What is the Blockchain?

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What is the Blockchain?

If the history of the Blockchain begins in 2008 with the emergence of Bitcoin, this technology of storage and transmission of information has since undergone many technical evolutions.  

Before we focus on its different modes of operation, it is appropriate to recall its definition. To do this, let's take the definition of the European Parliament which defines the Blockchain technology as follows:  

" Blockchain is a set of blocks integrated into a system sharing a common database " (Resolutions No. 2016/2007 of May 26, 2016 on virtual currencies).  

In practice, we can more simply define the Blockchain as a database containing the history of all the exchanges made between the users of this database, since its creation (if you wish to have a simpler illustration, we recommend you to consult this post which takes a simplifying example).

However, unlike traditional databases that are controlled by a central body, the Blockchain is shared among all its users, without intermediaries, with access and write rights to all its members.  

When we say that the Blockchain is "shared among all its users", it simply means that each user of the network holds a copy of the registry on his local computer.

Database vs Blockchain

But, in concrete terms, how does the Blockchain work?

Blockchain : instructions for use

In fact, answering this question is the same as answering the following question: how do you validate a transaction on a decentralized registry?

Before anchoring a transaction, it is first necessary to identify the actor who wishes to send the transaction. On a blockchain, theidentification of the "sending" party is done by a cryptographic process.  

Once the identification is done, the transaction will be sent to all the users of the Blockchain - each of whom holds a copy of the register on his computer - for validation of the transaction (more precisely, on a Blockchain, the transactions are stored on "nodes" and it is these nodes that host copies of the database).

The consensus algorithm in place then decides how the transaction will be validated.

Validate a transaction on the Blockchain

What is a consensus algorithm?

Theconsensus algorithm is the means by which the blockchain reaches a consensus. In other words, it answers the following question: how does one validate a transaction on the blockchain? This applies in particular to public blockchains since they do not depend on a central authority for the validation of transactions. They are what we call distributed nodes that are governed by a consensus algorithm that must agree to validate a transaction. The role of the consensus algorithm is to ensure that the rules have been respected.

The properties of the Blockchain: decisive advantages

If Blockchain technology is so popular with both public and private actors, it is because of its properties that solve many problems.  

  • Cybersecurity: centralized systems have shown their limits. One only has to look at the exhaustive documentation of major security breaches recorded in recent years to realize this (Cambridge Analytica scandal, exposure of Facebook databases...). The security of the Blockchain relies on the distributed control of the database by all users of the network. Thus, validating a new transaction on a Blockchain requires the agreement of all the parties involved in the network (the so-called nodes). Consensus algorithms determine the rules for validating transactions.  
  • Intermediation costs: the organization of exchanges between individuals and companies relies on the existence of intermediaries who operate trust services. Taking out a mortgage requires the intervention of an intermediary for the constitution of the loan file, buying a property requires the intervention of a notary, certifying your company accounts will require you to use an external auditor... By entrusting the organization of exchanges to a Blockchain, we considerably reduce the intermediation costs of centralized systems.  
  • Time-consuming administrative tasks: many transactions between individuals and companies (but also between companies) rely on administrative procedures that mobilize individuals. For example, validating a new supplier may require the validation of several employees, while verifying a proof of address may require numerous trips between different departments. With the Blockchain, validating a new transaction takes only a few seconds.