Introduction
At the beginning of 2009, a system of virtual currency called Bitcoin was released and, since then, has been representing a large revolution in the means of digital payments. The main ingredient of the success of Bitcoin is a system of record that was a good time without being noticed: the blockchain.
The blockchain is a database. What makes it so important is the fact this is not a conventional database: the system works as a book of records, but inviolable, “inderrubável” and extremely efficient.
The technology is so interesting that it soon became clear that the blockchain can also be used in other systems, of the most various types: financial, commercial, governmental, electoral and the list goes on. It is no less than banks, insurers, brokers, stock, companies security, governments and many other institutions are being attracted by the subject.
But how the blockchain works? Why the blockchain has so many advantages? Why the blockchain is so revolutionary? If you have questions such as these, do not worry: I, Emerson Alecrim, explain the following all the you need to know about blockchain.
What is Bitcoin?
Before we begin our foray in the universe of the blockchain, it is worth to understand what is Bitcoin. By doing this, it is more easy to understand the importance and the functioning of the blockchain.
Well, as I said at the beginning of the text, the Bitcoin has emerged officially at the beginning of 2009 — on January 3, to be exact. Months before, in 2008, an article signed by Satoshi Nakamoto (PDF) was released in group discussions describing the concept of Bitcoin.
“Satoshi Nakamoto” is a pseudonym that represents a person or a group of individuals. Over the past years, some names have appeared, but until today did not is it clear who really is this person (or this group).
But what we need to understand here is that the Bitcoin is a currency fully digital (without provision paper), of global reach and that is not controlled by the government or traditional institutions. Notthere is a central bank, home currency, monetary funds private, in short, no entity behind the platform of Bitcoin.
We are talking about a currency — a system, in fact — with modus operandi distributed (without a central element) and autorregulado. It’s all based on transactions digital encrypted, reason why the Bitcoin is considered a type of criptomoeda (in English, cryptocurrency).
And how much is a Bitcoin? Look, depends on demand and supply. Via rule, the more transactions there are in a given moment, the more expensive a Bitcoin will be. At the time that I wrote this text, a single Bitcoin cost almost R$ 2.900. The prices can vary a lot from one time to another.
How to obtain Bitcoins?
There are basically three ways:
– You can go on an online marketplace of Bitcoins (there are several), that works as a sort of house of exchange, only digital. You can buy Bitcoin with dollars, euros, reais, etc.;
– You can receive Bitcoins as a form of payment for any sale or service rendered;
– You can “mine Bitcoins”, that is, resorting to a system that uses the processing capability of one or more computers to solve math problems complex (discussed more to the front) to be rewarded with Bitcoins. Note, however, that is not easy to earn Bitcoins through this means.
From there, you can use your Bitcoins to transactions in the same way that it uses “real money”,including being able to use fractions of the currency. The Bitcoins should be stored in a wallet Bitcoin(wallets), a system that allows you to make transactions and track your earnings.
There are several types of portfolios. Each one is associated with a cryptographic key and a private key public so that you can perform the operations. In fact, it is thanks to the the system of encryption that the Bitcoin can’t be faked or cheat: any alteration, however small, invalidates the keys. Learn more about the subject in this text on encryption.
But as a digital currency may have and generate value if not there is no central command? It turns out that the Bitcoin it is a network Peer-to-Peer (P2P), or point-to-point, which means that the transactions are managed by each of the nodes (users) that are part of the system — is it something in style “the union makes the force”.
When you conduct transactions with Bitcoin, the computer (or mobile device) that you use to this order passes to participate in the network by means of your wallet Bitcoin. If a node goes out of the network (no matter the reason), the the others are still keeping the system functioning. If there was a central control, it was sufficient that this was brought down to the system fall for the whole world.
In the absence of a centralized system, such as the distribution of Bitcoins is done? And as the transactions are performed and validated? Is here comes into play the figure of the blockchain, a record the public that gathers all the information necessary for the processing and protection of transactions.
But, as you already know, this is not a the system records any. Let us, finally, to understand the blockchain.
A registration system for distributed
Imagine that you are part of a group of 100 people who, by account of a bizarre plane accident, will stop at an island that does not appear on the map. You are incommunicado with the rest of the world, and there is no means of transportation to get them there. You are going to get there by a lot of time, probably, for this reason, they decide to mount a society on that island.
