The blockchain is a cryptography-focused architecture based on the internet protocol, powered by networked computer servers that do not need to be set up by developers. The Bitcoin Core developers sign all of their releases using the “Pretty Good Privacy” (PGP) encryption program that provides cryptographic privacy and authentication for data communication. The trust service layer, in combination with Peer to Peer (P2P) network, handles microtransactions and large-value transactions as well – allowing two users to do the same things that a bank would need to do on their behalf.
The blockchain is a cryptography-focused architecture based on the internet protocol, powered by networked computer servers that do not need to be set up by developers.
That is, however, just one of its many attractive features. In addition, blockchain is a software approach designed to bind this hardware together and dedicate it to the consensus, a universal validity check system that, among others, uses the Proof of Work (PoW) and Proof of Stake (PoS) methods for validation, and is the primary layer of any decentralized verification architecture.
The Bitcoin Core developers sign all of their releases using the “Pretty Good Privacy” (PGP) encryption program that provides cryptographic privacy and authentication for data communication. PGP is used for signing, encrypting, and decrypting texts, e-mails, files, directories, and whole disk partitions and to increase the security of e-mail communications. End-users can download the software and signatures and verify the releases using PGP software running on their own machines. In this particular verification, blockchain is not necessary.
In many respects, blockchain can be considered a meta-technology, since it utilizes, enhances, challenges, and potentially supersedes other pre-existing software technologies. As such, it allows us to create versatile technological solutions that aim to minimize the agency of third-party providers and, in a way, return power back to the users. This can be achieved by the blockchain providing an environment where users can interact freely in a trustless ecosystem for very low to almost zero fees, at speeds that make everybody in the world reachable in a matter of minutes. To make this possible, the blockchain is used as a transaction platform and distributed accounting ledger that uses cryptocurrency tokens (digital money) as a representation of a specific value at the current time (much like traditional fiat currencies). Nevertheless, for trustless technology to work on a global scale, it needs to implement trust in a different manner. This is where ISO standards come into the picture, as they ensure that the blockchain interactions follow globally applicable rules, norms, and procedures. This is also why starting in 2016, the blockchain technology obtained its own set of ISO standards, called ISO/TC307.
From the perspective of a technician, the blockchain is:
A transactional platform and distributed accounting ledger using cryptocurrency tokens as a representation of a specific value at the current time (same as fiat). That means that a transaction is carried out by the blockchain nodes, and every member of this blockchain party has a copy of this transaction on their computer (node). Everybody verifies if the entities that are about to do a transaction have enough funds to make this transaction happen. You are basically announcing to all members of this system that you are about to make something happen and, even though this action is happening between two peers, the rest of the network verifies and records the transaction. It is a computing infrastructure that uses the power of the decentralized database with linear cell-space structure, published in a semi-public way (also known as “the block”). It’s an open-source software operating on a development platform of the future. The trust service layer, in combination with Peer to Peer (P2P) network, handles microtransactions and large-value transactions as well – allowing two users to do the same things that a bank would need to do on their behalf. That’s right, instead of a middleman or third party (such as a bank, PayPal service…), you and only you are the master of your transaction registers and the way you do it. This is all possible because of the fact that more and more people realize that there’s a way to do things differently. Because the blockchain transaction is borderless, you don’t need to think where your friends are when you are about to send them some money – and with very low fees, to boot!
“Fees are not necessarily low on blockchains. There are times when on-chain transactions are quite expensive! And of course, “low” is a relative term as well, what may be low for some is expensive to others and vice versa.” – John Light
The use for cryptocurrencies, the blockchain’s most famous derivative.Bitcoin, the most crucial contribution to blockchain technology of all time.
From the Evangelist Perspective, the Blockchain Provides:
A suitable environment for running decentralized financial service marketplaces. A layer that creates a borderless opportunity for anybody to join a technological and financial revolution.
To finish on a poetic note, blockchain sounds like a song of the future and can be described as an innovative digital splendor with a strong narrative, with the ability to influence the global direction of finance, data integrity, and the way people control their credentials.
What is needed to run a blockchain? Internet, Electricity, Software, Algorithms, and Hardware (miners)
Blockchain as a Helping Hand
Some economies are still catching up, but accepting innovative technologies that are easy to adapt and can supply those regions with proper financial substitutions, which can foster real and fast progress.
