduct their business without the need for traditional banks. Banks typically offer interest rates to lenders based on the amount of money saved, and the more that is saved, the more the bank can lend out. However, banks act as centralized entities and take a significant cut for providing a space to store funds. In contrast, DApps offer a decentralized platform where lenders can earn 100% of their interest without the need for intermediaries.

Gaming

Web3 added a new concept in gaming as well. In addition to the existing pay-to-win concept, where players have the opportunity to financially influence the development of their character and their own progress in the game. This concept is somehow unfair to players who put a lot of effort and time into their game progress while others simply pay and enjoy the same benefits as others. Web3 introduces a new concept called play-to-earn. Where players can earn rewards through their gameplay that they can later redeem for real money.

Why Web3 won’t end if cryptocurrency prices drop down?

In the end, it’s important to understand that the Web3 ecosystem is not just about the prices of cryptocurrencies. Even if the prices go down, it would necessarily result in the end of web3. This is because web3 technologies only utilize cryptocurrencies for their own functionality. Moreover, web3 technologies have many use cases beyond cryptocurrencies such as DeFi, NFTs, and dApps. These use cases are driven by real-world needs and are not dependent on cryptocurrency prices. Finally, the most important aspect is a community of passionate developers and enthusiasts who are always innovating and creating new technologies and applications.