But, you know, by own experience (and also, because this story of a plane falling in a lost island is strangely familiar), that a society need leaders. But a structure of government generates disputes of power that can turn into serious conflicts. So, you decide to draw up a model of society different: all the what happens there must have approval of the entire group, so that what is true for one must be true for the other.
And how is this done? From a book of records that someone was on the plane. This same person explained that this book is magical: it is possible to create infinite copies of them, but all that is recorded in it you will be automatically registered in the other.
So, the copies will be the same forever. Because of this feature, you decide to create a copy of the book for each person. As this book also can not be deleted nor tampered with, he an essential part of a system that distributes fair and efficient use of resources on the island. All that is recorded in the book is valid for the whole world, because the records appear in all of the units.
They called this the book of the blockchain.
The meaning of the blockchain
Let us return to the “real world” (or to the world, not fictional, if you prefer). Understand the such society on the island as the platform of Bitcoin, and the magical book, indeed, of the blockchain. The difference is that the blockchain truth is magic: it is a sophisticated computational system.
As we are talking about a system of distributed database (distributed database) and without intermediaries, we need a reliable mechanism to allow transactions direct — point-to-point. This is the role of the blockchain.
The blockchain is a system registry that contains all the transactions processed in the system. In free translation, the name means the chain of blocks. A the chain of blocks is nothing more than a set of recorded information that is connected to blocks of previous information and successors.
These blocks of information are also the public, in the sense that all nodes (participants) the network have access. However, when processed, the blocks can not be deleted or changed. In addition, new records can only be made through a process of validation.
This system, being distributed, is in thousands of computers. When an update (legitimate) is made, all the copies are synchronized in a matter of seconds. It may even be that one or the other computer short the network, but this will not affect the system, since all other nodes are still there.
To make a information in a chain of blocks, and to avoid fraud, the blockchain has a mechanism called proof of work — proof-of-work, in direct translation. This is a cryptographic protocol that validates a transaction on a computer (or other device) by means of resolution of a mathematical problem.
Tampering in the chains of blocks, smaller than are, will produce different results than expected for this math problem. This prevents the processing of the transaction and, consequently, your registry. Let’s to study this aspect with more details as soon as more.
How the blockchain works?
This scheme of the chain of blocks with distributed structure is what makes Bitcoin (and eventually other criptomoedas) so trustworthy. Stop understand better how this works, you may want to look a little more closely to the elements that make up the system, starting with the blocks.
Blocks
You already know that the blocks contain the records in you. All committed transactions — such as the transfer of value in Bitcoin from one computer to another — must be recorded in them. New transactions generate new records, which, as such, should be inserted into new blocks.
In Bitcoin, by default, every ten minutes a block is closed containing all the transactions in that period. I must stress that this time interval may be different in other times and in other systems that use the blockchain, however.
In addition to the set of transactions, a block needs to have a code that links it to the previous block (after all, they are connected in the chain), in addition to a code own that serves to connect it to the next block.
But how to generate these blocks in a secure manner, without the connections to be changed to point to a block illegitimate, by example? Here, the main weapon of the system is the figure of the miner (or mining).
Miners
Remember when I said that one of the ways to earn Bitcoin is doing the mining? Well, the complex problems that miners have to solve concern the creation of new blocks and, in effect, to the validation of the transactions.
A miner is nothing more than a computer (or a set of machines acting as one) that uses a specific software for the realization of the calculations. Each time the process is completed, the miner is rewarded — here, with Bitcoins.
It works like this: the software analyzes all the information referring to the block and applies a mathematical formula specific to this data set. The result of the calculation with this formula is code called hash. Typically, this code uses a hexadecimal base, the that, in practical terms, causes to be formed by letters and numbers.
Each set of data is unique, therefore, every time that this mathematical formula is applied on the block, the code the hash generated will be the same. But, if the data set suffer any modification, by the minor that she is, the hash code will be totally different. There does not to go ahead.
In addition to its own hash, the block contains the hash of the a previous block. In this way, a verification process you’ll be able to notice when a block is not legitimate, because the hash code will be different from the registered.
We
As you already know, Bitcoin is a network. Each part of the network is a node. So, if you you have a computer with a software to carry out transactions with Bitcoins, this machine ends up being a node.
This software maintains and helps to distribute copies updated in real time the chain of blocks in use. Each time transactions are carried out and, therefore, blocks are added, all the nodes are communicated to they can update the records with the new information.
The mechanism of encrypted communication (in retrospect, one method of private and public keys) prevents this network is not invaded or that we are added inadvertently.
