Kathrin Wolff graduated from EU Business School in 1998 with an MBA in International Business Management. After a long and varied career with UBS, where amongst other posts, she held the position of Chief Digital Officer, she joined aXedras as a senior advisor on DLT and blockchain.
In October 2021, Kathrin gave a virtual presentation to EU students and alumni, speaking with clear knowledge and passion about the world of blockchain, one of the fastest-growing and most profitable fields in the technology industry. Also known as “the trust machine”, thanks to its ability to prove the uniqueness of the data in its sequence, blockchain is predicted to become a three-trillion-dollar market by 2030.
In this article, we’ll introduce you to the fundamentals of blockchain technology, including Kathrin’s insight into how it works. In addition, keep reading to discover the top five trends in blockchain today.
The Fundamentals of Blockchain
Decentralized blockchain marks the beginning of the third technology wave. First came the internet, followed by Web 2.0 – an information-centric phase which required new sign-ins for each app. Now, the blockchain revolution has evoked the shift to a more integrated, user-centric experience.
But how does it work?
With blockchain technology, every transaction is written on a “block”. The data that you are storing is written on individual blocks, together with a hash function. A hash function is a long, unique code made up of numbers and letters that tells you when and where the block was added. Once the hash function is added, the block is broadcast to all local nodes, storage units which act in a similar way to servers. The nodes then validate the block, and when it is secure, the information gets added to the blockchain.
One of the biggest things happening in blockchain at the moment is the move towards decentralization. Traditionally, nodes are centralized, with a single organization in charge. By decentralizing operations, you can cut out the middleman and complete peer-to-peer transactions. With decentralized blockchain, you can also create distributed networks with different nodes.
There are two types of network:
- Public – no permissions; everyone can see all the transactions, and add their own.
- Private – gives access only to specific users; a more secure form of distribution.
There are many different platforms for blockchain (e.g. Bitcoin, Ethereum, Hyperledger, etc.), so it’s important to determine which platform best suits your needs before you start building your sequence.
To find out more about how blockchain works and whether you might be interested in pursuing a career in the field, check out our recent post on the different careers in Blockchain Management.
There are several different types of blockchain tokens, including currency, asset, utility, and equity tokens.
One of the biggest advantages of tokenization is that it allows for fractionalization, which in turn allows you to invest in, or own part of something that would be expensive as a whole. We’re seeing this a lot with artwork at the moment (you can own a fraction of a Picasso painting, for example), but there are many other uses being explored, such as shares in fine wine collections, real estate, and cars.
You may know this better as “cryptocurrency”, however Kathrin prefers the term “cryptoassets”, as it’s something you invest in as opposed to something you pay your taxes with.
There are almost 8,000 different cryptoassets, which you can buy and sell at coin exchanges (for example, Coinbase) and store in your own digital wallet, such as Metamask. This eliminates the need for banks, giving you full control over your assets. However, with no backing, you also have no guarantees as to the future value of your assets, leaving you alone with the responsibility of protecting your investment. A private key gives you access to the “money” in your wallet, and if you lose the key, it’s almost certain you’ll lose the funds as well.
3. Central Bank Digital Currency (CBDC)
CBDC differs from cryptoassets and cryptocurrency due to the fact that it’s backed by a central bank. These banks, which control money for entire nations, are concerned with stabilizing a country’s economy and reducing inflation rates. In order to do this, they need to understand the current financial market and be prepared to offer innovative solutions.
The Bahamas and China are among the countries that already have a CBDC, and more than 80% of the rest of the world’s central banks are piloting similar schemes, or have plans to do so in the future.
4. Smart Contracts
A smart contract is a programmable contract that is stored on a digital ledger, and is binding, fixed and self-executed. Smart contracts are also conditional, working on an if-then basis. Once a predetermined action has been carried out, the following action will be triggered, and so on.
Smart contracts eliminate the need for a middleman, and can make business deals more transparent. They are frequently used to guarantee royalties for authors, artists, etc., such as when the sale of a painting triggers an automatic payment to the owner’s digital wallet.
Non-fungible tokens (NFTs) are one of the most lucrative trends in blockchain, with NFT sales surging to $10.7bn in the third quarter of 2021.
In her presentation, Kathrin outlined some of the main features of NFTs, which are:
- They’re digitally stored, unique, and not interchangeable.
- They’re stored on a digital ledger (blockchain), certifying the digital asset as unique.
- They’re linked to physical and digital products.
- They can be created in different mediums, e.g., photos, videos, and audio files.
To discover more about NFTs, including how they’re used, what they’re worth and how to create your own, read the Beginner’s Guide to NFTs on our EU Blog.
And, if you enjoyed this article on the fundamentals of blockchain, don’t forget to check back and read our follow-up post, in which we’ll share Kathrin’s advice for choosing the right blockchain strategy for your business, together with the challenges you might face and how to overcome them during implementation.