Since a few months ago, we have been hearing a lot about “Blockchain” without really understanding this technology, which is often presented as revolutionary.
But what is Blockchain ? How does it work ? These are the questions we will answer in this article.
What’s Blockchain ?
Blockchain is an information storage and transmission technology that is transparent, secure and operates without a central control unit.
Blockchain is a peer-to-peer technology that we can define as a database that contains the history of all exchanges between its users since its creation. This database is secure and distributed: it is shared by its various users,without third parties, which allows everyone to check the validity of the chain.
Thanks to Blockchain, it is therefore possible to save all transactions, data and information, in addition to all of that, it is accessible and can be consulted by everyone and for free !
There are public blockchains, open to all, and private blockchains, whose access and use is limited to a certain number of actors.
Birth of Blockchain ?
The first blockchain appeared in 2008 when Satoshi Nakamoto created the Bitcoin. It is not known whether this pseudonym designates a person or a group of programmers.
These two inventions are linked because the “blockchain” is the infrastructure on which the bitcoin is based. It’s thanks to Blockchain that the first transaction of Bitcoin in May 2010 was a success, and it’s still thanks to it that all Bitcoin’s transactions occur today.
Bitcoin could not exist without this technology, but the reverse is not true. Today, businesses and governments are considering the use of this technology for more than just digital money.
How it works ?
The transparency of this system is based on the fact that all exchanges between users since the first transaction are saved.
These exchanges are saved in the form of “transaction blocks” which, when put together, form a “chain”… “blockchain”!
Transactions between users are grouped into blocks. Each block is validated by network nodes or “miners”, when there is proof of work (which in the case of the bitcoin consists in solving algorithmic problems).
The operation of a transaction can be schematically described in 5 steps:
1. A makes a transaction to B.
2. Several transactions are grouped in one block.
3. The block is validated by a network of nodes using cryptographic techniques.
4. When the block is validated, it is dated and added to the blockchain to which all users have access.
5. B receives the transaction from A.
This process takes about ten minutes in the case of a Bitcoins transaction, but only 15 seconds on the Ethereum blockchain (which has its own crypto-currency called ether).
Why all this success ?
the success of Blockchain technology can be explained by several factors:
- Its potential to drive down costs: $20 billion in fees could be saved by banks through the use of this technology by 2022. (Source: Santander Bank)
- Its speed in recording and validating transactions.
- Its ability to exclude any risk of fraud and tampering thanks to its decentralised system.
Blockchain use cases?
The decentralised nature of the blockchain, coupled with its security and transparency, is a path to a larger applications than the monetary field.
The use of the block chine can be classified into three categories:
- Applications for the transfer of assets (Not only monetary use but even for: votes, shares,…etc.)
- Blockchain applications as a register: it ensures better traceability of products.
- Smart contracts: these are stand-alone programs that automatically execute the terms and conditions of a contract, without requiring to human intervention once started.
There is many fields of use: banks, insurance, health care,pharmaceutical industry, voting, music industry and the list goes on !
Generally speaking, blockchains could replace most of the centralized “trusted third parties” (banks, notaries…etc ) by distributed computer systems.