In some regions, people are trying to improve their situation and develop their businesses while struggling with a lack of government support and FinTech adoption. Overcoming those problems is one of the main hallmarks of blockchain technology and cryptocurrencies, as people can use them to bypass obstacles posed by the overbearing authorities to achieve their goals, such as having a money account or credit score.
Indonesia: Small-medium Indonesian enterprises lack access to fundamental financial technologies like personal banking or cloud-stored accounting. This, in turn, makes it difficult for such companies to provide a formally valid and reliable record of business and trade credibility. All those facts make financial institutions reluctant to provide a loan when governments are not able to offer economic support. To exacerbate the problem, small businesses are struggling to join existing marketplaces dominated by large established companies that already control the market through great amounts of business know-how and customer loyalty.
The majority of Indonesian internet traffic is mobile, and only about a third of the population has an actual bank account.
A Possible Blockchain Solution:
The thing we can relate to is Indonesia’s excitement over mobile internet/app usage. This is especially handy since, in many parts of the world, people don’t have access to a standard PC with a fixed or wireless internet connection. This is an obstacle for them when it comes to making records, accessing financial institution services, and communicating with partners.
Instead of a PC with an internet connection, they could instead use smartphones and their mobile data from mobile network providers, since there is excellent coverage in places like Indonesia. Mobiles could solve the problem of the lack of traditional fixed infrastructure, and a blockchain-based application could embrace and encompass all possible applications under one roof. A publicly accessible profile, representing a form of identity management between the users and institutions originating from this fusion could be used to verify a user’s creditworthiness and define their business profile (identity).
In some countries, this potential for financial self-sufficiency of individuals is looked down upon by the government, and cryptocurrencies are thus considered illegal. However, there are also countries, such as Estonia, where the government accepted and endorsed the use of blockchain and cryptocurrencies as a medium in green energy procurement and trading platforms. Inevitably, their economies have benefited as a result. After all, this technology has not been invented to make people rich, but to make what we do more fluent, secure, and in some parts of the world, actually possible.
Estonia: Tokenized energy from natural resources (WePower)
Blockchains allow people to be their own banks in systems where they cannot have a bank account, it makes it impossible to provide fraudulent proof of authenticity of goods, and it prevents the issue of double-spending in digital transactions. The proprietary technology this solution could utilize are, for example, NFC compatible chips, which could be discretely incorporated with any physically manufactured product. Upon integration of the chip, the product is paired with the digital counterpart on the blockchain. Verification of authenticity is instantaneous with a simple tap or scan with any smart device. This way, any goods would have a record about their purchase on the blockchain and protect the ownership, which could be updated with every secondary market action that could happen to the goods and transfer that ownership to a new owner. This bears striking similarity with the use of NFT tokens and art. This method would protect the “non-fake” background of the chipped goods, the same way as proving the buyers’ ownership.
Still, there are many other aces this technology can pull out of its sleeves.
Everywhere it is needed: Decentralized Finance (DeFi) as the alternative to standard centralized financial products backed by banks. In this system, you can be the loaner and the borrower, without adhering to the wishes of central banks. At the same time, the users are in full control of their assets and are responsible for managing and safekeeping their own private keys.
For some, blockchain is still nothing more than an idea, which accidentally made some people rich. On the other hand, if we free ourselves from this bubble perspective, we will realize that blockchain is helping millions of users around the world to access previously unattainable possibilities, forbidden by their countries.
Afghanistan: The cooperation of three companies resulted in a system for a land registry secured by blockchain technology.
Why Does the World Need Blockchains?
Consider the following:
Roads need traffic lights. Modern states would fail without the rule of law. Every important technological field, such as economy, health care, and medicine, needs ISO standards.
These standards declare the correct limits, values, procedures, and quality evaluation methods. The same way a technology world needs ISO to keep things auditable and safe, a homegrown economy based on scarcity and a decentralized, permissionless, borderless financial-economic system needs blockchains.
