Tuesday, May 28, 2024

What Is Blockchain Technology?

If you are familiar with the world of cryptocurrencies and the new economic dynamics that exist today thanks to technology, you will most likely have heard the term “Blockchain“. Do you want to learn more about this concept? You have come to the right place. Next, we will tell you a little about its origin, what it means and how it works.

A Little History:

To understand the Blockchain, it is first necessary to know the history of cryptocurrencies and how they came to revolutionize the economy as we know it.

For decades there have been attempts to decentralize money and make the economic system a more fluctuating environment. The first known attempts to integrate the science of cryptography with electronic money resulted in Digicash and Ecash, currencies that used cryptography to make money transactions anonymous; however, its issuance and liquidation were still centralized. These first attempts are attributed to the computer scientist David Chaum.

Thanks to this, the concept of cryptocurrency was born, coined by Wei Dai in 1998, the year in which it was officially proposed to create a new type of decentralized money that would use cryptography as a means of control.

However, it was not until 2009 when the first known and used cryptocurrency was created in the technological world: Bitcoin. This first cryptocurrency was created by a developer – or group of developers – under the pseudonym of Satoshi Nakamoto.

Subsequently, other cryptocurrencies such as Namecoin, Litecoin, Peercoin or Freicoin emerged; however, it is the Bitcoin cryptocurrency that has become more popular over the years thanks to its vertiginous rise in April 2013.

Of Traditional Transactions To Blockchain:

Let’s see how a common bank transaction works: Laura wants to send a certain amount of money to Alicia. For this, you must access your account, either face-to-face or virtual and perform the operation. Once this is done, you have given the bank the order to debit that amount from your bank account and deposit it in Alicia’s bank account.

In this case, the bank acts as an intermediary for this operation to succeed and Alicia can receive in her account the money sent by Laura. We know that this process occurs automatically thanks to computer programs that receive the order and carry it out; however, so far neither Laura nor Alicia have known how the process works, much less have control of it.

The absolute control is held by the banks, who have the domain of their accounts and their information, therefore, they, as users of the banks, depend on them. This is how a centralized system works.

The Innovation Of Blockchain:

This is where Blockchain technology comes into play, whose main objective is to eliminate intermediaries and create a decentralized system.

Blockchain literally means “blockchain” or “articulated chain.” This is “a distributed database, consisting of blockchains designed to prevent its modification using an encryption system and linking the information with the other blocks”.

In this way, users have control over their money and the existence – and need – of intermediaries in the process is eliminated. They then become part of a huge bank where each one becomes a participant and manager of the bank account books.

In other words, Blockchain technology is a huge account book where records (blocks) are encrypted and linked to each other, with the aim of safeguarding the privacy and security of transactions.

In the case of Laura and Alicia, if Laura wants to send a bitcoin to Alicia, she will first notify all users of the network that she will do so. However, the process is safe because nobody knows that Laura is Laura and Alicia is Alicia, but they are called under keys or “hashes”, which contain alphanumeric information that only the owner user can know. In this way, they become only digital accounts in a large wallet system.

By sending the Bitcoin, the process starts a complex operating protocol that will aim to transfer the Bitcoin from Laura’s portfolio to Alicia’s portfolio. First, the users of the network will verify that, in effect, Laura’s account has the necessary amount to carry out the transaction and that, in addition, said Bitcoin has not been spent before (Double Spending). Once this is verified, the transaction is recorded, which will later become part of the transaction block.

Important Terms:

Cryptography: Art and technique of writing with secret procedures or keys or in an enigmatic way, so that the writing is only intelligible for those who know how to decipher it.

Centralized economy: The centralized economy is a way of producing, consuming and distributing wealth where production factors are in the hands of the state. It is the opposite of the market economy.

In the centralized economy, the state is the one who sets the prices. Its objectives are social equity and equal distribution of wealth. One of the main problems of the centralized economy is the excessive bureaucracy it generates.

Decentralized economy: The decentralized economy is the power of decision divided or distributed between the different controls and the different levels of an organization.

Cryptocurrency: A cryptocurrency, cryptocurrency or cryptocurrency is a digital medium of exchange.

Blockchain: A blockchain or articulated chain, known in English as blockchain, is a distributed database, consisting of blockchains designed to prevent modification once a data has been published using a reliable time stamp and linking to a previous block

Protocol: Process that guarantees coherence, consistency, and security of information in any of its movements (transactions). Elements that are part of the Bitcoin protocol: Proof-of-Work, the key of each user, the hash of each block, etc.

Proof of Work: A Work Proof System or “POW” System (Proof-Of-Work System) is a system that, in order to avoid unwanted behaviors (for example denial of service or spam attacks), requires that The service client performs some type of work that has a certain cost and is easily verified on the server-side.

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Teodora Torrendo
Teodora Torrendohttps://ccdiscovery.com
Teodora Torrendo is an investigative journalist and is a correspondent for European Union. She is based in Zurich in Switzerland and her field of work include covering human rights violations which take place in the various countries in and outside Europe. She also reports about the political situation in European Union. She has worked with some reputed companies in Europe and is currently contributing to USA News as a freelance journalist. As someone who has a Masters’ degree in Human Rights she also delivers lectures on Intercultural Management to students of Human Rights. She is also an authority on the Arab world politics and their diversity.

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