Blockchain

What is a blockchain?

A blockchain is a digital archive of a shared public ledger, which records transaction data for a money network such as Bitcoin. The file is distributed over a network where participants can update and validate the data with cryptography. This community activity provides a guarantee on the veracity of the file, since anyone can check if their copy matches that of the majority. Thus, we can say that a blockchain is a digital account book that records and expresses what happens in a value exchange network. It is built with advanced mathematics and can be public or private.

As a didactic analogy, we can say that a blockchain is like a big book where each and every transaction of a certain cryptocurrency is recorded, including exact amounts and dates. Although those transactions can also be used to represent other things within the chain and validate their authenticity: documents, smart contracts or messages of almost any type.

How does a blockchain work?

The ink with which the blockchain is written is called cryptography, so all the messages in there are encrypted to ensure their authenticity and protect the data related to the ownership of making each coin unique from prying eyes. A blockchain is a digital 'database' built with cryptography and stored in digital files on hundreds of thousands of computers.

Bitcoin, for example, organizes the record into a file that is stored in the memory of a node or computer. In specific terms, Bitcoin is stored in digital files of a certain size that are stacked on top of each other. Thus, for example, the Bitcoin blockchain is made up of files of the bkl.dat type, never larger than 128 MB.

This allows the nodes to download the new information and synchronize their respective copies with the rest without having to download all the information as a single set. The reason is simple, a network like Bitcoin accumulates more and more information and, at some point, it would be too computational to run the entire download continuously.

In simple terms, a node adds blocks with transactions to a blk.dat file. Suppose the network has just been born. A node will first add blocks to the blk00000.dat file until it is full. It will then go to the blk00001.dat file, then blk00002.dat, and so on.

The transaction log is known as a 'blockchain' because the sheets of this book are literally 'blocks' of information chained in sequence with each other, from beginning to end. The blocks have, in the case of Bitcoin, a size limit of 2 MB. Other protocols have higher limits. Transactions, meanwhile, have an average size of 200 or 300 bytes. However, if extra information is added (for example, a small text message) this size is increased.

To achieve the latter in a distributed way, a blockchain must own multiple copies. What's more, thousands of exactly the same copies in the hands of various users of the same cryptocurrency or platform around the world. Those thousands of users are supposed to have their own stack of folders with identical data.

Through rules established for general consensus, each one of the holders of that copy, called nodes, agrees with the others to add new transactions or data, so that they are all considered valid and the book data continues to be uniform. in all its versions.

Blockchain applications

Being this a young technology, surely all its possible applications have not yet been discovered or sufficiently developed. However, there are a certain number of uses that are quite recurring.

1) Cryptocurrencies: Its main function in this field is to record the values transferred between individuals and validated by the nodes and miners in an unalterable way between individuals and validated by the nodes and miners in an unalterable way. Many cryptocurrencies have developed their own blockchain such as Monero, Litecoin, and Zcash. Others, on the other hand, prefer to trust the already mature structure of Bitcoin or Ethereum and build on their platform.

2) Payment systems: Many companies, mostly banks and financial institutions, have taken this type of ledger to build their own platforms that allow faster verification and greater transparency between the parties.

3) Records of Documents: They can be used to register and verify the authenticity of all kinds of documents, from university degrees and marriage certificates to medical histories. This area has received a lot of attention, since it would allow hospitals, insurers and lenders to be united on a single platform, which would exponentially speed up the health process.

4) Supply Chain: With this technology it is possible to mark almost any object with a unique fingerprint that will follow its entire life cycle from the beginning. Thanks to this quality, it is perfect for use in the complex supply chain. It should be noted that the registration of a blockchain contributes to the fact that the data collected there is immutable. However, the veracity of the information external to that registry must be verified with other procedures. A blockchain does not guarantee that someone will not enter false information about a product.

5) Smart contracts and decentralized applications: Smart contracts can also be created on a blockchain, that is, automated digital agreements in which again the need to trust third parties for compliance is eliminated. The terms are initially established at the convenience of the parties, and are later fulfilled thanks to the code, as a programmed task. In turn, these open up an almost infinite range of possibilities that can be introduced into decentralized applications: computing functionalities of all kinds that are not controlled by a single party, but distributed among many.

6) Entertainment: Several video games and games of chance have been built on a chain of blocks or relying on some digital asset of its own. The speed, transparency and, above all, the rewards, are guaranteed.