Some inventions have revolutionized the world of computing. This is particularly the case of the blockchain which has enabled many cryptocurrencies to emerge. This rapid development of virtual currencies raises several questions. What is blockchain ? How does it work? What are the pros and cons? Discover in this article the answers to these different questions about the blockchain.
Basic definition of the Blockchain
Blockchain is a very complex technology. To define it in a simple way, it is necessary to refer to the etymology of the term. Indeed, blockchain is an anglicism made up of two distinct words put end to end. These are block and chain. The blockchain therefore represents a chain of blocks within which the blocks represent digital data and the chain a kind of public database. In technical terms, it will be said that the blockchain is a secure system allowing the storage and dissemination of information on a non-centralized public network. This technology was used for the first time by Satochi Nakatomo, the creator of bitcoin, the queen of virtual currencies on the internet.
In the typical case of bitcoin, the digital data stored in the blocks following transactions is generally of three orders :
- The transaction references (dates, times, amounts exchanged);
- The identity of the people who carried out the transactions;
- A unique identifier called hash that differentiates the block within the network.
Also note that at present, a block can contain up to 1 MB of data, that is to say between 1000 and 3000 transactions. However, this storage capacity is only used on average for 50% for technical reasons. Furthermore, the block generation process is fully automated and does not require any manual intervention by network members.
How the Blockchain works
The blockchain is made up of 3 distinct technologies that work in harmonized ways. These are private key cryptography, distribution on the decentralized public network (large shared register) of the Peer-To-Peer type and transaction processing technology. The system is managed by a network of computers (nodes) which are responsible for checking, validating and recording transactions. The example of a transaction using bitcoin provides a better understanding of how the blockchain works.
When an individual A wants to send an amount X to an individual B, he submits his transaction to the blockchain via his electronic wallet. The nodes of the network receive the request in turn and pass to the verification according to a fully computerized protocol. The cryptography technology with private key will then allow the different nodes to identify (A) the sender. Then, using to the shared registry, the nodes will check if the sender A actually has a bitcoin amount equivalent to X.
When these verifications are made, the transaction is processed then accepted and B receives the bitcoins in his wallet. The blockchain will then be updated with the data of the new exchange. Each node computer will therefore have made available part of the power of its processor to solve the cryptographic problem posed by the transaction.
The difference between public Blockchain and private Blockchain
Although blockchain is a priori an Open Source technology, it is possible to integrate restrictions. This is what the difference is between the public blockchain and the private blockchain.
The public blockchain allows any user to take actions (entry, exit, addition and modification of digital data) within the chain. As for the private blockchain, it is more restrictive. In particular, it requires authorizations to access information in the block chain. In this way, it is possible to limit certain users to transactions and to grant others the possibility of operating on blocks.
It is also possible to privatize the blockchain and allow viewing only. No user can then carry out transactions or modify the blocks.
The benefits of blockchain
Like modern technological inventions, blockchain has many advantages. Here are some of the main ones.
Accurate transactions make errors of assessment impossible
Before a transaction is committed to the blockchain, it must be approved by millions of computers across the nodes. No manual verification being required, this rules out any possibility of error due to human inattention. Note also that for a transaction to be compromised, 51% of the computers on the network must validate the error. This is almost impossible.
The non-centralization of the network offers optimal security to the blockchain
The digital blockchain data is not stored on any central server. The network is public and is constantly updated by integrating the new blocks generated. It is therefore almost impossible to attack the entire system and corrupt it. This is a major security asset. Blockchain technology is therefore used in the context of cryptocurrencies but it can also be used for other uses such as for example in the case of verification of data integrity. Acronis Backup backup software uses blockchain, for example, to verify the authentication and integrity of backups made by the software.
Also note that the blockchain is active every day of the week 24 hours a day, unlike banking and financial services.
Disadvantages of the Blockchain
Blockchain is advantageous, of course, but it also has weak points. These are mainly due to its polluting nature and its relatively high cost.
The harmful effects of blockchain on the environment
To understand the environmental issues inherent in blockchain, it is necessary to look again at bitcoin. In fact, to complete a single bitcoin transaction, around 304 kWh of electrical energy is required. If we multiply this value by the number of transactions, we get a daily power consumption that can supply the equivalent of a big city. This is all the more alarming since much of the electricity used by bitcoin miners is produced from coal. Blockchain is therefore rightly pointed out by environmentalists as a technology that destroys the environment.
The costs inherent in technology
Blockchain is a very expensive technology. According to a study, the cost of mining a bitcoin varies between 531 and 26,000 dollars. This is without taking into account the numerous repercussions of technology on miners’ electricity bills.
Blockchain applications in modern IT
Blockchain technology has several applications in modern computing. These include cryptocurrencies, the banking system and the healthcare industry.
Cryptocurrencies and the banking sector
Blockchain is the cornerstone of all cryptocurrencies, the most famous examples being bitcoin and ethereum. The technology not only offers an almost infallible security basis for virtual currency, but also a very practical decentralization. Transactions are not subject to a central body and are exempt from transaction costs. In addition, cryptocurrencies are forged. Did you know that it is possible to calculate the yield of cryptocurrency mining?
In banking, technology offers the possibility for banks to automate transactions and to exchange currencies between them more quickly. The integration of datamining with the blockchain makes it possible to identify fraudulent or risky transactions in real time and pin them down.
Blockchain as a platform for recording medical data
The use of blockchain in the health sector is a promising prospect, particularly for the management of patient data. Thanks to the block encryption system, patient medical records can be securely stored away from hackers. The possibility of privatizing the channel also guarantees the confidentiality of the data, since it would only be accessible to certain people. This principle could also be used in many other areas such as national security and contract management.
In conclusion, remember that the blockchain is a chain made up of data that is stored publicly which all users of the network can have access. The technology is so complex that it’s almost impossible to compromise it. Several perspectives are possible in the future, notably its use in the medical, financial and national security fields.