Looking back on the blockchain phenomenon, we find its origins some 3,000 years ago, basically in the very meticulous single-entry accounting records found in the time of the pharaohs; This is how they evolved throughout history, and in the 1500s, the first two-entry accounting system (duty and credit) published in Venice, Italy was registered.
In the 21st century, the world of computers and the Internet develop independent technologies and tools that, when combined, generate reliable models in the security and authentication aspects of data, which revolutionizes the way of keeping reliable records in financial transactions, thanks to attributes like:
Public key cryptography; The chains of blocks or blockchain; Peer-to-peer or P2P networks; The time stamping or "timestamping."
Precisely because of its importance, we have prepared this complete guide on the blockchain and everything you need to know about this technology.
In 1991, when the Internet emerged – a model distributed in blocks using the method of cryptography – the opening of digital blockchains was promoted, and in 1997 Adam Back developed and invented the Hashcrack, which consisted of a monetary system for replacing the current model of banknotes printed on paper money.
In 1998, Wei Dai formulated a decentralized solution for electronic payments based on the use of figures or codes to write secret information using a public key; This technique is what we know as cryptography.
Then in 2008, under a pseudonym called Satoshi Nakamoto, a group of people created the first digital currency called Bitcoin.
Bitcoin is based on the use of blockchains to record all transactions in a network called a peer-to-peer network, which consists of an interconnected system of computers, in which some of them work without the use of a fixed server or clients, but in a set of nodes where all behave as equals.
In 2015, after the launch of the Ethereum currency, the blockchain 2.0 was created, which allowed the development of smart contracts with the creation of Apps. These contracts allow the execution of agreements established between the parties in advance in the contractual conditions automatically and safely.
A blockchain is a tool with multiple applications in diverse fields; some of them are decentralized document registration, property registration, medical records, voting systems, customs control, digital identity, organization and distribution of energy resources and monitoring of production processes.
All these data carry a system called time stamping or “timestamping,” which consists of a mechanism that allows checking and demonstrating how the data or a series of data has not been modified or degraded at any stage of time; it is a protocol of extreme security that is currently used in internet systems.
Blockchain: what is it?
It is a system that works like a large accounting record (ledger) where all the transactions carried out are recorded, and every ten minutes, a copy is made, and a block is added.
Hence the name of blockchain or chain of blocks is a database where all transactions are recorded, with the inputs and outputs of the people involved and the value of the transaction in an encrypted way.
Then the data is stored in blockchains, encoded through a hash and distributed in a network of nodes, where each one has an identical copy of the ledger or the blockchain, making it difficult to access or tamper with the information. By third parties, and allowing to generate the highest level of trust, each participating node of the network is in charge of verifying and authenticating transactions.
For a better understanding, here are some concepts related to the blockchain:
Node is the fundamental base and consists of a connection point between computers; they must work under the same software or protocol. The computers are connected to the network. Regular Nodes (miners): they are in charge of storing, making a backup copy of the blockchain; they also execute actions to create new blocks, validating the transactions included in them. The mining nodes also receive and transmit transactions that take place on the network. Hash is a mathematical cryptography algorithm that has the particularity of transforming any block of data into a new series of characters with a fixed size. Quite apart from the size of the input data, the output hash will always be the same size or length. Nonce: it is a random number added to the hash of each block. Block: they originate in each node and are a true and exact copy of the information. When the verification and confirmation of all the participating nodes of the blockchain network are achieved, a new block is created with the corresponding hash, and it is automatically added to the chain without the authorization of a third party. All transaction blocks are posted to the shared ledger at ten-minute intervals. Workforce (proof-of-work): it is the block production process, which consists of solving a mathematical problem, and once solved, the block in question is added. Among all the nodes, the first to solve the problem is adding the next block to the chain. Wallet (wallet or wallet): it is a set of keys, one public and one private, that ensure the security of transactions. Anyone can launch a transaction using the public key of a recipient's address, but only the owner, who has the private key, can access the transaction value and match it to the public key. Protocol: it is computer software that allows the network of nodes to communicate with each other through a series of rules that define the behaviour of the nodes that will act on the blockchain. The use of cryptographic keys distributed in many computers (nodes) is a security advantage against manipulation and fraud.
A modification in one of the copies would be useless because the change should be made in all the copies that each node owns. The potential of the blockchain is based on its three great qualities: irrefutable, irrevocable and distributed.
Types of networks
It is how a series of computerized equipment is connected; these means are cables, radio signals, waves, or any other means for transport, such as memories, CD-ROMs, and printers.
The types of networks are:
Centralized: it consists of a single server or node containing all the network's historical information and has several miners connected to verify and record transactions. An example is a network used by a commercial bank or the PayPal system. It is decentralized: based on the diversity of equipment that functions as nodes, storing the information in all of them, and in turn a diversity of miners for the verification of transactions, states and others. Distributed: it is one where all the computers connected to the network fulfill the function of both nodes and miners (certifiers)—being all the members in charge of validating, certifying and saving historical information of the entire network. So the blockchain is a database in which the information is stored in all the nodes that support that network.
In the 1990s, society lived through a period that has gone down in history for its unbridled excesses that ended up destroying hundreds of billions of euros of wealth. We are talking, of course, about the dot-com bubble. There is much talk about the enormous economic losses that that bubble produced. What is not mentioned so often is how all that cheap capital that flowed incessantly in the boom years helped finance the infrastructure on which the most important internet innovations would be built after the bubble burst. This money allowed the deployment of fibre optics, the R&D of 3G networks and the construction of giant server towers. All of these advancements are what spawned the technologies that have now become the foundation of the world’s most powerful companies: algorithmic search, social media, mobile computing, cloud services, big data analytics, artificial intelligence (AI). And more.
This same pattern could be playing out again in the wildly volatile and overvalued market for cryptocurrencies and the blockchain. As crypto prices had plummeted from their dizzying highs last year, blockchain skeptics have been delighted to speak out against all the hype. But these skeptics make the same mistake as the crypto fans they criticize: they mistake the price of the coins for their inherent value. We cannot yet predict which industries will settle and achieve stable income from blockchain technology, but we are sure they will come because the technology is focused on creating an invaluable asset: trust.