What is the blockchain?

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Blockchain Possibilities

A Blockchain is a revolutionary technology for transparent storage and secure transmission of information without the need for a central control body.

An inherent part of the blockchain is the database that contains all the history of the transactions between its users since its creation. This database is secure and distributed: it is shared by its various users, without intermediaries, which allows everyone to check the validity of the chain.

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There are public blockchains, open to all, and private blockchains, whose access and use is limited to a certain number of actors.

A public blockchain can therefore be likened to a large public ledger or accounting book, wholly anonymous and tamper-proof. While everyone can look up transactions or add new ones, no one, however, can erase them. The ledger is indestructible.

The first blockchain appeared in 2008 with the bitcoin digital currency, developed by an unknown man using the pseudonym Satoshi Nakamoto. His invention functions as the underlying architecture.

While blockchain and bitcoin were built together, today many players such as businesses and governments are considering the use of blockchain technology for more than just digital money.

How does it work?

Any public blockchain necessarily works with a programmable currency or token. Bitcoin is an example of a programmable currency.

Transactions between network users are grouped into blocks. Each block is validated by the nodes of the network called minors, according to techniques that depend on the type of blockchain. In the Bitcoin blockchain this technique is called the Proof-of-Work, and consists in solving algorithmic problems.

Once the block has been validated, it gets a time stamp and it gets added to the block string, the so-called Merkle Tree. The transaction is then visible to the receiver and the entire network. This process takes some time depending on the specific blockchain we are dealing with (e.g. about ten minutes for Bitcoin, 15 seconds for Ethereum).

Scheme of Bitcoin Blockchain
Scheme of the Bitcoin Blockchain. Image courtesy: Matthäus Wander

The huge potential of the blockchain

The decentralised nature of the blockchain, coupled with its security and transparency, promises much broader applications than the monetary field alone. The use of the blockchain can be classified into three categories:

  • Applications for the transfer of assets – for monetary use and trading, among others.
  • Blockchain applications as a ledger – applications that ensure better traceability of products and active components.
  • Smart contracts – stand-alone applications that automatically execute the terms and conditions of a contract, without the need of human intervention.

The fields of exploitation are immense: banks, insurance, health and pharmaceutical industries, supply chains in many sectors (food, distribution, aeronautics, automotive, etc.), ecommerce, music industry, public utilities, real estate, voting, you name it. Generally speaking, blockchains could replace most of the centralized trusted third-parties by distributed computer systems. Banks, notaries, and cadastre should embrace the blockchain before it’s too late…

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