blockchain technology

blockchain technology

Blockchain what is it?

To understand a little better the functioning of digital currencies such as bitcoin, it is interesting to understand what the blockchain, and conversely we will understand more the blockchain thanks to the example of bitcoin, the technology of one (the blockchain) having been historically created in the service of the other (the bitcoin).

Can we give a simple definition of the blockchain?

The blockchain is in a nutshell a database, secure, reliable, tamper-proof and distributed.

It is the ability to make transactions with confidence, without knowing each other and without intermediaries.

That’s the definition! But what does it hide behind this definition?

The blockchain is a computer protocol, which will upset the transfer of money (but not only).

It is actually a large indelible numeric register, containing information grouped together.

This information is kept in the form of cryptography, ie in the form of coded messages.

In general when we code a message, we need a key.

What is a key?

For example, we decide to assign a number to each letter of the alphabet. This is a key. If you have this key you will be able to decrypt the message and respond to this message in the same way.

But there is a much more sophisticated form of encryption, it is asymmetric cryptography, for which the key that coded the message is not the same as the one that decodes it.

How is it possible ?

It’s a bit like having a French-Chinese dictionary, but you do not have the Chinese-French dictionary.

All these codes are in the form of extremely complicated algorithms.

But concretely what happens when you make a transaction with blockchain technology?

Let's take an example:

Mr. X, wishes to transfer 10 bitcoin to Mr. Y.

Each of them will use a private key, which could represent his signature, and a public key, sort of mailbox.

If X wants to give Y 10 bitcoin, it uses its private key to initiate the transaction, then sends the sum to Y’s public address.

All of these interactions are logged in a block that all users of the network can have a copy.

This history of all transactions made, indicates the date, the amount, the public keys of the two users, but not their real identity.

To secure the system, individuals or companies connect their computers on the network and provide computing power, they are called “minors“.

Using mathematical formulas, they verify that X has the 10 bitcoin he wants to transfer (and this, by checking all the transactions made since the genesis of bitcoin).

Once verified, the transaction is indelibly entered in the register. It is a block that is added to the chain of blocks, hence the name: blockchain.

Thus, thanks to this system, it is impossible to have false bitcoin, to deny having made a transaction, or to use the same bitcoin twice.

The miners would notice this and immediately stop the transaction after analyzing the fraudster’s history.

But why would the "miners" provide this computing power?

What is their interest in this story? (Especially since to make these calculations they need a huge computing power that is not given to everyone!)

Their interest is that they will be paid for this work by new bitcoin, as well as transaction fees.

This currency is printed as and transactions with the minors who receive in return part of this creation of value.

And that is what will form the money supply of bitcoin (money supply that should not exceed 21 million bitcoin issued, this is the rule that was fixed at the beginning).

Conclusion:

The blockchain therefore makes it possible to place its trust not in a conventional intermediary, but in a network of computers connected to each other.

There is no longer a central control body, such as a country, a bank or a company that could get hold of the register (see: No organization can seize your bitcoin- Why invest or buy bitcoin) .

We can exchange values ​​from peer to peer without any intermediary.

We now better understand the definition given at the beginning of this article:

The blockchain is a secure, reliable, tamper-proof, and distributed database.

It is the ability to make transactions with confidence, without knowing each other and without intermediaries.

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