What is Blockchain? What are the areas in which it can be implemented? Why is blockchain technology related to Bitcoin and cryptocurrencies? We find out in this guide what Blockchain technology or “blockchain” works and how it works.
Blockchain and Bitcoin: which correlation?
We certainly all know Bitcoins, but we don’t all know exactly how Bitcoins work and what these digital assets are based on.
Bitcoins are based on a revolutionary technology called Blockchain, but in reality the concept is not as simple as it may seem.
Once understood its real functioning, it cannot be deduced that its invention is a real ‘scientific innovation’ , which embodies a real technological revolution in the Fintech era.
In fact, this technology is able to solve one of the most difficult problems in the field of information technology and cybersecurity : preventing the duplication of information and personal data.
Bitcoins are assets, information and data which, however, must not be absolutely duplicated: digital assets are absolutely inseparable thanks to the block chain or blockchain .
It is a subfamily of technologies in which the register is structured as a chain of blocks containing the transactions and whose validation is entrusted to a consensus mechanism, distributed on all the nodes of the network, which are authorized to participate in the validation process of transactions to be included in the register.
The system that is used consists of a very complex technique, which uses cryptography to create encrypted blocks that are chained together.
And then, having made this premise we can already define ad hoc what a Blockchain is.
Blockchain: what is it?
Blockchain is a register structured as a ” block chain ” where each block is linked to the following and, of course, also to the previous one through the unchangeable cryptographic keys.
The Blockchain is a public register (a database) that is not unique, but distributed: this means that this register is not within a single server, but inside thousands of PCs that have the same public register (all equal ).
Obviously, to be connected, PCs must have the exact same Blockchain: this is the sine qua non condition that makes this technology absolutely inviolable and unchangeable.
In order for the Blockchain to be modified, it must be ensured that it is revised on all other PCs. In fact, to proceed, it is necessary to identify the entire blockchain on all the computers where it is inserted and installed.
As you can well understand, it is impossible to modify it: this is why one of its main characteristics is that of immutability .
In fact, since 2009 the year in which Bitcoin was created to date, countless attempts have been made to violate the Blockchain and no one has ever managed to do so.
The Blockchain is a register – distributed – that is, without a central validation “system or organization”. The DLT therefore provide for a validation mechanism in turn distributed based on the concept of consent .
Blockchain and Peer-to-Peer Software
It is necessary to know that the Blockchain is a large database for the management of encrypted transactions on a decentralized peer-to-peer network that redefines ad hoc the way in which we create, obtain and exchange value.
A Peer-to-Peer or P2P network is a network made up of many computers , all the same, without a center that commands.
There is no central server there is not, all the computers on which the software is installed are the same : the logic of governance is built around a new concept of trust between all subjects.
Nobody has the opportunity to command and the decision-making process passes strictly through a consensus-building process.
Being distributed, anyone can install it on their computer. Not surprisingly, blockchain is a technology that allows the creation and management of a large distributed database for the management of shareable transactions between multiple nodes on a network.
How to view the Blockchain?
To be able to view the blockchain, simply connect to one of the many explorer sites: for example, the best known and most used is certainly www.blockchain.info.
Within this site it is possible to view the entire blockchain: at the top of the list it will be possible to view the last block added to the blockchain.
On each block it is possible to click on and view all its data: scrolling past the main features of the block, it is possible to view all the Bitcoin transactions that are inserted within this block.
For each transaction, it is possible to know who initiated the transaction (the bitcoin wallet from where this transaction started) and where it arrived (the bitcoin wallet that received the transaction).
In addition, you can also view how many bitcoins have been sent, how many received and many other details. From this, one can understand how all BTC transactions are public.
Obviously, one must be aware of the public key of the wallet and, in any case, the interested party remains anonymous.
Once all transactions are placed in blocks, these blocks confirmed with the cryptographic key become irreversible.
So, in addition to the fact that the blockchain is inviolable, we can say that transactions are irreversible: this makes it a truly reliable data transmission tool. That’s why Blockchain technology can be implemented in different sectors.
Transactions are fairly fast and do not involve too expensive costs: for example in the case of Bitcoins the transactions take about ten minutes (i.e. each new block takes ten minutes to be added to the chain) a bank transfer a few days, if abroad also a week.
Other cryptocurrencies that use the same technology are very fast, some for example take only a few seconds.
As for the cost, a small surcharge is required to insert a transaction within a block: the cost varies according to the cryptocurrency used for the transaction.
Another extraordinary factor offered by blockchain technology is the possibility of being implemented on any public register, not only for Bitcoins and cryptocurrencies.
For example, the Cadastre is a public register and, as such, “block chain” technology could be implemented.
Another concrete example and application of the Blockchain concerns the Sidney Stock Exchange , which has announced that it will implement a new blockchain-based transaction service, in order to make everything easier and faster, but above all much more secure.
Blockchain in the industrial sector
Even though Blockchain technology is related to the cryptocurrency market and, in particular, to Bitcoins, blockchain technology is applicable in any sector and could have enormous advantages .
For example, in the industrial sector, all data relating to transactions printed on paper could be eliminated, in order to be able to carry out transactions thanks to the Blockchain.
In the field of manufacturing companies , there are several benefits that could be obtained thanks to its implementation:
- the elimination of one or more intermediaries;
- speed in transactions, thanks to the network, it is possible to carry out one at any time without relying on an intermediary;
- greater transparency, given the impossibility of changing its content;
- security, as already repeated several times this feature is offered by its inviolability;
- resilience, all terminals are connected to the chain to share information;
- automation, ability to schedule all payments automatically.
Blockchain in the banking sector
The banking sector is another sector that could derive interesting benefits from the implementation of blockchain technology.
This is thanks to the speed of transactions already explained, to the control of cash flows and, above all, to the inviolability of data.
In fact, this technology is already developing in some sectors concerning insurance, logistics etc.
Blockchain: what are the disadvantages?
More than disadvantages it would be better to define them as obstacles and difficulties deriving from the use of the blockchain. The first concerns legislation as each business unit must ensure that the blockchain technology implemented complies with the laws of the European Union.
The second concern is to increase the legitimacy of commercial robots such as the German commercial robot called Bitcoin Billionaire.
Furthermore, it is essential to pay close attention to its use and the corresponding insertion of personal data, especially if it is a public Blockchain. As for transactions, it may happen that they are not fast, but take time.
Smart contracts applied to Blockchain technology
The smart contract are very useful for the proper functioning of the transactions. Furthermore, they represent the neutral part to be able to solve any problems.
These contracts are fundamental for blockchain technology, even if they do not have any legal requirements.
Smart contracts are realized through the use of codes through a computer, inside which all the conditions of the parts of a transaction are present.
To better understand the use of smart contracts, the case of the AXA insurance company can be mentioned. Due to a delayed flight, it was decided to reimburse customers through an insurance policy based on the use of an Ethereum blockchain.
This actually performs two main functions: the first is to keep a contract register accessible to everyone, while the second is used to activate an automatic payment to all customers who have been delayed for more than two hours of their flight.
To take advantage of this insurance just buy it online. At the moment this technology is only used for intercontinental flights bound for the United States, but the company plans to expand this new feature on all flights.
From this concrete example, we can deduce how smart contracts can be useful in all areas and sectors to conclude transactions: thanks to their transparency, any type of problem and controversy is avoided.