Blockchain Technology – What do we really know ?

A trip down memory lane

In 2008, an individual or group of people known under the name of “Satoshi Nakamoto” published a paper titled “Bitcoin: A Peer-To-Peer Electronic Cash System”. In this paper, the author(s) put forward a « peer-to-peer » version of the electronic currency (or “Cryptocurrency”) that would allow transactions to be achieved successfully from one party to another without the need to use any financial institution. This idea marked the creation of what is more commonly known as « Bitcoin ».

On 3 January 2009, the author(s), who remained anonymous, released an open source program using a new protocol that gave birth to “Blockchain”. Before delving further into our explanations, it is worth noting that Blockchain is not a cryptocurrency! Indeed, Blockchain is the technology used to facilitate online transactions. It is made up of a series of blocks, or lists of records of data if you will, that are interconnected to each other.

“Blockchain is the tech. Bitcoin is merely the first mainstream manifestation of its potential.” 

Mark Kenigsberg, founder of Bitcoin Chaser

The popularity of the Bitcoin has gradually increased since then and is believed by many to have become a real and reliable alternative in the financial world. According to Marc Andreessen, a very influential entrepreneur in Silicon Valley, Blockchain is « the most important invention since the Internet itself « .

Blockchain technology has now evolved, and could be applied to many other fields beyond finance. Johann Palychata, Head of Blockchain at BNP Paribas Securities considered it as an invention “like the steam or combustion engine” that has the potential to transform the world of finance and beyond.

But how does it actually work?

Blockchain is, in the broadest terms, a way of passing information from A to B in a safe and automated manner.

« How Blockchain works » (Financial Times)

The party that needs to make a transaction (1) creates a block (2). This block is first verified (3) by millions of computers around the network. The now-verified block (4)  is added to a chain (5), which is stored across the network, creating not only a unique block but also a unique history.  Each block contains a reference of the previous block. It is thus impossible to falsify one block because such an action will automatically falsify the whole chain.

Moreover, the Blockchain technology is totally “decentralized”, that is, it has no central authority like banks of any other financial institutions for example. Instead, it is maintained by a group of people called the “miners” (or “nodes”) who use very high-powered computers to solve complex mathematical problems (we’ll spare you the details).

By doing so, they make sure that all the transactions go through all around the world. Thus, thanks to the Blockchain technology, date, time, participants and amount of every transaction are publicly accessible and fraud is nearly impossible.

Shifting the economic paradigm?

With the ongoing evolution in Information Technology, our current economic system is being continually transformed by the rise of new information networks. The Blockchain technology, one of the features of the Web 3.0, has shed new light to the way finance operates, creating what could become a real alternative to our current centralized economic model. Indeed, embracing a more decentralized economic model, which enables personal computers to maintain a database of values and exchange via Internet Protocols, may well be a step towards Web transparency as information public and available on the network by all.

More concretely, and beyond peer-to-peer interactions, Blockchain has also helped companies strike deals with the smart contract features on Public Blockchains, such as Ethereum. Those smart contracts have allowed fundraising through the Initial Coin Offering (ICO).

Blockchain and Advertising

In the current world of advertising, the eyes of consumers are drifting away from newspapers and televisions to computers and smartphones. In the digital advertising world, the market is constantly growing and is expected to expand further in the years to come.

If a picture is worth a thousand words, an example must be worth a million, right? So, in 2017,  the Vietnamese start-up « Bigbom » successfully raised 14 million USD of their own cryptocurrency “BBO”,  thanks to the ICO-fundraising system.  Their long-term project is to combine Blockchain features to e-commerce and advertising. According to Nguyễn Văn Vững, CEO and founder, « digital marketing is a promising technology that is expected to transform the Global Digital World in the next few years ».

“We are the second most important Blockchain project in Vietnam, our experts and engineers are constantly working on Blockchain features that will go beyond the current ones », he added. This start-up is a good example of  Blockchain features used in the digital advertising sector. Their marketplace is expected to become a real hub where advertisers, publishers, agencies and content providers will come together to connect and do business.

EU actions

Since 2018, the European Union started to take action to improve the status of Blockchain in Europe. According to the French President Emmanuel Macron, this technology could put Europe at « vanguard » of innovation.

European Blockchain Partnership (EBP)

On 10 April 2018, 21 EU Member States and Norway agreed to sign the European Blockchain Partnership (EBP) that is expected to develop « cross-border digital public services, with the highest standards of security and privacy ». Of course, the Commission’s Mariya Gabriel was thrilled: “In the future, all public services will use blockchain technology. Blockchain is a great opportunity for Europe and Member States to rethink their information systems, to promote user trust and the protection of personal data, to help create new business opportunities and to establish new areas of leadership, benefiting citizens, public services and companies”.

EU Blockchain Observatory and Forum

In 2018, The European Commission also launched the EU Blockchain Observatory and Forum with the support of the European Union. This action is expected to highlight key developments of Blockchain in Europe. It is also an opportunity to support European actors and reinforce European engagement with multiple investors involved in Blockchain activities.

Even though these EU actions aimed at a smart and better use of Blockchain in our societies, promoting Blockchain development is not unanimous. Jakob Von Weizacker, European Parliament lawmaker, gave warning of the capacity of a single system to prevail above others. He also pointed out the necessity to protect consumers against cryptocurrencies. According to him, they must “not become tokens of unlawful behavior or the object of empty speculative bubbles”.

Conclusion

To conclude, it is clear that Blockchain offers valuable features by securing transactions around the world and creating new opportunities for development for companies. It is a huge network with a current market capacity of over 170 billion USD.

Nevertheless, it is also sensible to highlight some of the criticisms towards this technology. Blockchain is not very eco-friendly… Indeed, in order to secure the billions of transactions around the globe, a large amount of computing power is needed, and this comes at a cost. For example, Bitcoin has used as much energy as 159 nations in 2018. Moreover, the lack of regulation around Blockchain creates a risky environment. Today, there is no clear legislation that can protect millions of users in the world. Between 2014 and 2016, the Bulgaria-based company, Onecoin, made 3.7 billion USD in revenue “based completely on lies and deceit”.

Nothing is black and white, and if Blockchain can be a powerful catalyst for change, one must bear in mind that it comes at a (hefty) price. If our digital world is in constant evolution, let us hope, then, that it will yield sustainable ways to foment the Blockchain revolution, too.

written by Alkacem Guerbai