Blockchain technology is behind many services and aspects of digital technologies. A look back at a mechanism that continues to amaze us.
The invention of blockchain dates back to the 1980s. It paved the way for technologies now worth trillions of dollars, such as cryptocurrencies. One of these, Bitcoin, really took off in 2008.
These decentralized digital currencies are currently experiencing a new surge in value, which you can easily follow online by consulting the Bitcoin dollar rate, for example.
Decentralized exchanges, greater efficiency
Decentralization is at the heart of the innovation brought about by this technology. Indeed, with blockchain, there is no single, centralized control; data is distributed across a network of independent nodes.
Blockchain members can remain anonymous (although their activities can be traced). Blockchain technology makes it possible to deposit information that can no longer be modified, but which can be accessed by anyone, and which is supplemented by new blocks.
This combination of immutability and traceability eliminates the need for a trusted third party between two individuals or entities (a role usually entrusted to a banking institution or regulator for regulated currencies), enabling secure exchanges, without intermediaries taking commissions along the way.
Thus, blockchain is a database containing the history of exchanges between its users since its origins, and whose information cannot be erased or modified, as modifications are sent to all blockchain nodes.
In addition to the speed (variable, but improving over time) with which blocks can be validated, blockchain is a robust and secure system, as its operating principle means that it cannot be controlled by a single individual or entity.
This mode of operation, and the cryptography used to secure it and anonymize its users, make it a particularly practical system for conducting sensitive transactions.
Efficiency in abundance for those who know how to master it
Banking institutions, which are kept out of the transaction validation process, generally take a dim view of the rise of cryptocurrencies, as there is no institution to monitor and protect investors, who can gain or lose everything in a matter of hours as the price of virtual currencies fluctuates, generally as a result of massive buying and selling by whales, the very large holders of cryptocurrency portfolios.
The Wild West of the early days has, however, been partly regulated, with mechanisms acting as shock absorbers by linking virtual currencies to the physical world and the real economy, such as ETF funds bringing crypto-currencies and fiat securities closer together.
But blockchain technology is also of interest to banks for some of its advantages associated with the speed of transactions and the secrecy of data and participants.
As a result, the European Central Bank is no longer too far away from creating a digital euro that incorporates some of the advantages of crypto-currencies, while providing an anchor and guarantees. Some will see this as a betrayal of the original spirit of crypto-currencies, while others will see it as a necessary adaptation to protect users.
The traceability and transparency of transactions (it can also be used for authentication purposes) are also important elements for several economic sectors that may need these irrefutable validations (insurance, logistics...).
More generally, the speed and efficiency of transaction validation often surpasses traditional control processes, saving time and resources. It can thus replace paper documentation and the need for revalidation or intermediate checks.
One potential area for development will be smart contracts capable of automating transactions when predefined conditions are met, again reducing dependence on third-party implementers or controllers.
It's not all good news
Blockchain technologies also have their dark side. As already mentioned, their operating conditions can be used to fuel trafficking and illegal activities, under the guise of the anonymity of the players, decentralized operation and the cryptographic processes used to resolve the blocks.
This very resolution of the blocks requires advanced calculations performed by computer systems that consume varying degrees of energy, depending on the operating mode. Bitcoin mining requires huge quantities of electricity and has a heavy environmental impact, both directly and indirectly, to the extent that some states are curbing it.
The technology is also not necessarily easy to understand outside those naturally involved in its development.
Here too, things are improving as blockchain technologies see their usefulness recognized and take up more space to be better understood or to make their complexity disappear behind more accessible interfaces.
