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The blockchain technology and investment in cryptocurrency move the economy: banks, insurance companies or logistics firms - hardly any large company does not deal with this topic. But what is actually behind it? And above all: How does a block chain work?

The Quiet Revolution - Investment in Cryptocurrency

With many innovations, people initially underestimated how much they would later change the world. In 1990, for example, Ron Sommer, then head of Deutsche Telekom, believed: "The Internet is a gimmick for computer freaks, we don't see any future in it. Ex-Microsoft boss Steve Ballmer made a similar statement about the iPhone in 2007. As is well known, both were mistaken.

If one believes lectures and interviews of representatives of the digital economy, another digital turn of an era could be imminent: "Blockchain technology will turn the financial sector upside down just like the investment in cryptocurrency will turn the car industry upside down," believes Philipp Sandner, head of the Blockchain Center at the Frankfurt School of Finance and Management. Czech journalist Vít Jedlička goes even further. He has invested in cryptocurrencies his own state on a deserted Danube sandbank on the Croatian-Serbian border. As president of the "Free Republic of Liberland" he wants to create the first country on a block-chain basis.

Blockchain fever has broken out everywhere. It is being discussed at industry conferences, group board members are attending Blockchain seminars, medium-sized companies are working on pilot projects. And it affects the entire economy. From insurance companies to tourism groups to the shipping of bananas: If you believe the apologists of the new technology, investing in cryptocurrency like Bitcoin could turn our world upside down like the Internet did recently.

The block chain is a database that consists of a chain of data blocks

This chain is constantly being extended by new blocks in which transactions are stored. The principle can be compared to an accountant who writes all transfers in a network on a sheet of paper every day and staples them in a large folder in the evening. The sheet of paper would be the data block, the folder the block chain.

It doesn't matter which information is stored in the data blocks - Bitcoins, title deeds, freight books - it's all the same.

A good accountant ensures that a register is error-free and only records transactions that have actually been carried out. In block chaining, a reconciliation mechanism takes over the role of the accountant. With its help all participants decide which data blocks are sorted out as invalid and which are accepted as valid. How exactly agreement is reached among the participants differs depending on the block chain application. In the case of Bitcoin, for example, the decision is made by those who have the most computing power. Thus keep the database running. Once the participants have checked and accepted a new data block, it is appended to the chain. This chain thus becomes longer and longer over time. Our simple trading sheet blockchain shows exactly what happens.

Blockchain Interactive a good Investment in Cryptocurrency? 

What sounds complicated must be a good investment in cryptocurrency, right? Don't worry. A simple block chain from the Handelsblatt shows how it works. Enter your first name in the yellow field and click on "Start Tutorial". Afterwards you create your own database - and you can try your hand as a block chain hacker. If new blocks are attached to the block chain, all participants receive a copy of the updated block chain. The trick: Since the database is growing continuously, it records all transactions since the block chain network was started.

The real investment in cryptocurrency

Since there are as many copies as there are users. The information in the blockchain is stored on thousands of computers around the globe. This makes it practically forgery-proof compared to conventional central databases. It is true that a version could easily be manipulated. However, since there are thousands of copies of the unaltered block chain, deviations can be detected by a simple comparison and forgeries can be sorted out. This is also known as DLT, "Distributed Ledger Technology", distributed accounting technology.

The system is flexible

In some block chain networks, users can participate anonymously. In others they have to identify themselves personally. Some blockchains are public, so anyone can join (example Bitcoin). Others are private and are aimed at a fixed group of participants. According to this logic, virtual money produced by users replaces the state coin press and bank transfer. Digital proofs of ownership of contracts, houses and containers make notaries, land registries and freight papers superfluous. The blockchain technology accelerates world trade, logisticians and customs authorities have identical data. And one day, blockchain voting will bring democracy to even the most remote corners of the planet. The future shines brightly in the eyes of visionaries. Implementation is often still in its infancy. IT giants IBM and Microsoft, for example, are testing the technology. The major US investment banks are counting on cooperation, hoping for estimated savings of around one billion dollars each per year. And supermarket giant Walmart is already monitoring its supply chains via blockchain, for example, in order to lose fewer pallets due to human error. In any case, the data is protected - by decentralized storage around the globe and encrypted storage. Fans thus see blockchain technology as the logical complement to the Internet. While the Web enables the decentralization of information, the block chain enables the decentralization of values.

Blockchain: Concrete Examples

Sceptical observers see the block chain playing out its greatest benefit where there are no efficient central systems yet. This means, for example, that the German land registry offices are not expected to be replaced quickly. But it is quite realistic that the cadastral system in Kenya could soon be based on a block chain solution. Perhaps the scene's greatest visionary, Vitalik Buterin, not only wants to decentralize values but also revolutionize the business world. His Ethereum software makes "smart contracts" possible. These are not contracts in the legal sense, but rather intelligent functions that automatically trigger agreed actions, such as instructing a payment upon receipt of goods. The long-term goal is nothing less than the democratization of capitalism. Digital Autonomous Organisations  are to replace data kraken like Google and Facebook. Their shareholders are to use voting and smart contracts to instruct, monitor and, where necessary, fire managers. As fantastic as this sounds: the first experiments are underway. And Buterin is not the only visionary.

How to buy cryptocurrency?

Cryptocurrency is the umbrella term for virtual currencies that can function as a digital means of payment. No banks are required for the payment processes. Financial institutions are replaced by a decentralized network whose participants manage transactions and generate new units of currency. This is made possible by the blockchain technology that underlies every cryptocurrency. If you want to invest in cryptocurrency and buy Bitcoin, you may consider this whether its useful for you. A blockchain (composed of "block" and "chain") is often called a "collective accounting system". In data blocks, it contains encrypted information about any transactions made with a particular to buy cryptocurrency. It acts as a database whose blocks are not located on a central server, but on the computers of the large number of participants it manages. Anyone can become a participant in this decentralized network and provide computing power to continue the chain of data. This is rewarded by receiving currency units ("coin" or "token") of the investment in cryptocurrency. This process is known as "mining". Once a transaction has been recorded in the blockchain, it can no longer be changed by any participant. In this way it is hedged and individual currency units cannot be used more than once. For this reason, there is no longer any need for established institutions, which have always been intermediaries in monetary transactions in the past.

Why are there cryptocurrencies?

The goal of the first cryptocurrency Bitcoin was simply to create a payment system that works without financial institutions to allow consumers a certain degree of informational self-determination and anonymity. As a result, Bitcoin has been used in recent years as a means of payment for illegal transactions, among other things. Although this circumstance reduced the social acceptance to buy cryptocurrencies, the underlying technology has since been expanded and improved. Crypto currencies can now be used for much more than just financial transactions, as they provide a secure, fast and cost-effective alternative for the transmission of sensitive data. In a pilot project, for example, the United Nations World Food Programme uses Ethereum to distribute resources to refugees. The organization issues food coupons via the Blockchain and those affected can pay in refugee camps by iris scan. In this way, the financial means  and corruption is no longer a problem for the organisation.

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