“Trusted standards mean that industry doesn’t need to reinvent the wheel, that innovations will be compatible and work with existing technology, and that products and services will be trusted, too. Governments use standards as trusted solutions to complement regulation, and they give peace of mind to consumers who know they are not putting themselves or their families at risk.” – Acting ISO Secretary-General Kevin McKinley
To extend the above wheel analogy further, the use of the wheel as an instrument was initially very limited, but eventually permeated through every aspect of the industrial revolution and the world it created. In many ways, the internet is the new wheel, and the blockchain, its pneumatic tire – an enhancement to make the wheel even more useful and ubiquitous. Nevertheless, there is still some uncertainty about how innovative an aspect this technology can prove for the IT infrastructure of the future. A lot will depend on what can be built on or around blockchain technology. Implementing blockchain-based solutions to systems that deliver ISO standards globally is a great step towards adopting blockchain technology thoroughly. Some may still not believe that the blockchain could ever escape the pitfalls of being “just another technological buzzword.” However, since this technology is starting to permeate areas like the ISO, banking, and identity protection, many have already begun to pay closer attention. Still, the most important phenomenon born from the blockchain to date has been Decentralized Finance (DeFi) and the freedom of finance for self-sovereign identities it brings. Thanks to DeFi, even the erstwhile blockchain skeptics are now wondering “What is this blockchain I keep hearing about??!” and “How do I buy it?!”
The Massive Adoption of Blockchain Technology During the DeFi Season of 2020-2021
Decentralized finance, or DeFi, is a cryptocurrency use case that has recently been attracting significant attention. DeFi refers to financial services using smart contracts, which are executed by miners with a transaction when certain conditions are met. Smart contracts are automated agreements that do not need intermediaries, such as banks or lawyers, and instead, use online blockchain timestamping as proof of authority. With cryptocurrencies, there are no restrictions related to wealth, social status, religion, etc. Almost everyone can permissionlessly and pseudonymously access and use DeFi applications. This is an advantage for those who cannot access traditional financial services because of the lack of formal documentation or the absence of such services in their country. Also, the current conditions and captivating rate of Annual Percentage Yield (APY) attract various investors to DeFi ecosystems every day.
Between September 2017 and September 2020, the total value locked up in DeFi contracts has grown significantly, from $2.1 million to $6.9 billion (£1.6 million to £5.3 billion). Since the beginning of August 2020 alone, its rise has grown even faster, and as of April 2021, it stands above $45 billion (£32 billion).
DeFi from the Regulatory Perspective
An important question from a regulatory standpoint is, “Are cryptosystems money transmitters or money service businesses?” This is because money transmitters are regulated in a different fashion than other finance systems.
Money Transmitters – FINCEN’s definition
“Any person, whether or not licensed or required to be licensed, who engages as a business in accepting currency, or funds denominated in currency, and transmits the currency or funds, or the value of the currency or funds, by any means through a financial agency or institution, a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both, or an electronic funds transfer network; orAny other person engaged as a business in the transfer of funds.”
An entity that receives money from one person and transmits that money to another person or location. This entity needs to be registered with FINCEN and is required to have an anti-money laundering compliance program, including the “Know Your Customer” procedure, KYC.
See a video of Yago’s thoughts on ‘The dangers of KYC’ here.DeFi – A money-service business that is not a money transmitter
Non-custodial DeFi systems – like Sovryn – do not take possession of your funds. They are not controlled by a single entity and do not hold transactional control over users’ funds. Using smart contracts to distance DeFi platforms from the ownership of the funds being used causes a regulatory grey area in most jurisdictions. Therefore, the system is not currently classed as a regulated financial institution, but its users can be regulated in other ways, such as being taxed on profits, or having limits on fiat on/off-ramps.
Why are Blockchains a Good Solution?
Traditionally, electronic security focuses on authorization, authentication, and access control. These mechanics are intended to keep unauthorized users from accessing or modifying data. However, when it comes to authorized access, either on the application or system level, it does not provide any protection. Blockchains enable tamper resistance for data through distribution over many systems that are run and managed by independent parties. This is ensured by the architecture of the blockchain, where every piece of data has thousands of globally distributed copies. A potential attacker intent on breaching the certificate would have to compromise the majority of the data distribution at the same time, which is extremely hard, expensive, and with a well-designed blockchain almost impossible.
To reiterate, a blockchain is a versatile solution for a variety of real-world use cases, and it is up to innovative minds how soon and how extensively this “pneumatic tire” of the internet will be used for the betterment of many walks of modern life.
