Database Technology Journal

Bitcoin and its applications

Perhaps the first thing that comes to mind when talking about blockchain is Bitcoin (BTC), but blockchain goes far beyond cryptocurrencies. There are already projects using the technology for other purposes, such as document validation.

The concept of the first public blockchain was born in 2008, in the academic article Bitcoin: a peer-to-peer electronic financial system, published by a person or group under the pseudonym Satoshi Nakamoto (alleged creator of bitcoin).

Created in a scenario of global economic crisis and real estate bubble, bitcoin was born to, among other things, prevent the double spending of values ​​and increase the confidence of financial transactions, taking them to the internet.

In the digital environment, data can be copied, changed and exchanged. The blockchain was the solution to eliminate the first two characteristics: a person cannot spend 1 BTC twice or say that he sent you 10 BTC, but transferred only 0.01 BTC, for example.

Blockchain works by having information stored in data blocks. Each block contains a kind of digital signature called a hash, which basically functions as a biometric impression. The hash is the cryptographic guarantee that the information in this data block has not been breached.

When a new block is created, in addition to having its own hash, it loads the hash of the previous block. Hence, the name blockchain - or chain of blocks, in Portuguese. This is a way that, in addition to making transactions secure, makes a hacker attack very difficult.

The data of all transactions are recorded on the ledger. The ledger is compared to a great book. There, they are open to all information of what or how much was sent to someone. No names or documents, just the address made up of letters and scrambled numbers.

Here are some of the main Blockchain applications:

- Cryptocurrencies: its main function in this field is essentially to transfer value. The technology prevents a unit of digital currency or cryptocurrency from being spent twice, once the transaction is registered it is unalterable.

- Transactions and payment systems: intrinsic qualities of the blockchain are the speed, security and privacy that allows users at the moment of making transactions. Therefore, many companies, mainly banks and financial institutions, have taken the technology to build their own platforms. They make it possible, for example, to accelerate speed and reduce the cost of international and interbank payments.

- Document registration: the blockchain is a large register where many parties can access from anywhere in the world. It is already being used to register and verify the authenticity of all types of documents.

- Supply chain: knowing exactly where things come from is always a problem, but blockchain can solve it. With this technology it is possible to make almost any object with a unique fingerprint, which follows it throughout its life cycle from the beginning.

- Smart and decentralized contracts: the blockchain is also capable of creating adequate infrastructure to create smart contracts, that is, automated digital agreements, which more than once the need to use third parties for compliance is eliminated.

- Entertainment: several video games and games are built on a chain of blocks or using any digital asset of its own. Speed, transparency and, above all, rewards are assured.

- Trade: transparency and security are the certainties of the code, so its use in trade is inevitable.

Citations:

Nakamoto, Satoshi. “Bitcoin: A Peer-to-Peer Electronic Cash System.” SSRN Electronic Journal, 2008, doi:10.2139/ssrn.3440802.

PricewaterhouseCoopers. “Making Sense of Bitcoin, Cryptocurrency and Blockchain.” PwC, www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html.