Why are good blockchains useful?
What does blockchain offer to the general public?
Whilst the good blockchains are now finally becoming ready for use, right now today the general public is still waiting on all the really useful things they are going to provide. The reason for this is that blockchains themselves are actually just a tool that anyone can then use to create whatever service or application they want on top of them. Whilst the blockchains are just becoming ready, the applications that will engage the general public are still being developed.
Part of the reason for this is that entrepreneurs and developers didn’t want to get to work on them until the blockchains that are going to enable them were ready and had proved they can really work and scale. The other part of it is that what blockchain offers is so very powerful and different from what has come before, actually designing and building these new Web3 decentralized services is also a really big undertaking. They are coming, thousands of people today are busy building them, but frustratingly there are not yet obvious widely used examples to just show you.
As we move through 2024 there are going to be many released, both using Cardano and using other blockchains, that will let everyone finally see just why so many people got so excited about this technology in the first place. For now understanding why needs either a bit of patience, or imagination, or delviving into the more tech-focused apps and services that do already exist, or joining the conversation amongst all the different groups of people that are busy building them.
What's so useful about a good blockchain?
Good blockchains provide a highly secure and trustworthy foundation which can be used to provide all sorts of services on top of it. The blockchain itself doesn’t typically provide those services, it just provides itself as the tool, the decentralized root of trust. Individuals, companies and institutions utilise the blockchain to offer their services on top of it.
In the case of Bitcoin, the blockchain offers not much more than being a store of value (it does this well, apart from its terrible environmental credentials). In the case of newer blockchains such as Cardano, the blockchain offers tools that can be much more useful. Here are a few examples:
Provision of other cryptocurrencies, beyond the blockchain native cryptocurrency. This means not just Bitcoin, say, but any other digital coin you may wish to create.
Provision of tokens that convey ownership, achievements, membership, desirable items, etc. Think land deeds, qualifications, membership, NFTs, …
Provision of financial services, without needing to rely on service providers (anyone can provide services to anyone else – no bank sitting in the middle making large profits and who can decide not to provide services, or to charge extortionate fees).
Proof of identity, but without giving up your rights to control and protect your own identity.
Provable voting, where every citizen can verify their vote was counted but without anyone else being able to see how they individually voted (yes you read that right – maths and cryptography is very clever these days!).
Cryptocurrencies remove fractional reserve which is inherent in the traditional fiat banking system. Your currency held in your self-custody wallet actually exists and is assured to always be yours (something that isn’t the case for the dollars, euros, etc held in your traditional bank account). The fixed supply of cryptocurrencies also protects you against your government printing more money at will, killing your savings through inflation.
Like how, in normal speak please?!
OK, so a blockchain typically has a native currency. In Cardano’s case, that is a coin which is called ADA. ADA is a cryptocurrency and it is stored on the Cardano blockchain. Like Bitcoin is a cryptocurrency that is stored on the Bitcoin blockchain. This cryptocurrency is used to pay for things on the blockchain and can be used to pay other people too. The Cardano blockchain has a certain number of ADA in total, and each coin (each ADA) is stored in a wallet on the blockchain.
Wallets are owned by people. An individual wallet can contain one coin, a fraction of a coin, or lots of coins. Think a Euro, a few cents, or lots of Euro’s and cents that you keep in a physical wallet in your pocket. Blockchain wallets are the same, just digital and stored on the blockchain itself. Your ownership of a wallet means you and only you are able to provide the secret password which allows that wallet to be used (its coins to be spent).
The blockchain keeps track of everyone’s wallet, and moves these coins between wallets when you carry out a transaction – when you decide to pay someone from your wallet to theirs.
The decentralization of a blockchain means that no one computer does this, but instead lots of computers owned and controlled by different people, each running the blockchain software. If someone bad controls one of these computers and tries to change the blockchain, for instance send themselves coins they shouldn’t, the software running on all the different computers spots the anomaly and rejects any change that is different to the correct changes the majority of the computers that form the whole blockchain agree on.
What we’ve just described there is what Bitcoin does. It doesn’t do much more than that. However, newer blockchains, blockchains like Cardano, they can do a whole lot more.
Firstly, on a blockchain like Cardano you can create other assets that the blockchain will store for you. Like an ADA coin, but different. It could be a new coin you decide to create, one you decide to call “Dave coin” if you wish. You can create one of them, or you can create billions of them. They are each stored in wallets on the blockchain just like the native cryptocurrency ADA is stored in wallets. You can keep all of them in your wallet, or you can send them to other people’s wallets.
These coins you create don’t need to be coins though, they can be any sort of digital token, each of which has whatever data you want to store in it. An “NFT” that you may have heard of, is one of these digital tokens. A NFT could be a token that you create and send to someone else to prove they own a piece of art you created and sold to them, for instance. A token that proves membership of your fan club. A token issued by a university that proves you graduated from there and achieved a particular qualification. A token that proves you own a piece of land or an item of property. Really anything you want them to be.
That’s what’s so cool about NFTs, what they will be used for is up to you and your imagination.
OK, that’s all pretty neat, so I can get or create coins and tokens, I can keep them in my wallet and I can send them to other people. All protected by the security and decentralization of the Cardano blockchain. Is that it?
Nope, because we’ve not touched on smart contracts yet, the things that make a modern blockchain come alive!
These are pieces of software that execute on the blockchain and do whatever the creator of them wants to happen. That might be a little program they’ve written which says “transfer these coins or these tokens when some specific set of conditions occur”. It might be “do this if these things happen, but if they don’t by this time then instead do this”. Again, what a smart contract can do is limited only by your imagination. What’s really powerful about them is that they run on the blockchain, there is no person or company you need to rely on for them to work. They are decentralized and controlled only by the rules the creator of each smart contract builds into them.