Blockchain in Cryptocurrency: Beginner's Guide and Career Overview

Since digital currencies and blockchain technologies are developing rapidly, professionals with blockchain expertise are in high demand. Applying these technical skills can help you unlock opportunities in your current role or transition into a fast-paced career working with decentralized finance (DeFi) technology. In the following article, you'll learn what blockchain is, how it relates to cryptocurrency, and how you can start building the skills you need to launch a career in this emerging field.

If you're ready to gain actionable expertise in decentralized finance technology today, you can learn blockchain basics and smart investing techniques through the University of Michigan's Financial Technology (Fintech) Innovations Specialization. In as little as one month, you'll also earn a certificate to enhance your resume and demonstrate your skills to potential employers.

What is blockchain in cryptocurrency?

Blockchain technology records and confirms cryptocurrency exchanges, like a digital ledger. It collects and stores information about buying, selling, or exchanging digital assets. This information is placed on the blockchain in the exact order it was received to ensure its accuracy and security. Blockchain ledgers give all users the same end-to-end view of information, promoting full transparency and trust. These trust measures help eliminate the need for a central authority (such as a bank) overseeing or controlling the cryptocurrency market.

Bitcoin, Ethereum, and other wide-scale cryptocurrency coins use blockchain to process and record transactions securely. This technology makes it possible to ensure transparency and protect the financial information and identity of crypto buyers and sellers, and remains the primary use of the technology. However, it is making its way into projects outside of cryptocurrency. Understanding how these blocks are coded and how different industries may benefit from this application can help you market yourself to new roles in this field.

How blockchain works in cryptocurrency

With blockchain technology, each transaction or piece of data is stored as a “block.” You then add this block to the existing chain of blocks to create a chronological picture of all activity. The blockchain is designed to be a secure and transparent technology, so each block is immutable or, unchangeable and viewable by everyone. As the uses of blockchain technology continue to expand beyond virtual currencies, familiarizing yourself with key terms can be helpful whether or not you work in the field.

Blockchain cryptocurrency transaction process

Blockchain technology confirms and authorizes transactions. As described, a transaction's data gathers into a block with a digital signature, timestamp, and any other necessary information. Each block then uses nodes to travel through the network to another user who has the correct private key to complete it. Below are a few crucial concepts that facilitate the blockchain transaction process. 

Key features of blockchain technology to learn

• Distributed ledger technology is a crucial feature of blockchain that allows all users on the network to access the immutable record of transactions and the distributed ledger. Transactions are only recorded once on the shared ledger. Because of this technology, duplicating a transaction recording is unnecessary, saving businesses time. 

• Immutable records are an additional key feature of blockchain technology. When a transaction is initially recorded on the shared ledger, no user can change or alter it. If an error occurs in the recorded transaction, you must record a new transaction with the correct information. This process makes both records visible. 

• Smart contracts execute automatically based on rules designed to speed up transactions. Smart contracts are versatile and are utilized in various situations, including corporate bond transfers, supply chain transparency, travel insurance terms, and more. 

• Blocks: As the name suggests, Blockchain is a chain of blocks. Each time a transaction occurs, the data becomes a new block. This block has a cryptographic hash that links it to the most recent block, a notation of the time, and a record of transaction information. The blocks link in chronological order and can record each new block on devices worldwide rather than on one or two devices. This ensures accurate, transparent, and permanent records. Depending on the situation, these blocks can contain various information, such as who is doing the transaction, what is included, and when it is happening. 

• Mining: Mining describes the process of updating the blockchain by adding blocks and creating new coins. Miners validate the transactions, which requires them to solve cryptographic hash puzzles. Once miners validate your transaction, you can add the block to the blockchain ledger and update records. This type of validation requires high-level computing power and advanced equipment. Those pursuing a career in mining often invest in this type of equipment and receive Bitcoins or other cryptocurrencies as payment for mining efforts.

• Hash encryptions: Hash encryptions secure data and information through an advanced algorithm. The specific algorithm is primarily SHA-256, which transmits the transaction, the sender and receiver addresses, and the private key details. The algorithm nearly prevents hacking and simplifies the authentication process. 