Blockchains can be the solution to improve data integrity to the highest possible standard. By design, blockchains are inherently resistant to the modification of data. Blockchain ledgers are designed to be immutable, meaning that if data addition or transaction has been made, it cannot be edited or deleted without great difficulty (e.g., the cost to re-organize the bitcoin blockchain). This means that what is put on the blockchain stays on the blockchain as long as the data owner needs to update them. Then, this updated information is distributed between thousands of computers that created a blockchain network.
Blockchain blocks are: structures for data keeping the timestamping mechanism for these data structures.
Blockchains provide: proof of the history of any data recorded on a blockchain data integrity that can be used for audits, regulatory compliance requirements, or legal challenges decentralized data distribution with a transparent transaction history.
Trusted Time stamping
In the context of blockchain, you can specifically encounter a term called Trusted Timestamping. This is a process of securely keeping track of the creation and modification time of a document, and it is an indispensable tool in the business world. It allows interested parties to know, without a doubt, that a document in question existed at a particular date and time. By design, a Bitcoin transaction includes a date and time held on the blockchain. By including a cryptographic digest of a file, you can later certify that the data existed at that time.
Important Blockchain and Bitcoin Milestones
An asymmetric key cryptosystem was published by Whitfield Diffie and Martin Hellman who, influenced by Ralph Merkle’s work on public key distribution, disclosed a method of public-key agreement. This method of key exchange, which uses exponentiation in a finite field, came to be known as Diffie–Hellman key exchange. This was the first published practical method for establishing a shared secret-key over an authenticated (but not confidential) communications channel without using a prior shared secret. Merkle’s “public key-agreement technique” became known as Merkle’s Puzzles and was invented in 1974 and only published in 1978.
Dissertation “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups” is the first known proposal for a blockchain protocol. Complete with the code to implement the protocol, Chaum’s dissertation proposed all but one element of the blockchain later detailed in the Bitcoin whitepaper.
The PoW concept was invented by Cynthia Dwork and Moni Naor as a way to deter denial-of-service attacks and other service abuses such as spam on a network by requiring some work from a service requester, usually meaning processing time by a computer. The term “proof of work” was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels.
Smart contracts ancestors were first introduced as “Ricardian Contracts” by Nick Szabo, a computer scientist, legal scholar, and cryptographer. The term “smart contract” was first introduced long before the invention of Bitcoin, but it underwent a long gestation period of inactivity and disinterest since there was no platform that could enforce a smart contract, until the advent of Bitcoin blockchain technology in 2009.
DigiCash created the first digital currency with eCash (an electronic cash application that aims to preserve a user’s anonymity, and inventing many cryptographic protocols like the blind signature, mix networks, and the Dining cryptographers protocol)
Computer scientist Nick Szabo works on ‘bit gold,’ a decentralized digital currency.
Stefan Konst publishes his theory of cryptographically secured chains, plus ideas for implementation.
Invention of cryptocurrency. Developer(s) working under the pseudonym Satoshi Nakamoto released a white paper establishing the model for a blockchain.
31 October: Bitcoin white paper published on the internet.
Nakamoto implements the first blockchain as the public ledger for transactions made using bitcoin. Later that year → Blockchain was the first time operable.
January 3 – Satoshi Nakamoto mined the genesis block of bitcoin (the first block) for 50 bitcoins.
January 9 – The first open-source bitcoin client was released on SourceForge.
January 12 – The first bitcoin transaction was made of 10 bitcoins to the first bitcoin user (other than Satoshi), Hal Finney
November 19 – Satoshi created the Bitcointalk.org site. November 22 – Satoshi Nakamoto posted the first post on the bitcoin forum using the account “satoshi.”
December 16 – Bitcoin version 0.2 is released. By this point, Martti Malmi has joined Satoshi Nakamoto, a developer with full permission to change the codebase.
December 30th – The first difficulty increase occurs, from 1 to 1.18.
February 6 – A currency exchange is born. The Bitcoin Market is established by dwdollar as a Bitcoin currency exchange.
March 17 – The now-defunct BitcoinMarket.com exchange was the first one that started trading with cryptocurrency.
