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Blockchain technology has made a name for itself in the media alongside its main application, the cryptocurrency bitcoin. There is talk of the exorbitant prices achieved by bitcoin, but also of its sharp falls in value that motivate fierce criticism for the risks they carry, even at the climatic level. But what is really behind all these headlines? What changes can blockchain technologies bring? What else is it for? Is it really a new technological revolution of the order that the Web brought about?
A decentralized digital currency system
To recognize the scope of changes that these technologies can bring about, it is important to understand their rationale and motivations. Blockchain was created to make possible a digital currency that did not require centralized control. That is, it does not need an entity responsible for saying how much money each one has in their account, and with the aim of making banks and the financial system that we know obsolete.
Our economy works less and less with physical money and more with digital money, but always conditional on the existence of trust in the entities that control it and with the guarantees that states or even gold reserves usually give. But there is no global trust mechanism. How do we do it if we are traveling and we have to deposit money in a bank in a country where we do not have these guarantees? How do we claim our money if when making a payment they tell us that it is not possible because the account is empty despite the deposit we just made?
The great contribution of bitcoin, and other cryptocurrencies following its example, is to achieve a digital currency system that does not need entities in which to place our trust and that, therefore, centralize its control. Bitcoin is based on a decentralized and shared control among all those who participate in counting how many Bitcoins each account has and that all transfers are valid.
Bitcoin mining principles
To encourage participation in the control of bitcoin, a prize is included in the system. Anyone who collaborates by contributing a block of valid transfers, who does not try to cheat by trying to pay with a currency that is not available, is rewarded with a number of bitcoins. This process is called “mining.”
The miners compete to win that prize, and verify the blocks proposed by the other miners to verify that all the transfers are valid (electronically signed by the owner of the account and spending the bitcoins available in each case). If not, the block will be discarded by most miners who will then attempt to propose their own block of valid transactions.
The important thing is to get the block to be accepted by the majority and become part of the blockchain. Then, the transactions of the block are registered and become part of the history of all the transactions carried out since the beginning of bitcoin. That record is immutable and no one can undo an accepted transfer anymore. With this history, it is easy to keep track of how many bitcoins each user has and detect cheats.
Bitcoin mining scheme
Penalties for maintaining order
A miner, or set of miners, may attempt to cheat by conspiring with others to get certain blocks to be accepted. For that reason, Bitcoin also incorporates mechanisms to punish dishonest behavior.
To propose a block, a series of calculations must be carried out that require a lot of computing power, and the consequent electricity costs. In this way, it is not trivial to prepare a new block. It is not enough just to collect a set of transfers. A calculation effort (proof of work) is required that makes it impossible for one or more miners to saturate the system with their block proposals, since each one that is proposed requires that effort and calculation time.
In addition, if you try to cheat and the block is finally rejected, all that effort will have been in vain and will be lost, which constitutes the punishment.
The prize offering, along with the effort to prepare each block and the punishment if cheating is done, has made it possible to create decentralized digital currencies. The combination of incentives and penalties allows the majority of those who control cryptocurrency in a decentralized manner to behave reliably. And that those who try to cheat are quickly detected and penalized.
Bitcoin is the greatest proof of the success of this mechanism. Since its launch in 2009, there have been no major problems in its operation and so much confidence has been generated in the system that the value of all bitcoins has reached more than a trillion dollars. This amount is still far from the value of all the gold, about 12 trillion dollars, but it places bitcoin as a potential competitor of the precious metal.
Blockchain to manage copyright
However, the opportunities offered by blockchains do not remain solely in cryptocurrencies. In addition to serving to keep an account book with all transfers in a decentralized manner, there are also proposals to use this mechanism in the creation of reliable systems in many other areas.
For example, from the University of Lleida we are applying blockchain technology for copyright management in the context of the CopyrightLY initiative, funded by the European Union within the framework of the ONTOCHAIN Next Generation Internet project. In this case, the blockchain is used to keep track of who claims to be the author of a content and the evidence of authorship they provide. An evidence would be, for example, a photo or a video of a painter creating the work of which the author is proclaimed.
Thanks to the use of a chain of blocks, when someone says that they are the creator of some work (especially digital ones), this is registered and can no longer be deleted or modified. In the event of a dispute over authorship, the parties may provide these records as evidence, which will have been kept immutable and linked to the time in which they were made. This will make it possible to determine who the original author is and who has tried to appropriate the work, as well as document the different changes and uses that it has undergone so that they can serve as evidence in any judicial process.
As we have seen, the great contribution of blockchain technologies is the creation of decentralized systems, which do not require the prior designation of an entity responsible for ensuring their proper functioning and which holds control. With blockchain, it is possible to participate in systems without the need for a prior relationship of trust with any or all of the parties involved. This enables the scope of these collaborations to be expanded to a truly global level.
As bitcoin and other cryptocurrencies have shown, the technology works to create fully decentralized digital currencies. But the opportunities go much further, from an emerging decentralized financial system to applications to facilitate copyright management like our proposal with CopyrightLY.
This article was originally published on The Conversation. Read the original.
Roberto García receives funding from the European Union through the Horizon 2020 research and innovation program
Rosa Maria Gil Iranzo receives funds from the European Union