During the last years, a variety of articles and news related to ICT have emerged praising the benefits of an innovative protocol known as “blockchain”, and its promising possibilities.
What is the Blockchain?
Blockchain is an unchangeable and shared book to record transaction history. It promotes a new generation of transactional applications that establish trust, responsibility and transparency.
Understanding what this chain of blocks is, is not so difficult, and since this concept is being used more and more, we wanted to make a kind of quick “introduction” to blockchain, how it works and what is the revolution that the chain of blocks imply.
Nowadays, when we want to make a transaction with our money, it is normal for us to do it through an intermediary; and that intermediary is nothing more, nothing less than our bank.
Banks act by intermediating this and many other transactions, centralizing the movement of capital.
In addition, this management currently does not need note transferring, but simply changes in the account balance.
This may sound great, but the problem is that we have no control in that process. Only banks have the information. We are also subjected to their conditions and fees.
This is where the now famous blockchain system comes in, which basically eliminates intermediaries, decentralizing all types of management.
In this case, the control of the process belongs only to the user, who becomes part of a huge bank with millions of nodes.
In addition, each user becomes a participant and manager of their account books.
How does it work?
It’s a really simple process, but it involves more than one person. In this innovative system, we will be part of a large group of users to verify that the entire process works correctly.
Let´s imagine that…
1.- A wants to send money to B.
2.- The transaction is represented in the network as “block”.
3.- The block is transmitted to all parts of the network.
4.- Those in the network approve the validity of the transaction.
5.- The block can then be added to the chain, which provides an indelible record.
6.- Money moves from A to B.
The transactions are being completed and moved to that block, which has a limited capacity. Then, when it does not admit more transactions, it is time to “validate” it or “seal it”; and this is what is known as mining.
This block mining consists in the realization of a series of complex calculations; but when this process is done, those blocks are permanently registered to the chain.
The first miner who manages to create a block and seals it receives a bonus for its services (a Bitcoin for example).
The account book is not only safe and distributed; the linked blocks have a coded port that analyzes the previous block, giving a timestamp next to the transaction data. The transaction is public, which means that although it protects the privacy of its users, it does control the traceability of those transactions.
ICO (Initial Coin Offerings)
An ICO is basically a new way of financing a business project. What makes them different is that instead of offering actions, it offers virtual tokens; or what is the same, new cryptpocurrencies.
These new cryptocurrencies will have a value closely linked to the business project that creates them, therefore, if that project succeeds, the cryptocurrencies on which their financing was based gain value.
All these new crypto currencies rely on a chain of blocks that supports the structure of this new virtual token. The most used is that of Ethereum for its versatility and for the ease that this platform poses.