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What blockchain is
Distributed ledgers and blockchain
There is a lot of talk today about blockchain.
We are at a time in history when this innovation is attracting a
lot of attention, but too often there is still confusion between
crypto-currencies, platforms, NFTs, smart contracts and more.
Blockchain technology is traditionally included in the broad
family of so-called 'Distributed Ledger' technologies, i.e., those
technologies that, as the name suggests, make use of a
'distributed ledger'.
A distributed ledger is a replicated, shared and
'network-synchronised' database, spread across multiple
subjects (or parts) that is devoid of a central administrator.
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All the single parts of this distributed registry, called 'nodes', possess a constantly updated copy of the entire database, and each single part can independently read and modify its own copy of that registry as well through a special consensus algorithm (1).
A particular kind of ledger
Although some features such as network type, consensus mechanism and ledger structure are the same as distributed ledgers, the blockchain, however, is only one of them and works in specific ways not necessarily applicable to other types of decentralised databases.
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The term blockchain refers, in fact, to that distributed ledger, in which data are collected 'in blocks', linked to each other according to a time sequence and validated in an unalterable way by means of cryptography (2).
In particular, the blockchain is a set of technologies, in which the register is structured as a chain of blocks containing all the transactions (each block keeps a complete and updated copy of the blockchain ledger locally).
The consent is distributed on all the nodes of the net, which may participate in the validation process of the transactions to be included in the register (3).
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Some blockchain features
Due to its characteristics of decentralization, transparency, security, immutability and consensus, this technology has digitally declined a concept of trust that has brought with it guarantees of reliability and security, which in the past were delegated to ‘third party’ figures.
The process of recording transactions and tracking assets of a tangible type such as money, houses, cars, properties, etc. and intangibles such as patents, trademarks, etc. it was, therefore, the natural application outlet of this technology. This also explained the rise of the crypto-currency market (e.g., Bitcoin), which used the blockchain to transparently record monetary transactions.
To date, however, many of the most promising applications of the blockchain have moved away from the universe of crypto-currencies (this is not to say that they have stopped being used in Bitcoin and similar transactions, but simply that it is no longer a mechanism exclusive to them) and have gotten closer to those related to tokens and smart contracts:
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Tokens are a set of recorded digital information managed and exchanged within the blockchain, which give a given party a right regarding the ownership of an asset, access to a good or service or the realisation or even receipt of a payment, etc. (4);
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Smart contracts are computer protocols that facilitate, verify, or enforce, the negotiation or execution of the terms and conditions of an agreement between the parties, which, unlike a traditional contract, are executed on the blockchain (5).
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Blockchain developments
The possibility of manipulating data with executable code, stored
in blocks, has made the blockchain over time a flexible database
for applications in a wide range of sectors, which have gone
beyond those related to crypto-currencies and, therefore, to the
sector of finance and markets, to extend, for example, to those of
administration, health, transport, science, art and culture, etc.
Furthermore, as it has continued to evolve and meet business
needs with other technologies, it has also applied to the role of
key application’ for new realities such as Artificial Intelligence
(AI) and Machine Learning (6), the Internet of Things (IoT) (7) and
the Metaverse (8).
(1) The consensus tool allows all the nodes to validate the state of the register and to coordinate with each other to validate the changes to be made on the same in the absence of a central body. There are different types of consensuses such as Proof of Work (PoW), Proof of Stake (PoS), Proof of Authority (PoA) and Proof of History (PoH); the ways in which consensus is reached and the structure of the registry are some of the characteristics that characterize the various Distributed Ledger technologies.
(2) Using specific cryptographic and algorithmic methods, the block chain generates a list of records that grows sequentially without the ability to edit or delete previously entered data on previous blocks: This means that, even in case of human error, it is no longer possible to go back but, at most, to record the information, which will rectify or integrate the previous ones, in a new block.
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(3) There are different types of decentralized or distributed networks in the blockchain: public networks (permissionless), private networks (permissioned), hybrid networks, etc. Moreover, the different types of consent also give rise to different types of blockchain such as. Bitcoin, Ethereum, Algorand, Solana, Polygon, etc.
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(4) In the token economy (or tokenomics), the decentralised structure of the blockchain allows tokens to be exchanged without intermediaries and in a totally secure manner, guaranteeing transparency and traceability of transactions. Theoretically, anything can be tokenized, whether physical or digital: corporate assets, shares, bonds, shares in movable and immovable property, works of art, but also voting rights, services, etc., and managed through smart contracts that define their characteristics and functionalities.
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(5) Underlying the issuance of tokens are computer protocols whose task is to ensure that a certain transaction is carried out under a certain condition and that the rules written within are respected. These are called smart contracts and can automatically activate certain functions when the conditions established by the parties occur, becoming in fact the instruments on which the entire token economy is based.
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(6) Artificial intelligence (AI) is a machine’s ability to show human skills such as reasoning, learning, planning, and creativity, while machine learning (ML) is a subset of artificial intelligence (AI) creating systems that learn or improve performance based on the data they use.
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(7) The Internet of Things (IOT), is a neologism used in the world of telecommunications and computer science that refers to the extension of the Internet to the world of objects and concrete places, acquire their own digital identity so that they can communicate with other objects in the network and be able to provide more complete services to users.
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(8) The Metaverse is a virtual reality in which the user can interact with others in a three-dimensional world, or a digital universe resulting from multiple technological elements, including videos, virtual reality, and augmented reality where people can interact with each other through personalized ‘avatars’.