Blockchain [n.] (literally “chain of blocks”) is a shared and immutable data structure. It is defined as a digital register (a “ledger”) whose entries are grouped in blocks, concatenated in chronological order, and whose integrity is guaranteed by the use of encryption.
The Blockchain is, therefore, an open and distributed “ledger” that can record transactions between two parties efficiently, verifiably, permanently, and, therefore, substantially immune to corruption. Each block in the chain contains a cryptographic hash, a mathematical function capable of producing a sequence of characters of fixed length, derived from the previous block. In particular, it usually contains a date, time and transaction data which are unchangeable by design.
Blockchain technology is based on 3 key features: the distributed ledger, the consensus mechanism, the nodes.
Let’s start with the distributed ledger: in its simplest form, a distributed ledger is a database kept and updated independently of each participant (or node) in a large network. The distribution is unique: the records are not communicated to the various nodes by a central authority, but instead are built independently and kept by each node. That is, every single node in the network processes every single transaction.
The consensus mechanism is a dynamic way of reaching agreement in a group. More precisely, the consensus mechanism ensures that the rules of the protocol (set of primary rules of a blockchain) are followed. For example, in the case of the Bitcoin protocol, the consensus mechanism ensures that all transactions take place correctly, making sure that coins are only being spent once. There are different types of consensus mechanism, the most common implementations are “Proof of Work” and “Proof of Stake”. For further details on consensus mechanisms, we suggest this link.
Let’s get to the last element, the nodes. The network node is a point where a message can be created, received or transmitted. The nodes is where the consent is distributed. Nodes consist of all computers connected to the “system” of Blockchain. Taking again the Bitcoin protocol as an example, any computer or device that connects to the Bitcoin interface can be considered a node since all communicate with each other in some way. Also here, there are different types of nodes, for more information we suggest this link.
This complex technology actually has very ancient origins. More precisely, a primordial version of the concept of blockchain can be traced back to the fifteenth century and the creation of a ledger attributed to a population of Micronesia, an archipelago in the Pacific Ocean, north of Australia’s coast. It is said that, during their roaming, the inhabitants of the island of Yup landed on the island of Palau. Here they were struck by a particular type of stones that they began to use as exchange coins: “the Rai”. These stones, however, were difficult to transport. For this reason, the inhabitants created a “ledger” on which all changes of ownership were written down. Each inhabitant had his own ledger, which he updated from time to time.
However, it was not until 1991 that a real step forward was taken in the development of this technology. Year in which two researchers, Stuart Haber and W. Scott Stornetta, began working on a chain of encrypted blocks to archive records with a time stamp. The goal was to make sure that the records could not be backdated or altered. However, this technology remained unused and the patent expired in 2004.
Only four years later, in 2008, the blockchain began to gain relevance thanks to the work of a person, or a group of people, named Satoshi Nakamoto. Satoshi worked on the first real application of this chain of blocks: the Bitcoins.
Most people believe that Bitcoin and Blockchain are the same thing. However this is not the case: the blockchain is the underlying technology, which powers several applications of which the cryptocurrency are just one example.
“The Blockchain is for Bitcoins, what the internet is for email. A great electronic system, on which you can build applications. The currency is just one of them” Sally Davies, reporter for FT Technology.
In 2009, Satoshi Nakamoto also published the first white paper on technology in which he explained how this blockage mechanism could increase confidence in the “digital” thanks to its decentralised system. This mechanism ensured that control was always distributed.
Since the birth of Bitcoin, a number of applications have born that exploit the principles and capabilities of blockchain technology.
By now, several companies around the world have begun to experiment with Blockchain solutions in different areas of application. Among the most advanced sectors, certainly there are Finance & Insurance but also applications in Agrifood, Logistics, Public Administration, Digital Advertising and more generally Media.
For example, Barilla uses the blockchain to guarantee the origin, quality of products and raw materials, from field to table, while Banca Mediolanum has entrusted the Ethereum blockchain with the process of certifying the inalterability of the non-financial declaration (a document that collects information on environmental and social policies, for example), thanks to the publication of the hash (the encrypted key) of the document on the bank’s institutional website. Carrefour Italia, on the other hand, has been the first Italian large-scale retailer to use the blockchain for product traceability on its shelves, while itTaxi, the largest network of taxi drivers in Italy (almost 15,000 units), together with the Italian startup Chainside, has activated a system that allows bitcoin payments for your ride.
Using Blockchain in the political arena, just as Casaleggio explains in the second episode of Tech & Society, can be useful for example to deposit a program, as it would guarantee its unchangeability; the adoption of Blockchain would also allow the exercise of forms of direct democracy, offering the opportunity for each member of a network to express their vote in a unique, unalterable and intrinsically authenticated, way adopting new formulas of participation and involvement, on a basis of certified and unquestionable authenticity.
As you will have understood from the summary prepared by LEA, the blockchain is definitely a technology that helps improve the security of many sectors. In a not too far future we could see it applied in many realities.
If you want to know more about technology, listen to the next episodes of Italian Tech Speak.