Introduction to Blockchain
The blockchain is undoubtedly the greatest innovation of the decade. Defining the blockchain in a few words is not easy. Depending on your background, your conception of what a blockchain might be is probably different than mine. Nonetheless, let’s try to agree on a general or acceptable definition for the sake of this introduction.
The first version of the blockchain protocol was conceptualized by a person (or team) under the pseudonym Satoshi Nakamoto in 2008. It was implemented the following year by Nakamoto as the main component of bitcoin, where it serves as a public registry to all transactions on the network. In some aspects, Satoshi proposed a functional numerical solution to the Byzantine generals’ paradox. Naturally, with this solution, the most immediate impact was on the payment system. Satoshi Nakamoto completely redefined the current payment system by completely cutting off the need for a central authority (Banks are an example of a central authority).
We can assume that Satoshi Nakamoto’s objective was not to create the blockchain to serve the world of finance but to revolutionize the industry as a whole. Over the years, banks and financial institutions began to discover that this technology could severely disrupt their business model and represented both a threat and an opportunity. For now, we only see a few use cases where this technology can be applied. However, as we dive deeper into the technology, we will notice that the possibilities offered by this the blockchain are endless.
The main principles of Blockchain Technology
• Transparency: All transactions made in the network are recorded and verifiable.
• Consensus: A trust system that requires a set of participants to validate and verify transactions.
• Decentralization: There is no central authority.
• Distributed ledger: Transactions are recorded in an “Open Ledger“.
• Immutability: Transactions recorded in the blockchain cannot be modified or deleted.
The innovative fact in its solution is that the blockchain has no central organ. That is, anyone in the world is able to transfer electronic cash to another person safely without a central authority. Furthermore, all transactions in the network are verifiable by anyone with a computer.
To put it quite simply, the blockchain can be seen as a large database that takes advantage of the internet, the free protocol and the computational power of cryptography. It is a large data registry in which a new transaction is written following the others, without having the possibility to modify or delete the previous ones. This registry is active, chronological, distributed, verifiable and protected against forgery by a distributed trust system (consensus) between members or participants (nodes).
How it Works
When a user makes a transaction through the blockchain network, the latter is bundled with other related transactions within a block. It is then verified and validated by network members using cryptographic techniques. This step called mining makes it possible to verify the authenticity, to make sure that its structure is correct and that it is coherent in relation to those previously recorded. Once validated, the block is immediately timestamped and added to the blockchain. The operation becomes visible and accessible to all users, but can not be changed, even if an error occurs.
When an error occurs, rectification only requires the addition of a new transaction. The validation of a transaction is almost instantaneous. It varies, however, according to the importance of the operation performed. The time required for such confirmation is generally of the order of 10 minutes.