The blockchain: the tecnology behind cryptocurrencies.

The blockchain is a disruptive technology because it breaks with all previous economic and technological systems to be the foundations behind the generation of crypto market.

It is an evolution that was born with the WWW (World Wide Web) in the 1990s, after the fall of the Berlin Wall, and started in 2009, after the great economic crisis of 2008 with the launch of the first cryptocurrency: the Bitcoin.

More than 10 years ago it was already known that the prevailing economic system at the end of the last century was in crisis and unsustainable since it was and is still based on debt and money without precious metal backing, and so a group of computer specialists in cryptography (under the pseudonym of Satoshi Nakamoto) decided to develop a breakthrough and revolutionary technology based on decentralization, autonomy, transparency and immutability, called Blockchain.

But, what is the Blockchain? A term that has been widely used in recent years because it is shown to be a great revolutionary system that is meant to transform many processes and systems or ways of ordering these processes, companies, industries or sectors, in other words, the entire world economic-financial system.

“The blockchain is a huge database (BD) that is distributed worldwide, which is cryptographically protected and organized in blocks of transactions mathematically linked to each other that are hosted in all nodes or computers in the network in a decentralized way so it is not subject to any central control.” 

This technology offers to eliminate the intermediaries in a solid way guaranteeing the integrity and security of the data, since each block has a time stamp and a distribution through all the nodes of the network based on the P2P, Peer to Peer (person to person, computer to computer) in a direct way. The result is a distributed, decentralized, self-managed DB.

The fact is that the world as it currently works needs to produce, manage and store a huge amount of certified information at all times, every day, every hour, every second. Until now, this management has been done by human beings, who are characterized by being slow, with little attention to detail and corruptible. The proposal of the creators of the first blockchain is that this work should be carried out by machines that are characterized by their incorruptibility, efficiency, constancy and systematic with an increasing speed.

But we already know what the great weakness of a computer system is: it is hackable. And how does the Blockchain solve this? Well, not with a super powerful antivirus or firewall. Blockchain protects itself thanks to its own infrastructure, its own architecture, that is to say, its chain of blocks that contains the information.

What's in each block? Mainly 3 elements:

  1. Firstly, in the case of the Bitcoin, information regarding the transfer of funds corresponding to the sender, receiver, date, amount, etc.
  2. The so-called Hash or transaction ID, which is the identification number of each block, and it is a unique and unrepeatable number.

3.            The hash of the previous block, so that each block is connected with the previous one. Here it is clear why the term "Chain" is used.

 

And, why is it unhackable? Because of two things working together.

  • The first is the hash: the unique number of each block that has the peculiarity that it is generated according to the content of that block, which means that if you change the information of the block it automatically changes the hash. Imagine each block as a piece of a big puzzle, with such information it will have a shape, if the information is changed the shape will also change so the blocks will stop fitting and the chain will be invalidated.
  • The second is that many eyes are watching: in fact, since many users (machines) are watching simultaneously, if a user alters the information in his copy, the community will know because his copy is null and invalid. That is the difference, the security and certification of the documents in the Blockchain is given by the users, not a big institution, not a bank or notary but many equal users.

And, how can the blockchain get so many users?

Users can decide to join the blockchain network for two reasons:

  1. Simply to use the system;
  2. or to do something more attractive, to create new "blocks" for the "Chain" and those who do this last thing are the miners, in fact many participants are not there to use the services of the system, they only want one thing, to create new blocks, as they are signing contracts, making transfers or transferring any other information, there is a need to store it in a new block, and in order to add a new block to the chain the miner has to solve a very complex mathematical problem and for that purpose it is needed a lot of computing power, so the miners put their processors and graphic cards (CPU and GPU) at full speed trying to solve those mathematical problems to generate a valid block. Once they think they have solved it, the rest of the community (of miners and users) verifies that the solution is correct and if it is so, the new block is added to the chain, the information is consolidated and the agreement is carried out, and most importantly, the miner who has found the key, gets the reward. Now after the May halving this year the reward is 6.25 BTC per block, a still attractive one for the miners, taking into account that each BTC is worth about $ 9,000.

 

But blockchain, particularly the one related to Bitcoin, has not always been so popular, and at the beginning nobody paid attention to it. Although the Blockchain system was created in 1991, it was in 2009, when Bitcoin was released, that it was really used.

Possible applications of the Blockchain

But this technology is much more than bitcoin, or any other cryptocurrency that uses it to create codes. The applications of this system are very diverse, it can be used to sign contracts, vote in elections, keep medical or bank records and many other utilities that have yet to be discovered. For example with the Blockchain it would be impossible to falsify the origin of food or to hide if, during the transport, the so-called "Cold Chain" has been broken.  Similarly, in the field of health it would be impossible to manipulate medical records. In the jewellery trade, we can trace their origin to ensure that we are not buying, for example, “blood diamonds'. In short, it is the fact of storing information with many eyes watching and certifying its veracity what makes it difficult for the information to be falsified.

Blockchain is much more than a simple DB, but a system for storing information outside the conventional system, a tool for creating a more equitable and transparent society.

In future articles we will talk about the different types of blockchain, how some come from another as branches from a common trunk and how they can generate different cryptocurrencies. We will talk about other different blockchains created from the first blockchain known as the bitcoin Core.

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