Blockchain and Bitcoins

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You may have never heard this term and much less know what the blockchain is, but it is only a matter of time that you find it, because it is a paradigm shift in our understanding of the digital world that will sooner or later end up integrating into our lives, or at least that's what the experts say. In this article, we will try to explain what blockchain means and why it will be key in the future of digital networks.

What is Blockchain?

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The first thing is to contextualize it. Blockchain means "chain of blocks", its own name will be very illustrative later to understand how it works. It was born as a secondary actor in the bitcoin revolution since it is about technology or the information coding system that is behind the virtual currency and that sustains its entire structure. Soon it saw the potential it had for itself and the number of applications it allows in other areas beyond financial transactions, such as public administration or the Internet of things.

BLOCKCHAIN AND THE END OF THE CENTRALIZATION OF DATA

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The blockchain is a technology that allows the transfer of digital data with a very sophisticated coding and in a completely secure way. It would be like the book of accounting entries of a company where all the entries and exits of money are registered; in this case, we are talking about a book of digital events. But in addition, it contributes with a tremendous novelty: this transfer does not require a centralized intermediary that identifies and certifies the information, but it is distributed in multiple independent nodes that register and validate it without the need for trust between them. Once entered, the information can not be deleted, only new records can be added, and will not be legitimized unless most of them agree to do so.

Along with the level of security that this system provides against hacking, we find another huge advantage: even if the network were to fall, with only one of those computers or nodes not doing so, the information would never be lost or the service, depending on the case that we speak, it would continue working.
An example that illustrates the importance of the distributed network is in social networks. With this system, blockchain would eliminate the centralization imposed by applications such as Facebook or Twitter when identifying or validating the origin of our messages, and the integrity of them would be guaranteed by the network of nodes.

Even if the network goes down, if only one of those nodes do not, the information will not be lost

The technology is based on four fundamentals: the shared registration of transactions (ledger), the consensus to verify transactions, a contract that determines the rules of operation of transactions and finally cryptography, which is the foundation of everything.

Once the business network is created, the transactions and processes that the blockchain will use are defined. Here, we highlight some basic criteria to help in the classification of the eligible processes:

Extremely complex (and slow) processes that maintain a validation chain at several levels;

Transactions that require traceability;
Transactions that require unique and non-alterable records;
Identity processes;
The need to increase (or establish) a relationship of trust between members of the business network;
New business models

One of the main benefits of a blockchain system is that it has the promise of eliminating - or greatly reducing - friction and costs in a wide variety of applications, mainly financial services since it eliminates a central authority (for example, a clearinghouse) when making and validating transactions.

How the block chain works

To gain a solid understanding of how to use blockchain in a business configuration, CIOs must first understand how a unit of value in a transaction moves from part A to part B. This infographic details how the block chain works from the beginning of the transaction, through verification and until the delivery.

Bitcoin: Learn how the new universal currency works
The exchange rate of Bitcoin to the dollar is high: 1 Bitcoin (BTC) equals the US $ 2,559. It is estimated that more than 70,000 transactions are made every day for more than US $ 100,000.

The Bitcoin is a currency, like a euro or a dollar, which serves to exchange goods and services. However, unlike these currencies, Bitcoin is an electronic currency, which exists exclusively on the Internet, which gains prestige in cyberspace thanks to its efficiency, security, and ease of exchange.

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Its main difference compared to other currencies is that it is a decentralized currency, whose value does not depend on the interest rate set by a Central Reserve Bank or its reserves in commercial banks. The Bitcoin is subject to the laws of supply and demand, raising or decreasing its value on the basis of Bitcoins available or not in the market. It is known that up to 21 million Bitcoins will be issued by 2040.

It is the first implementation of a concept known as cryptographic currency. The first specification of the so-called Bitcoin protocol was published in 2009 under the alias of Satoshi Nakamoto in an email list. This digital character left the Bitcoin project at the end of 2010 but since then there has been an enthusiastic community that has grown exponentially, thanks to the arrival of more and more developers working on the Bitcoin protocol.

To date, although several investigations have identified the people who could be behind the alias Satoshi Nakamoto, there is no certainty about the true identity of the creator of Bitcoin, generating doubts and uncertainty about his intentions.

Why the Bitcoin protocol remained in operation? Because it is an open source software that any programmer can access. Although programmers are introducing more and more software improvements, they can not force changes to the protocol because it needs to be compatible with everyone. In simple words, Bitcoin will only work correctly as long as there is the consensus among users. Therefore, users and programmers have a high incentive to avoid altering the code. From the user's perspective, Bitcoin is nothing more than a mobile or desktop application, which provides a personal wallet and allows you to send and receive Bitcoins quickly and easily.

For programmers, it is an activity that involves the maintenance of a sophisticated public accounting through the Blockchain network. That is a shared database that functions as a book for the registration of purchase/sale operations or any other transaction. This accounting contains each transaction processed, making it easier to verify the validity of the transactions. The authenticity is protected by digital signatures that correspond to the shipping addresses, allowing users to control the issuance of Bitcoins from their electronic wallets to their destination. In this scenario, there are programmers who are responsible for processing transactions, receiving in reward Bitcoins for their service.