• Nodes: A node in blockchain technology is a computer that runs blockchain software and has access to the blockchain. The network of nodes in the blockchain is all the computers that run the database. Every node updates with the latest version of the blockchain, so there is a decentralized record of all transactions. 

• Tokens: Programmers create tokens to represent different types of digital assets. The ownership of the token is trackable, and it can execute a certain functionality based on its set of instructions. Tokens can be various assets, such as records, music files, tickets, contracts, and more. NFTs are blockchain-based tokens that ensure the authenticity and protection of digital media ownership. 

Read more: Cryptocurrency Explained: Definitions, Skills, and Opportunities

Types of blockchain

Different types of blockchain networks serve specific purposes for users and businesses. Each blockchain network's construction is slightly different to effectively serve its defined purpose.

1. Private blockchain networks

A private blockchain network has one organization that oversees the entire network, having a full say on who can join and participate, govern the ledger, and execute protocols. Private networks are peer-to-peer and decentralized. Users in these networks trust in their security because of the overseeing organization. Corporations can host their own private blockchain networks behind a firewall or on-premises. 

2. Public blockchain networks

A well-known example of a public blockchain network is Bitcoin. Public networks allow anyone to join and participate, making them susceptible to privacy and security issues. Public networks also require strong computational power, which only applies to specific purposes. 

3. Permissioned blockchain networks

Permissioned blockchain networks combine the attributes of public and private blockchains. They are commonly used by businesses that are setting up their own private network and are only used by that company. However, public blockchain networks can also be permissioned. These networks require permission or an invitation to join, and multiple people are given abilities on the blockchain. 

4. Consortium blockchains

Consortium blockchains have multiple governing bodies or organizations maintaining the network and determining who can access it and its data. These types of networks are most valuable in situations where multiple organizations are responsible for the blockchain and where all participants in the network need permission. 

Read more: Blockchain Certification: Which To Choose?

Blockchain applications beyond cryptocurrency

The success of blockchains for currencies has opened the door to many expansion opportunities. The technology can increase connectivity and transparency between organizations and streamline processes. For example, using smart contracts can simplify transactions and business payments. These smart contracts set up a list of conditions to be met and code the payment to be released once users meet the conditions. Blockchain technology can provide templates for these contracts and simplify payments since they don't need intermediaries. Additional examples include:

Payment processing and financial transactions

The use of blockchain in the financial industry has the opportunity to make transactions more efficient. It may streamline international and domestic transactions, reduce transaction fees, and increase transparency. Visa has shown the efficacy and potential of blockchain technology for mainstream use since adopting blockchain for international business payments in 2017 [1].

Recording property records and real estate transactions

Blockchain technology can record the transaction records for property in a transparent, widely available, and secure way. This allows the public access to an indisputable record of property ownership and makes these records more easily available than following a paper trail. When it's time to sell, verifying and transferring ownership can be done more efficiently.

Securing patient information

Inefficient hospital record-keeping and lack of security have caused problems for providers and patients. Blockchain technology has the potential to secure patient data, track outbreaks of diseases, and create more accessible hubs of medical information. Instead of tracking data across all locations, patients and providers can access all the information in a decentralized database.

Streamlining the supply chain

Blockchain technology offers two key benefits to supply chain functions: improved data security and communication. Manufacturers, shippers, and customers have access to the most up-to-date information about the shipping process. Not only does this keep everyone in the loop, it can also improve coordination between supply chain partners and reduce execution errors.

Tracking voting records

The immutable nature of blockchain makes it appealing to election officials who want to increase public confidence in election results. Blockchain technology could promote transparency in election results and securely store records of all votes. Not only does it create a permanent register of votes, but it can reduce the possibility of voter fraud since each ballot corresponds to a single ID.

What are some advantages of blockchains?

Many industries are seeing the advantages of blockchain for storing, recording, and securing their data, such as global access and increased privacy. While specific advantages and disadvantages of blockchain uses will differ by industry, common advantages include the following:

• Anonymity: Blockchain technology allows you to create transactions under pseudonyms without being attached to your identity. While the record is available publicly, the identities of the people making them often are not.

