Introduction to blockchain and its origins
Although Blockchain technology has seen unprecedented enthusiasm since Bitcoin introduction in 2009, the origins of this technology date back to the early 1990s. The vision behind Blockchain technology was first shared in 1991 when two researchers , Stuart Haber and W. Scott Stornetta, introduced a computer solution, allowing the timestamping of digital documents without alteration or modification possible by using a secure cryptographic blockchain to store time-stamped documents. Later in 1992, the merkle tree protocol was introduced into operation, making the system more efficient by allowing multiple documents to be gathered in a single block. In short , in computing and cryptography, a merkle tree or hash tree is a data structure containing an information summary of a data volume, usually large such as a file. This system was invented by Ralph Merkle in 1979.
Today, even if this technology is very widely associated with cryptocurrencies, it is important to emphasize that these currencies are based on distributed ledger technology and that they are only one example among all the possibilities offered by the blockchain.
The first proof-of-work system
This first version of the distributed register was little used until the associated patent expired in 2004. Then in the same year , Hal Finney , a computer scientist and crypto activist launched a new system called RPoW or Reusable Proof Of Work. The system worked by receiving a non-exchangeable and non-fungible proof of work token based on the Hashcash system, which in turn created a token with an RSA signature which could then be transferred from person to person. RPoW has solved the problem of double spending by keeping a token ownership record, stored on a trusted server, designed to allow any user around the world to verify its accuracy and integrity in real time. Even in 2020, RPOW is still considered as a first prototype and a first step towards the world of cryptocurrencies as we know it today.
The birth of Bitcoin
At the end of 2008, a white paper introduced a decentralized peer-to-peer electronic payment system, called Bitcoin. The white paper was distributed through a cryptographic email list by a person or group of people using the pseudonym Satoshi Nakamoto. Even today, despite the fact that many people have tried to claim this prestigious title, the real identity of Satoshi Nakamato is not known to the general public. Many theories exist concerning this pseudo which could represent a single person or else a secret entity namely a group of people.
The Bitcoin network is based on the HashCash proof of work algorithm, but instead of using a trusted IT function like RPoW, protection against double spending is ensured by a decentralized peer-to-peer protocol in order to follow and verify transactions. In short, Bitcoins are mined as a reward, using the proof of work mechanism, by individual miners and the transactions are then verified and validated by decentralized nodes in the network.
On January 3, 2009, Bitcoin was officially born when the first block was mined by Satoshi Nakamoto, with a reward of 50 Bitcoins. The first Bitcoin recipient was Hal Finney, who received 10 Bitcoins from Satoshi Nakamoto in the first global Bitcoin transaction on January 12, 2009.
Ethereum to push the limits of Blockchain and Bitcoin
In 2013, Vitalik Buterin, a programmer said that Bitcoin needed a scripting language to build decentralized applications to reach general adoption and more use-cases. Unable to gain community agreement, Vitalik started the development of a new distributed blockchain-based computing platform , Ethereum, with specific script functionality, smart contracts. In short , Smart contracts are programs or scripts that are deployed and executed on the Ethereum Blockchain. Smart contracts are written in specific programming languages and compiled in bytecode, which is a decentralized “Turing-complete” virtual machine, called the Ethereum virtual machine which can then read and execute them.
With this innovative blockchain solutions , developers also have the ability to create and publish applications running on the Ethereum Blockchain , known as DApps (Decentralized Applications). The vision behind the creation of Ethereum was to be able to offer new blockchain solutions not limited to a single financial system such as Bitcoin, but rather for services and applications with daily utility.
Blockchain definition and types
Blockchain is a technology for storing and transmitting information, transparent, secure, and operating without a central control body. By extension, a blockchain constitutes a database that contains the history of all the exchanges made between its users since its creation. This database is secure and distributed: it is shared by its different users, without intermediaries, which allows everyone to check the validity of the chain.
Permissionned versus Permissionless blockchains
Permissionned blockchains or private blockchains, can be thought of as closed ecosystems that can only be accessed by those who are allowed access. Anyone who is interested in validating transactions or viewing data on the network needs to get approval from a central authority. This is useful for companies, banks, and institutions that are comfortable to comply with the regulations and are very concerned about having complete control of their data.
At the opposite , public or permissionless blockchains allow anyone to transact and join as a validator. The data on these blockchains is publicly available, and complete copies of the ledgers are stored across the globe. This is what makes it hard to censor or hack these systems. This blockchain does not have anyone who controls it, and one can remain relatively anonymous as there is no need for identifying themselves to get an address and perform transactions. This type of blockchain is ensuring a complete decentralization at the opposite of private chains where an entity has the control.
How does Blockchain works?
Any public blockchain necessarily works with a programmable currency or token. Bitcoin is an example of a programmable currency. Transactions between network users are grouped in blocks. Each block is validated by the nodes of the network called “miners”, according to techniques which depend on the type of blockchain. In the bitcoin blockchain this technique is called proof of work and consists in solving algorithmic problems. We will introduce the different types of algorithms and consensus in a future article. Once the block is validated, it is time stamped and added to the block chain. The transaction is then visible to the receiver and the entire network. This process takes a certain time depending on the blockchain we are talking about , from few seconds to minutes.
The potential of blockchain
The decentralized nature of the blockchain, coupled with its security and transparency, promises much broader applications than the monetary field. We can classify the use of blockchain in three categories: - Applications for asset transfer (monetary use, but not only: securities, votes, stocks, bonds, etc.). - Blockchain applications as a registry: it thus ensures better traceability of products and assets. - Smart contracts: these are stand-alone programs that automatically execute the terms and conditions of a contract, without requiring human intervention once started.
The fields of exploitation are immense: banks, insurance, health and pharmaceutical industry, supply chain of many sectors (agroalimentary, luxury, international trade, distribution, wines, aeronautics, automobile…).
Above all, blockchain paves the way for a new web, the decentralized web, and a new digital economy with tokens and coins. Obviously, these promises are not without challenges, whether economic, legal, governance, or even ecological. Overall , blockchain solutions offer a digital revolution across all sectors and might be implemented in various companies and services in the upcoming years as we can see today with the integration of blockchain in the IBM cloud system for example.