What is Blockchain?

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Etymologically, the term "blockchain" is a contraction of the English words "block" and "chain", which can be translated into French by the expression "chain of blocks". Indeed, it is a consecutive sequence of data blocks each containing a list of timestamped transactions. 

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The blockchain can also be likened to a distributed ledger that allows information to be stored in real time and simultaneously on several different computers (nodes). In other words, here, the data is not centralized on private servers, as is the case when you use the services of Google or Facebook for example. Rather, they are kept on remote nodes, independent of each other and whose geographic location and ownership are undetermined. Each node then has an up-to-date copy of the registry, which has the effect of reinforcing the security of the system.

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The blockchain is presented as a decentralized network that makes it possible to transfer assets (cryptocurrencies, property titles, works of art, etc.) from peer to peer in a transparent and secure manner without the intermediary of a central authority. Thus, the transactions listed there are accessible to all network users without compromising the confidentiality of the parties involved. The transparency thus provided by the blockchain guarantees a high level of trust among the participants and almost completely eliminates the risk of corruption of the ledger.

That said, aside from crypto-asset transfer, blockchain can also be used to deploy smart contracts and host decentralized applications.

Note: these concepts will be developed later in other articles.

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How Blockchain Works?

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The blockchain is made up of servers whose role is to list the transactions initiated by the network's users (observer nodes) and eventually to process them (validator nodes). It should be noted that a user can operate the network without participating in its functioning as is the case for the nodes.

To better understand how blockchain technology works, let's imagine a typical case of asset transfer within such a network.

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When a request is made within a blockchain network - in this case, Alice wants to send money to Bob - it is immediately written into the current block by the observing nodes. If there is no active block, a new block is created.

At the same time, observers continue to collect requests from other users and add them to the block one after another until a defined period of time.

The block is then distributed throughout the network so that validation nodes can verify each transaction it contains. For example, this may involve ensuring that the initiator of the transaction has entered the correct password (private key) or that he is the owner of the goods he wishes to transfer.

Once all transactions have been reviewed and the block has been validated, one of the validation nodes will be awarded a reward according to the consensus mechanism in place in the network.

Finally, the block will be time-stamped and added to the existing blockchain and the transaction will be closed.

Each block consists of a header, the hash (digital fingerprint) of the previous block, a list of transactions, its timestamp and its own hash. The hash of block n links it to block n+1, which reinforces the integrity of the blocks and, consequently, of the whole blockchain. This is why the blockchain is said to be immutable or unfalsifiable.

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What are the types of Blockchain networks?

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Depending on the nature of the data registers, we can distinguish different types of blockchain networks, each characterized by specific attributes.

• Public blockchains

A blockchain is said to be public when its register of transactions can be consulted by all without restriction. In general, this type of network is entirely decentralized and is intended for general public use. Thus, to ensure the scalability of the network, everyone can participate in the consensus. Public blockchains are also characterized by the indispensable presence of a crypto-currency to support the economy of the system. In addition, for each transaction performed, fees are charged to reward validators.

• Private blockchains

Private blockchains, unlike public blockchains, are managed by a specific organization and access is restricted. Only authorized users can operate or participate in the system by checking and adding transaction blocks. Private blockchains are centralized and the permissions granted may vary from node to node. The consensus mechanism used here depends exclusively on the administrators who can modulate it as they see fit. This type of network is best suited for enterprise use. 

• Hybrid blockchains

This blockchain model combines the functionality of a private blockchain and a public blockchain. It allows companies to restrict access to specific data while making other data available to the public.

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What are the advantages and disadvantages?

Blockchain technology has a number of advantages and disadvantages.

The advantages

The success of blockchain is due to the fact that it has certain assets that could revolutionize current practices. These are: 

• Decentralization: it ensures independence from central services, thus guaranteeing the protection of personal data, the durability of the system, the speed of operations and the reduction of transaction costs.
• Transparency: This is the ability of the blockchain to make visible to all the events that take place within the network (mainly in the case of public blockchains). This characteristic facilitates audits and is very useful for detecting fraud (corruption, embezzlement, etc.). In addition, it ensures the traceability of transactions, which can be used to verify the origin of products and fight against counterfeiting.
• Confidentiality and security: many cryptographic techniques are deployed in blockchain technology. The combination of consensus mechanisms, hash functions, digital signatures and public key cryptography contributes to guarantee a very high level of security.

The disadvantages

Currently, blockchain is facing some challenges. These include:

• Scalability: this is the ability of a system to evolve as the number of users increases. This is probably the biggest barrier to blockchain adoption. Lack of scalability leads to slow transaction processing. This issue is pervasive in the blockchain ecosystem. The goal is to achieve a number of simultaneous transactions per second comparable to traditional services such as Visa or Mastercard.
• Energy consumption: blockchain has been heavily criticized for its energy requirements, particularly with respect to networks implementing the Proof-of-Work (PoW) consensus mechanism. However, some professionals in the mining sector tend to refute this claim.
• Lack of education: blockchain is not well known by the general public and is often overshadowed by crypto-currencies which seem to be a more attractive opportunity. Yet, blockchain has many features (smart contracts, decentralized applications, asset tokenization,...) that can be exploited to provide innovative solutions to socio-economic problems (value creation).

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What are the use cases of Blockchain technology?

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Blockchain is poised to revolutionize many fields and industries, including:

• Financial services: thanks to the advent of cryptocurrencies, blockchain is reinventing traditional financial systems, especially with the facilities offered by decentralized finance.
• The land registry: thanks to the tokenization process, it is now possible to digitize land properties and store them on the blockchain. The objective is to allow people wishing to acquire land to verify the ownership of the property in question in order to avoid being scammed and falling into land disputes.
• Healthcare: this field can benefit from the transparency offered by blockchain technology, especially with applications such as tracking medical records, fighting counterfeit drugs and distributing donations.
• The supply chain: the traceability offered by the blockchain makes it possible to trace the supply chain of a good from the acquisition of raw materials to the delivery to the end user. This makes it possible to verify the origin of goods and facilitates the auditing of logistics circuits.
• Education: tracking academic records, combating fake degrees, and peer review are all applications that the advent of blockchain has made possible.

Note : This succinct list will be developed further in future articles, each one detailing the applications of blockchain in these various areas in more depth.

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We have just briefly mentioned the contours of the Blockchain. But this brief presentation only covers the fundamentals of this technology. We will come back in more detail to each of these key concepts and mechanisms in the following chapters.

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