• Cost: Blockchain technology can potentially reduce the cost of international transactions. This comes from lower transaction fees, reduced need for an intermediary, and automated smart contracts to streamline transactions.

• Decentralization: Blockchain's decentralized nature means records remain consistent across locations and countries. This diminishes discrepancies in data and ensures professionals have access to the same information.

• Increased privacy: Blockchain encrypts data and uses a system that prevents data corruption. Private key authentication is used to protect data, so network administrators only have access to an overview of the data and not user-specific information.

• Permanent records: Each data block has a cryptographic signature that validates that the information has not been tampered with. Because blockchain information exists across many devices, the data record stays forever. This takes away debate about the validity of the records.

• Security: Blockchains are not kept in a centralized location, so hackers cannot disrupt or corrupt the data. The blockchain is continually updated to nodes worldwide and provides an indisputable record of data and transactions.

• Streamlined processes: Blockchain technology can provide templates for smart contracts, making it easier for businesses to set up transparent, efficient, and secure business deals. Smart contracts with blockchain reduce the steps to complete a transaction and process payments quickly.

Career opportunities in blockchain

Because blockchain is a new concept, many careers in this industry are still emerging. It’s an exciting time to build skills in this area, as you never know what potential opportunities are around the corner. Common professional opportunities in blockchain technology include development and consulting jobs.

Blockchain developer

Average annual base salary (US): $143,509 [2]

Blockchain developers use blockchain technology to develop applications for organizations, including dApps and smart contracts. Sometimes, you may focus on creating protocols and architecture and maintaining and improving them over time. You also can design software that operates on this architecture.

Blockchain legal consultant

Average annual base salary (US): $73,739 [3]

As a blockchain legal consultant, you would help companies navigate blockchain implementation. This can include finding the best practices to protect information and privacy while maintaining transparency. You may also be asked to help companies comply with US regulations and abroad.

Blockchain project manager

Average annual base salary (US): $158,792 [4]

Blockchain project managers build teams of blockchain experts to work on blockchain-related projects. In this role, you are responsible for tracking deadlines, solving problems, and communicating between experts and customers to ensure the project meets the customer's needs. Although this is a relatively non-technical role, understanding blockchain technology can be useful.

Blockchain quality engineer

Average annual base salary (US): $128,045 [5]

Blockchain quality engineering positions are similar in their responsibilities to other software quality engineers, except the focus is on validating the use of blockchain technologies. When a company or industry designs a new blockchain environment for a specific process, your role would be to test and validate that the project is ready to be used publicly. 

Blockchain architect

Average annual base salary (US): $182,025 [6]

Blockchain solutions architects work with research and design teams to design platforms and solutions that address problems. You also have opportunities to look for ways to improve the current system, identify risks, and maintain operational efficiency. Understanding blockchain and business operations can contribute to your success in this role.

Blockchain Web/UX designer

Average annual base salary (US):  $112,634 [7]

As a UX designer, you will create and maintain the application's user interface. Companies creating new blockchain solutions need user interfaces that are easily accessible and convenient for customers to use. This can help facilitate the wide-scale adoption of this technology.

Qualifications and degrees for blockchain careers

The qualifications and degrees needed for a career in blockchain technology vary by profession. For example, a blockchain UX designer may showcase their experience with UX design in previous projects and demonstrate how these skills can be transferred to UX design in the blockchain space. A blockchain project manager may want to show proven success managing technical teams and why they would be the right fit to lead a project team in this area.

A degree in computer science or a related field can demonstrate working knowledge in the technical field. In any position related to blockchain technology, showing an in-depth knowledge of how blockchain technology works can help you stand out to employers and validate your knowledge and skills. 

Top technical skills for a career in blockchain

Many blockchain professions are relatively new, so finding people with direct experience in blockchain technology can be rare. For this reason, showing your knowledge of this area and technical skills related to the position can help you stand out from other applicants. You may consider building the following skills:

• Computer science

• Cryptography

• Cybersecurity

• Data science

• Data structures

• Programming languages

• Smart contracts

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