Blockchain technology is an essential pillar of the Web 3.0 (Web 3.0) concept and, alongside machine learning and the internet of things, is seen as a critical innovation that will change the existing face of the internet. The idea of Web 3.0, unlike its predecessors 1.0 and 2.0, assumes a decentralised and propertarian nature of the web. Blockchain, cryptocurrencies, and NFT would bring this vision to life.
Scheme of operation
Blockchain is a method of creating and operating digital databases. It is one of the developments of the DLT (distributed ledger technology) concept, which is an umbrella category for this type of solution. It is characterised by the decentralisation of database registers, i.e. the dispersion to all network nodes, operating on a peer-to-peer network architecture. Put differently, each network user/connected computer can directly receive and send data, acting de facto as a peer host. Organised in this way, the network is the opposite of a centralised network with client-server relationships, thus introducing a distinction between nodes in the network.
The functioning of blockchain-based networks, vis-à-vis DLT, is primarily characterised by the existence of an innovative cryptographic consensus algorithm called Proof of Work. In addition to this property, blockchain also fulfils the characteristics described above. All this means that blockchain technology provides certainty as to the authenticity of the data, its immutability, its security, and the ability for all participants in the network to control the data, at least in theory. A key issue is well-written source code because, as the precedent from the so-called The DAO attack has shown, bugs or vulnerabilities in code can be exploited to make unauthorised changes to the data registry by network nodes.
Another potential threat to blockchain technology is the rapid development of quantum computers, which will have the ability to achieve computing power up to a million times greater than today’s analogue computers, which in theory will allow them to break the cryptographic security of blockchain networks. However, as both technologies are being developed simultaneously, developers are already considering the use of so-called post-quantum cryptographic algorithms in blockchain networks, which are expected to be resistant to future attempts at attacks by quantum computers. Currently existing quantum computers, or rather still prototypes of them, pose no threat to the modern cryptographic algorithms used in most existing blockchain networks, however, this may change in the next few years. The future will tell which of the above, still new and developing technologies will reach a higher level of sophistication in this matter.
Despite its origins dating back to 2009, blockchain technology has only recently become popular, finding ever new applications and developments. To date, the original and most widespread and popular use of this technology is for cryptocurrencies.
A breakthrough and key innovation, however, came with the development and implementation of smart contracts (smart contracts) in the Ethereum blockchain, i.e. peculiar computer programmes placed and running within a blockchain-based network. In addition to the simple transfer of cryptocurrency units between user wallets, smart contracts allowed the creation of complex and multi-level legal, quasi-legal, or purely de facto relationships, initiated, established, established and executed entirely according to the arrangements of the parties contained in the code of the smart contract.
Smart contracts have become the basis for generating tokens with broader uses and functions than the original cryptocurrencies, which technically are also tokens. A token is a digital unit of data generated using a smart contract. The use of the new ERC 721 and ERC 1155 standards for their generation has made it possible to embed diverse data in tokens, allowing for a significant expansion of their applications.
So far, the most talked-about use of tokens is NFTs or non-fungible tokens. NFTs registered on a given blockchain network, are certificates of authenticity relating to a specific digital file. For the time being, NFTs have gained popularity as certificates for trading cultural goods, most notably images, videos, or memes. However, new, more practical, and versatile applications continue to emerge. In the US, especially under Delaware State law, tokens, including NFTs, are being used to create crypto-assets of various kinds, especially shares in companies, which are the equivalent of Polish limited liability companies.
Great potential is presented by blockchain technology for the creation and operation of a wide range of digital database registries. Possible uses include property registers, land registries, bank registers, customer registers, facilitating KYC procedures (verifying potential customers), registers of patents, utility models, and trademark protection rights. Also, registers of shareholders of companies show great practical potential. It is in this area that the Polish legislator has decided on a legal regulation allowing the use of DLT technology, including blockchain. The basis, added in 2021, for the institution of a shareholder register in the form of a distributed and decentralised database, is Article 30031 § 3 of the Polish Commercial Companies Code (in relation to a simple joint stock company) and 3281 § 3 of the Code of Commercial Partnerships and Companies (in relation to a non-public limited company and a limited joint-stock partnership).
Beyond this, blockchain is already being successfully used in business transactions, to streamline logistics processes in transport, invoicing systems, claims, or guarantees.
Blockchain and NFT are also increasingly cited as the basis for the emerging concept of the metaverse, or virtual reality. This is a new concept for the existing internet or gaming model. VR goggles and wearable devices are pointed to as innovations in this category, which are expected to allow greater immersion of the user into the digital world. Blockchain and NFT are increasingly being used to build the internal economies of these worlds, ensuring the secure and rapid circulation of digital goods.
Blockchain technology, thanks to its versatility and a set of characteristics such as security, safety, and decentralisation, is continuously finding further applications in today’s knowledge-based economy. This is not surprising, as information is becoming one of the most valuable commodities today. Blockchain, which ensures the authenticity of data, its immutability, and security, introduces a new quality that has the potential to make economic transactions more transparent, certain and fair.