Introduction

For the longest time, my perspective on blockchain technology was quite limited. I viewed it as an abstract, overly complex concept, something technologically rigorous but lacking real-world impact beyond its innovation. Admittedly, I was ignorant of its true potential. My fascination simply wasn't high because I couldn't connect the dots between decentralized ledgers and genuine human benefits.

However, things always trend for a reason, and I’d figure it would be worth looking into blockchain and forming a proper opinion before making baseless assumptions (just like how you should try out Attack on Titan even if you think anime sucks). After doing some research, here’s what proved me wrong about blockchain, and why it might be worth looking into for you, too.

While technology has significantly advanced, the fundamental human desire for trust and accountability remains a problem. Whether it's about who controls social media networks that influence our online discourse, who financial institutions choose to bank, or the sudden emergence of AI bots, many of the world’s digital problems have to do with centralized authority in a network. Blockchain, at its core, is a highly secure and transparent software system that attempts to solve this with a public, immutable ledger of all transactions (more on this later).
Traditional finance (TradFi) – our established financial systems that have been in place for decades – has, without a doubt, provided a stable framework for economic activity. That said, some major limitations include accessibility issues, slow transactions, and high fees. Due to geographic locations, systemic or economic barriers, many individuals have struggled accessing these institutions or putting their trust in these systems. DeFi aims to transcend banking hours and global borders, addressing some of the biggest issues with TradFi. That said, the DeFi systems we have in place are held back by regulatory issues, technical vulnerabilities, and governance gaps.
Doing your own blockchain project didn’t seem as impossible as it seemed. Building anything with blockchain sounds a bit like rocket science, but rather than building a new blockchain from scratch, you’re using existing networks! There are a few new languages and tools to get used to, but the main prerequisite is having a solid high-level understanding of how dApps work and how the systems interact with each other.

Ultimately, I’m not pushing for a dApp revolution on the internet, but it is definitely worth being aware of the problems with our traditional systems in place and how we might want to integrate novel innovations. For instance, traditional systems are already creating their own stablecoins (a digital currency pegged to an asset, such as the US dollar). Using digital assets as an everyday way to make payments and move money is coming closer to us than you might think.

Breaking Down Blockchains and Crypto

To understand how to build your own DeFi app, you’re definitely gonna need to understand the two concepts: blockchains and crypto. Cryptocurrency refers to digital assets, and they’re built on a blockchain. We’re gonna need to understand first how blockchains work, what cryptocurrency is, and how transactions are made on a blockchain network.

What are blockchains?

Blockchain is a digital ledger that records transactions. It’s decentralized, so no single person or company controls it. Everyone can see the changes, but no one can delete or modify past entries. Here are five key characteristics:

Decentralized: No single entity controls the system, reducing reliance on intermediaries
Pseudonymous: While transactions are publicly visible, the identities of users are typically represented by cryptographic addresses, not their real names.
Immutability: Once data is recorded, it cannot be altered
Consensus mechanisms: Transactions are validated by network participants, ensuring accuracy and security

You can visualize a blockchain literally as a chain, where each "link" is a block. Each block is essentially a container for a bunch of validated transactions. When new transactions occur on the network, they are gathered and bundled together into a new block. Once a block is filled with data, it undergoes a crucial process called hashing. A hash is like a unique digital fingerprint for that block's content. It's a fixed-size string of characters (often numbers and letters) generated by a cryptographic hash function. Even a tiny change to the data inside the block will produce a completely different hash, making it incredibly sensitive to any tampering.

A blockchain consists of the following:

The collection of new transactions
Its own unique hash