The blockchain was born in 2009 with the launch of Bitcoin by Satoshi Nakamoto. Since then, it has been the center stage of a worldwide revolution of the virtual landscape. Created against a backdrop of a global economic crisis and the real estate bubble, Bitcoin was born to, among other things, prevent double-spending and increase the confidence level in financial transactions by taking them to the internet.
The main reason for Bitcoin’s success is its digital ledger that wasn’t really noticed right away: the blockchain. In a traditional digital environment, data can be copied, altered, and exchanged. The Blockchain presented a solution to the first two problems – one user can’t spend an X amount twice or say they have transferred you X amount but send you Y amount, for example.
To put it very simply, the blockchain is a transparent and decentralized database where every movement is recorded and can be seen by anyone. As a database, the blockchain records all token transactions. Tokens can be cryptocurrency or any other digital asset. A record in the blockchain is resistant to modifications, which means that once created, it can’t be erased or altered.
The technology is so interesting that it soon became apparent that blockchain could also be used in other systems of the most diverse types: financial, commercial, governmental, managerial, electoral, etc. It is not by chance that governments, banking institutions, stockbrokers, insurance companies, and so many more are “giving in” and getting familiar with the technology.
How does the blockchain work?
As its name suggests, the blockchain is a “chain of blocks” that grows as new blocks are created. In other words, whenever there is a new transaction, a new block is created, which, after going through the validation process, is added to the chain.
These blocks are added chronologically. As the Blockchain is a decentralized system, all of its “nodes” (computers that share this “chain of blocks”) automatically receive an updated copy of the updated database.
Blockchain and its advantages
Security | The structure in the form of a chain of blocks makes the blockchain virtually inviolable. To be able to tamper with any data, an attacker would have to obtain control of more than half of the nodes.
This massive control over nodes would require immense computational power. A situation like this is practically impossible and highly unlikely. Also, to infringe the chain and alter a single record, the whole database would have to be rewritten. Unimaginable;
Availability | The decentralized structure allows the system to keep running even if one or more nodes fail. All nodes are immediately restored after a problem occurs;
Reliability | The data in the Blockchain cannot be erased or altered. This is how we can be sure that the recorded transactions are legitimate and intact;
Transparency | All transactions are public, meaning all nodes are able to check their integrity;
Consensus Mechanisms | Transactions are verified by network participants (peers) and cannot be defrauded;
Privacy | Encryption mechanisms ensure users have access to the system without an identification process. However, whenever needed, there is the possibility of associating an identity with a user. This tamper-proof solution ensures that only legitimate users take part in transactions;
Savings | Operational and energy costs may also be lower when compared with centralized computing systems. This varies by application, but in general, the decentralized or distributed model allows for the sharing of processing and storage resources.
1st Generation | Bitcoin launched in 2009, bringing with it the first edition of the blockchain. The first generation is defined solely by the ability to conduct monetary transactions in digital cryptocurrencies without the use of a middleman;
2nd Generation | The Ethereum network, which was launched in 2015, marked the beginning of the second wave of blockchain technology. The previous generation’s success fuelled the application of blockchain to new scenarios. In terms of privacy and ownership, this second generation was a continuation of the first, but the highlight of this edition was the ability to manage digital assets. Beyond the conventional financial industry, the Ethereum platform launched Smart Contracts, DApps (Decentralized Applications), DAOs (Decentralized Autonomous Organizations), DeFi (Decentralized Finances), as well as new business fronts and markets;
3rd generation | Using cloud storage and service layer principles, in 2017, the third generation aimed to make the platform scalable, versatile, and stable. Cardano, SkyLedger, and Cosmos are three networks that are considered to pertain to the third generation. These all share the aim of eradicating the most important issues of previous versions, such as energy conservation, quicker transactions, better management, and high levels of competition, to name a few.
4th Generation | A fourth generation is already being discussed, with requirements and implementations still in the works. In addition to the features listed in previous generations, mentions of IoT (Internet of Things), neural networks, and millions of transactions per second are all significant.
Blockchain and Its Revolution
Much is said about a blockchain revolution. The technology introduced by Bitcoin has evolved and already has thousands of practical applications in various industries.
This revolution goes through several sectors and aspects: financial services, public transparency, anti-money laundering, identity management, intellectual property, knowledge base, smart contracts, among others.
Regarding blockchain, one thing is certain: this technology seems to have no limits and no expiration date. A revolution in constant evolution.
Article and Research | Marcus Ferreira Translation and Review | Carolina Martins