Take also into account that the nodes participating in the validation of the transactions. A series of procedures is applied to verify if there is consensus on the completion of certain transaction. So, if you are getting Bitcoins from someone as a form of payment, a process check next to we will confirm the operation.
This transaction will then be recorded in blockchain. As this record cannot be deleted, in thesis, no one can take those Bitcoins you doing changes in the blocks.
Advantages of the blockchain
At this point, you may already be able to imagine the reasons for the blockchain to be finding space other applications beyond Bitcoin. But we’ll see some. We can start with the security.
The structure in the form of strings of blocks makes the blockchain virtually unbreakable. To be able to tamper with something, the attacker would have to control more than half of the nodes to perform changes by consensus.
In the universe of Bitcoin, at least, this control massive of we would require a computational power is extremely large. It is impossible, therefore. Already the change a registry would require the rewriting of almost the entire base data. Again, it is unfeasible, not to say impossible.
Availability is another great advantage. The structure distributed causes the system to continue functioning even though one or several of us from falling. When the nodes missing return to the network, they are immediately updated.
Let us also think of the reliability. As the data in the blockchain cannot be erased or changed, we are sure that the the transactions recorded there are legitimate and righteous.
Another aspect to consider is the transparency. The transactions are public, which means that all we can check them. The mechanisms of encryption makes that the users of the system do not need to be identified, however, it is perfectly possible to link identities, if necessary — this aspect helps to ensure that only legitimate users are participating in the transaction.
The operating costs can also be lower in comparison with computational systems centralized. This aspect varies according to the application, but, so general, the distributed model involves sharing ofprocessing resources and storage.
Applications of the blockchain — examples
We already know that the blockchain is a fundamental part of the Bitcoin, but also we already know that the concept can be employed in other applications. Ok, but which? Let the some of the examples.
Financial services
There are a growing number of banks and financial interested by the blockchain. The sector has already realized, for example, the technology can be used for transactions payment and money transfers. At least in the international in scope, transactions of this type can take several hours to complete. The blockchain you can make the process faster and, simultaneously, provide more security.
Public transparency
As the data cannot be deleted, nor tampered with, government systems can use the blockchain to fight diversion of public resources, facilitate process audits and prevent fraud in elections, for example.
Identity management
The registration of users or clients in a system of blockchain you can combat false identities, which would be useful, for example, for closing of contracts electronic or transfer of property.
The intellectual property
The use of the blockchain is also being considered for management of patents and copyrights. With the the association of a work to a person, the system could, for example, help a company to check whether a particular the individual is the same author of the content that it is offering.
Knowledge Base
As the blockchain is basically just a database distributed, it is also possible to use the technology for distribution of documentation of systems, manuals of use, articles academics, digital books, and the like. In fact, the blockchain can be used to share virtually any the type of information.
Contracts smart contracts)
The blockchain has been shown to be particularly relevant to a type application that is gaining momentum: contracts smart (smart contracts). In this mode, a software draws up contracts with terms and conditions specific as to the circumstances.
Consider, as an example, in a virtual store that uses the different delivery services to meet the customers from all over the country. For a customer near you, the system can consider the least distance to draw up a contract with a term short delivery. For customers that are further away, this same the system may include in the contract a longer term, and the billing of a possible local tax, all automatically.
The blockchain can help in this type of software to do checks and register operations, among other benefits, will prevent the company comet lapses in one or more clauses and suffers a loss on that account.
Ending
The applications mentioned are just examples. There is a huge range of possibilities that the blockchain can to provide for individual users, businesses of all ports, governments and other institutions.
The subject is relatively new, so the ideas around the concept are just starting to emerge. But, as you may have noticed throughout the text, the proposal of the chain block has huge potential and can benefit from the most different branches of activity.
It is true that the characteristics of the blockchain can be disadvantageous for certain applications, for example, services that, in respect to privacy laws, need to allow users to delete their data — the immutability of the chain of blocks is a barrier to this need.
In addition, in a private system (such as the internal network of a company), all the nodes can be controlled at a time just because the administration of these machines tends to be centralized. If there is not an efficient means of protection, an attacker could take control of the we to permanently modify the blockchain.
As you can see, the advantages and disadvantages of the blockchain need to be assessed in each case. Not if you can get a glimpse of a scenario of use of technology just because of the hype around the subject.
Before we close, let me make a note important to avoid confusion: if you search more on the subject, you may arrive at address blockchain.info. This the site is not the same thing as blockchain, but rather a service for the monitoring of the market of Bitcoins.
