top of page

"The Blockchain"

Updated: Jan 28, 2022

A blockchain is a group of information in a block, and each block is linked together through a mathematical formula called hash. Bitcoin´s blockchain contains a list of transactions, much like a financial ledger, stating the amount of money a person has. It was created to make up a decentralized network, meaning every transaction ever made in bitcoin will be recorded and virtually impossible to modify. The Bitcoin blocks are added every ten minutes and, using specialized equipment, anyone can add a block. This is known as the mining process.

Nowadays, our financial records are only knowledge of the bank where our money is stored. Banks have a centralized network in which every transaction you make is recorded into their database. However, not all of our bank information is centralized. The Superintendence of Banks and Financial Institutions in Chile has the legal obligation to maintain substantial and permanent information on the debtors of the financial system for the exclusive use of the institutions that are in control. In order for this to work, the banks are provided with monthly debt reports that are prepared with the information supplied by supervising institutions. Therefore, before giving anyone credit in any bank, the executive will verify in the Superintendence of Banks and Financial Institutions, and now every bank institution will have your information.

On the other hand, in the Bitcoin world, your information is decentralized. In order to get this done, first, the system needs the miners, who are known as the people who have specialized equipment to write down the bitcoin transactions into the blockchain, but that's not all. The mining process works both for adding a transaction and releasing a new Bitcoin; both processes are paid as fees to the miners in bitcoin. With the blockchain, once your transaction is written down in the network, it will be irreplaceable; this system makes it impossible to eliminate it. This is the beauty of having this decentralized network; your information is kept on many servers around the world.

The data that every block has in a blockchain depends on the type of blockchain. In the Bitcoin case, it stores the details of a transaction, identifying who sends and receives bitcoins and how much of it was sent. A block also contains a hash, which looks like a series of numbers and letters. A hash is used to identify a block and all the content in it. Every hash is unique, and each one is calculated once a block is created. When a new block is generated, there is no changing it or messing around with the hash in the block; if this happens, the block will change completely. This also becomes quite useful in terms of security, because it's easy to identify a change in the network. Every block is also made up of a hash of the previous block; therefore, if a hash is changed in any way, it will make every other block after it invalid. The blockchain process also contains Proof of Work, which shows how many resources and time was used to create a block. The management of the chain is done by a peer-to-peer network to which everyone can join. Once you join, you will receive a complete copy of the blockchain. When a block is created, it is sent to everyone in the network; they check the information collected and come to a consensus, finally adding it to the chain.

The blockchain system has opened many new ideas of how to make this new technology work to secure more than just cryptocurrencies. An example of this would be the creation of smart contracts, on which you can make a contract and it can be stored in the blockchain just like the Bitcoin process. This idea seems very cool, especially if you have been in this type of process where your lawyer must write it down, then have both parties agree, and not to mention the time spent in a notary. All this bureaucracy ends with these smart contracts. This technology can work for anything, from property certificates to intellectual property. A very interesting case would be having your medical records recorded in a blockchain and being able to give access to anyone you want. I bet there are so many people that go to a particular hospital to get tested and if they wanted to be checked in another hospital, they would have to take all the exams over because hospitals, public or private, don't share people's medical records.

Hope you enjoyed it! Feel free to comment.

51 views0 comments

Recent Posts

See All
bottom of page