Introduction to bitcoin and to the blockchain technology

Everyone has heard about the bitcoin, but very few are able to understand how it works exactly. While frequently caricatured by the medias as a currency for terrorists and traffickers, the bitcoin remains at the origin of a revolution that will deeply tranform our society. This website will give you the tools to better understand and anticipate this revolution.

The Bitcoin

The bitcoin has been created in 2009 by Satoshi Nakamoto, an individual or group of individual which identity remains unknown to date.

It is the first cryptocurrencie ever created and is revolutionary because it allows instant and secure transfer of value on the internet. This is the reason why the bitcoin is usually called «cyber cash ».

The transfer of value system on the internet in its current state can be compare to the e-mail exchange system as it was at its beginning, when you could only send e-mails to persons that belonged to the same system. For instance, users of AOL could not send e-mails to users of GEnie or CompuServe, the ancestors of Gmail and Yahoo. This is the apparence of the SMTP protocol that has allowed users of different e-mails systems to send e-mails to each others.

Today, to make an international transfer of money, you need to use a bank which systems are not even connected. The information are transmitted using the internet network, but the bank’s ledgers are independant and need to be updated for each transfer. Sometime these systems need to be updated manually and this is the reason why these transfers are so expensive and time consuming.

The bitcoin is above all a protocol, similar to SMTP, which connects any person that has an access to the internet and make it possible to exchange any amount instantly, with a person based on the other side of the planet, in a secured and anonymous manner. The only condition is to obtain a portfolio that will grant you access to the bitcoin network and the ability to buy or sell bitcoins.

If the bitcoin protocol has never been hacked since its creation, it is not the case of the exchanges on which you can buy/sell bitcoin and of the portfolios on which you store them. Hackers have been exploiting with success the lack of security of these exchanges and portfolios many times in the past. That’s why it is extremely important that you take any possible measure to protect your bitcoins and crypto-currencies. If you want to know more about these process you can read the following posts : « How to buy your bitcoins, a complete guide » and « The best way to keep your bitcoins and cryptocurrencies safe ».

THE BLOCKCHAIN

But the technology that undermine the bitcoin, the blockchain, will have a much deeper impact on our organisations, than only facilitating international monetary transfers.

The blockchain is a data base of a new kind, a ledger on which are registered all the transactions created between the members of a same network. The main difference with the database we currently know lies on the fact that the blockchain is decentralised and updated by the members of the network.

For instance, a bank in its basic sense is also a ledger on which are recorded the transactions (expenses, credit..) made by the members of the banking network. The clients have initially granted the banks the fonction to update their ledger on their behalf and treated them as a trusted intermediary. Today, the network plays the role of this trusted intermediary. The creators of the bitcoin did find a (cryptographically) secured way to update the ledger of the network without any intermediary. The trust can now be transferred from central organisations such as banks, governments, but also corporations like UBER or Amazon, to users.

Today if you want to sell a bike on the internet you go on a platform like eBay and become a member, by revealing all your personal and banking information, so that you can post your ad. With the blockchain there is no platform, only a software that you will upload and which will give you access to the network on which you will be able to freely post your ad. This is exactly how works OpenBazaar which connects person who want to sell or buy on the internet.

Hope this brief introduction gives you a better idea of the potential of such technology on a society as centralised as ours and in a period where data organisation has never been so important.