May 22 – Mr. Sturdivant filled the order for two large pizzas from Papa John’s paid by 10,000 BTCs, making this transaction the first physical purchase ever made with Bitcoin in history.
In May of 2021, this amount of BTC was worth 367,991,000.00 USD: See the TX
July 6 – Bitcoin version 0.3 was released.
November 6 – Bitcoin market capitalization passes $1 million.
December 9 – The mining difficulty exceeds 10,000
December 12Satoshi Nakamoto posted his last post on the BitcoinTalk forum.
January 2 – Tonal Bitcoin, designed for those who prefer the Tonal number system, standardized its units.
May 9 – The launch of Bitbills is announced. Bitbills are the first physical incarnation of bitcoins, coming in plastic cards that contain cryptographic information.
January 15 – Bitcoin made an appearance in the show “The good wife” in the episode “Bitcoin for Dummies.”
September 27 – The Bitcoin Foundation was launched with the aim of implementing a core development team for the protocols and the body to oversee the digital currency.
June 3 – Bitcoin confirmed its largest transaction to date with 1322 transactions on block 181919
November 28 – Bitcoin Halving Day. On Halving Day, Block 210,000 is the first with a block reward subsidy of 25 BTC.
QixCoin , a Turing-complete cryptocurrency, was created by some of the RSK founders. QixCoin introduced the concept of pay per execution, currently known as transaction “gas.” However, RSK inherits several key concepts from Ethereum, such as its account format, VM, and web3 interface.
January 22 – BitPay surpasses 10,000 transactions. BitPay, a Bitcoin payment processing company, announces that it has surpassed 10,000 Bitcoin transactions for its merchants, with no cases of payment fraud reported.
February 15 – The bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency.
February 19 – Version 0.8 of the Bitcoin client was released. It features Bloom Filtering and improved download speed.
February 21 – Internet Archive began accepting BTC donations so that its employees can be paid in Bitcoins.
Mar 12 – A hard fork occurs on the blockchain. A protocol rule that was previously undiscovered results in a hard fork of the 0.8.0 reference client.
March 18 – the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction.
March 28 – The total Bitcoin market cap passed US$1 billion.
May 1 – Online gaming company ESEA is called out for secretly using customer computers to mine Bitcoins.
May 2 – 2013 The first Bitcoin ATM in the world debuted in San Diego, California.
May 3 – Coindesk, a bitcoin-focused resource, and news website was launched by Shakil Khan, an angel investor and advisor to Spotify.
May 17 – The first major Bitcoin Conference was held at the San Jose Convention Center.
December 5 – The People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to freely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering.
Blockchain technology is separated from the currency, and its potential for other financial, inter-organizational transactions are explored. Blockchain 2.0 was born, referring to applications beyond currency. The Ethereum blockchain system introduces computer programs into the blocks, representing financial instruments such as bonds.
Ethereum launched – first 2.0 blockchain system (but It’s not even the first cryptocurrency to have a Turing-complete language, which was QixCoin).
World Economic Forum – first governance models through blockchain
IBM opens a blockchain innovative research center. Started a development that ends up with an umbrella product called Hyperledger Fabric.
Blockchain has its own set of ISO standards, called ISO/TC307
The “Dubai Blockchain Strategy 2021” project was launched.
15% of global banks using blockchain for intercommunication.
March 2 – The day one bitcoin overtook the price of an ounce of gold.
July 21 – SegWit was locked in by Bitcoin miners
August 21 – SegWit was activated.
December 6 – Lightning Network preview was released.
July 17 – 2018, MasterCard accepted the agreement to participate in cryptography. Emirates Blockchain Strategy launched.
Sovryn platform launched.
The cooperation of three companies resulted in a blockchain-based land registry for AfghanistanSovryn developed the Bitcoin-native DeFi protocol that allows Ethereum and Binance Smart Chain users to experience the most feature-rich platform directly on the Bitcoin-native RSK blockchain.
El Salvador became the first country in the world to officially classify Bitcoin as a legal currency.
June 16 – The World Bank has rejected a request from El Salvador to help with the implementation of Bitcoin as legal tender.
Congratulations. You made the ninth step in becoming a blockchain expert.
Also Published At: https://wiki.sovryn.app/en/library/education/episode-eight
Create your free account to unlock your custom reading experience.