Blockchain is a new technology that serves in financial digital transactions’ processing. It works in order to make the information in the distributed ledger not modifiable (by leveraging cryptographic properties – hashing) and to time-stamp each single transaction. This prevents from fraudulent acts such as double-spending.
Nodes in blockchain networks manage and concur to validate transactions according to specific rules of the consensus mechanism. The greater the number of nodes that populate the network, the greater the security level of the information in the network and, consequently, the greater the network’s potential resilience to external attacks.
This is why public blockchain networks with a high number of participants -such as Bitcoin or Ethereum– have proved to be the most secure and reliable networks.
In the traditional blockchain operating process (Proof of Work), a transaction is first broadcasted to all nodes (request of validation). Once every node has received the transaction information, miners begin to validate transactions by trying to solve a complex cryptographic puzzle.
It’s important to note that in this process, transaction information is turned into a unique 64 character length string called hash (sort of a digital fingerprint of the transaction), which also contains information related to the previous block, thus creating a connections between them. When a new block is created, all nodes update the status of the blockchain, adding it to the to the ledger.
The hashing algorithm is probably one of the most interesting features of blockchain consensus protocols. Thanks to the fact that data computed through hashing algorithm are deterministic -one input will always yield the same output-, irreversible -can’t go from output to input- and sensible to variability -any modification in the input, even the slightest, will yield a different output-, information become truly secure and tamper-proof, making it virtually impossible to corrupt data in a blockchain network.
Another blockchain core feature is disintermediation. We mentioned that when a transaction occurs on the blockchain it does not require a third trusted party that guarantees validation, because what we actually trust in is the consensus mechanism of the network, regardless of the network participants’ behavior (“in math we trust”). That said, since such mechanism makes it (most of the times) economically unprofitable to modify data, we can be quite sure that the transaction is actually going to be processed according to the consensus mechanism rules. This is the core feature that allows the creation of a peer-to-peer transaction system.
For each transaction recorded in a public ledger we also gather information regarding the time of validation, that in turn allows us to time-stamp each recording happened on the blockchain.
Double-spending issue is averted thanks to (but not only to) the chronological evidence of data registered in the validated blocks of the network (invalid transactions are not added on the blockchain).
Thanks to all the mentioned features, blockchain technology can offer a great number of extremely efficient applications in various fields and, above all, it has the potential not only to speed up the evolution of several industry sectors but also to create new markets for new digital assets.
Public vs Private Blockchain
Private networks (as also permissioned or hybrid ones), on the other hand, present quite different characteristics. They are a) networks which do not provide an open participation or b) not fully decentralized networks. Compared with a public network, private ones do guarantee a nearly instantaneous transaction’s speed, but offer a (dramatically) lower resiliency level from security perspective.
Blockchain features provide great contribution to the digitalization of everything that could be matter of a transfer of ownership. Moreover, they represent the ideal (at least for now) means for implementing automation and disintermediation within processes, especially thanks to smart contracts (a system that allows an automated execution of some operations when predetermined conditions occur, according to the If This Then concept).
What Does It Mean for WizKey
WizKey aims to leverage public blockchain in order to make the credit market more secure and streamline, thanks to tokenization process made possible by this new technology. The tokenization of credits (and debts) enables a nearly unfailing traceability of information, with the parties involved in a transaction having immediate access to the whole, not-tampered story of every single credit. Furthermore, traceability of credit offers a solution to the double-pledging problem (as an example, the same invoice could not be discounted multiple times by different credit institutions).
For the reasons mentioned, we believe that Wizkey, with its clear choices and its always forward-looking attitude, sets itself in a pivotal role for the innovation in the everchanging credits market.