The blockchain is often associated with Bitcoin, the virtual currency created in 2008. It is a sort of decentralized account book controlled collectively, on the peer-to-peer principle, from a distributed database. It is the blockchain that ensures the security of transactions by sharing trust. A system reputed to be transparent and tamper-proof, the scope of which goes far beyond currency alone.
What is the blockchain and why are we talking about a revolution about it ? Behind this system for securing Bitcoin transactions lies a concept that bases its reliability on transparency and mutual trust. Some think that the blockchain is led to play a central role in our existence by replacing trusted centralized third parties such as banks, notaries, insurance companies and more.
The blockchain was born with Bitcoin
The blockchain was born at the same time as the cryptographic currency called Bitcoin and appeared in 2008. Bitcoin is used to purchase goods and services ; it can also be exchanged for other currencies. Unlike traditional currencies, Bitcoin is not administered by a single banking authority, it operates in a decentralised fashion through a set of nodes. These form the network through which all transactions are made. A secure public register keeps the history of all these operations. It is considered forgery-proof since it is based on the principle of shared trust.
« Mining » form the nodes to the blockchain
Each transaction is encrypted and stored in a block, which may contain several separate transactions. A block contains a numerical marking from the previous block that attests to its validity. This marking operation is carried out by voluntary users, who are called “miners”. The latter make their time and the computing power of their machines available to administer the blockchain. The miners form the nodes, or rather the links of the blockchain.
This operation called “mining” allows these people to be paid, in Bitcoin of course. The Bitcoin value is maintained by software that adapts the intensity of the calculations to the number of active miners. The more bitcoin miners there are, the more complex the calculations are and the safer the blockchain is.
The future of the blockchain beyond Bitcoin
The blockchain has many advantages. First of all, it reduces bank transaction costs and even eliminates banks as trusted third parties. In addition to digital payments, this technology can be used to transfer other assets, such as securities, bonds, shares, voting rights…
Furthermore, the transparency of the system and its decentralised architecture give it a potential for applications that go beyond the financial sphere. The blockchain being a register, it can be used to establish a traceability on all kinds of products and services. It can also be used to ensure the application of intelligent contracts, programs that automatically execute the terms of a contract.