Blockchain emerged from the meeting of the tech and financial spheres, and first captured the world’s attention a few years ago. As a new and relatively complex phenomenon which involves money, blockchain inevitably leads to doubts. Guided by Sherlock Communications’ 2022 blockchain report, we will explain who invented blockchain, what it is, how it works and how safe it really is.
The blockchain is a large shared database that records the transactions of its users, allowing the system to track the movement of certain types of information across the internet. These are pieces of code generated online that carry connected information – like blocks of data that form a chain. This technology represents a major disruption to the global economy.
The bitcoin network – the first on the market – stores information such as the amount of cryptocurrencies transferred between users, identification of who sent and who received the values, and the date and time of transactions.
As it evolves, this technology has demonstrated much more potential uses than just cryptocurrency transactions.
Other cryptocurrencies were created, and these networks can be programmed to track and record any type of value – not just financial transactions, but also property deeds, digital identities, stock exchanges, supply chain records, data management and much more.
Blockchain can reduce the costs of banking institutions and infrastructures, and can generate significant savings, mainly due to the technology’s operational efficiency.
In 1991, Stuart Haber and W. Scott Stornetta conceived what many people now know as blockchain. Initially, the first project involved creating a network of cryptographically protected blocks where no one could modify the data of the documents.
In 1992, they upgraded their system to increase efficiency, allowing them to collect more documents in a single block. However, it wasn’t until 2008 that the history of blockchain began to gain prominence, thanks to the work of Satoshi Nakamoto – a pseudonym which has come to be known as the name behind blockchain technology.
Nakamoto conceptualized the first blockchain in 2008, when the technology evolved and found its way into many applications beyond cryptocurrencies. He released the first article about the technology in 2009, explaining why it was so well equipped to improve digital trust.
The blockchain periodically stores information about transactions in batches, called blocks. These blocks have a fingerprint called a hash – a unique mathematical code – and are linked together in chronological order, forming a continuous line of blocks – a chain.
If someone tries to make a change to one of the passed blocks, it won’t be rewritten, but a new transaction can be sent, which will be analyzed and included in a new block of information.
In other words, the process of recording information, changes and transactions is now 100% digital, has network consensus and is fully encrypted. This ensures greater trust, efficiency and security, as each transaction is verified at the same time by different computers.
The fact that the data is not centralized on a single server, but dispersed across a group of independent computers that are part of the network, makes it difficult for hackers to interfere.
As explained above, blockchain was created to avoid so-called “double spending”. For example, if you send a file that is stored on your computer to a friend of yours, you will notice that this document has been “duplicated”. Blockchain prevents this from happening with bitcoins, by linking one block of information to another.
This is important because a hacker will never be able to duplicate or create bitcoins – the technology simply does not allow it.
Furthermore, this technology is popular because it allows the creation of revolutionary products – such as cryptocurrencies, digital currencies that are not backed by any country.
In addition to these cryptocurrencies, blockchain can also be used for document validation – such as contracts and stock exchanges –, financial transactions, the commercialization of music and movies, and even voting.
This technology has the potential to completely transform the business transaction model in the future, as the pseudonymous figure who invented blockchain has already noted. This is because the network’s security levels are much more advanced and solid than any other conventional system.