Blockchain And Finance

by Lorenzo Nunzella
May. 1, 2019
3 minutes

The word “blockchain” has recently grown more and more popular in various fields, from politics to technological applications, and has drawn the attention of social media communities all around the world, being one of the most discussed topics in the last two years. However, many people still lack a comprehensive understanding of this revolutionary phenomenon which, paradoxically, seems to be at the same time know but not understood.

Looking for clear, detailed and sufficiently synthetic information about blockchain is no easy task. Most of the articles posted on the web are biased by the strong belief or, on the contrary, by strong adversity of the writer, and rarely are we presented with an objective representation/description of the pros and cons. If, on the one hand, blockchain is considered by many as a powerful magic remedy for any human field, on the other hand there is an equal number of people suggesting just the opposite, pointing at the many unsolved issued currently affecting the blockchain field, such as scalability, regulation, fraud and so on.

Technological revolutions don’t happen unexpectedly; they are a natural result of the collective effort of researcher and scientists. Blockchain is no exception, representing the most recent solution proposed to overcome the difficulties related to transactions on the Internet without the need of a central authority.

Blockchain technology belongs to the DLT realm. A DLT is a system database where information is shared and recorded by multiple users of a decentralized network. One of the most challenging issues related to such a system is the fault tolerance towards malicious participants in the network. The first article on the subject was written by mathematicians Leslie Lamport, Robert Shostak and Marshall Paese in 1982: the Byzantine Generals’ Problem.

That said, let’s take a look at the path that led to the creation of blockchain technology. What follows is a list (with no pretense of exhaustiveness) of few of the topics/technologies that contributed to the deployment of bitcoin.

Bitcoin timeline

Time-stamping

In 1991, physicists Haber and Stornetta proposed a solution to the temporal record of digital data in an academic paper titled How to Time-Stamp a Digital Document. In the article the two scientists describe the processes needed to time-stamp data and to prevent an eventual modification of such temporal record by using hash value calculation and private keys signature.

Ecash, Bmoney, Bitgold ed Hashcash technologies

It’s important to keep in mind that the first digital transactions took place well before the advent of bitcoin, more less 20 years ago.

In this regard, the development of technologies such as Ecash, Bmoney, Bitgold and Hashcash (spanning between the ‘80s to the first 2000s) represent a fundamental contribution not only to the structuration of consensus mechanism, but also to related aspects such as network security, double-spending and registration and immutability of data.

How to achieve trust in a decentralized network

In 2002 cryptographists David Mazières and Dennis Shasha published the paper Building secure file systems out of Byzantine storage. The two described a precursory decentralized structure of a blockchain where the hashing algorithm SHA256 was used to save transactions data into blocks.

Bitcoin

In 2008 the white paper titled Bitcoin: A Peer to Peer Electronic Cash System appeared for the first time on the web, signed by Satoshi Nakamoto. The author (or authors?) moved from few of the issues addressed up to that point by the abovementioned technologies (double-spending, time-stamping, creation of a trustless peer-to-peer network, etc) for the deployment of the first blockchain, whose genesis block has been mined on January 3rd 2009.

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