Blockchain – definition

At the dawn of an economy freed from traditional banking institutions, everyone can be interested in blockchain. The virtual currencies that abound everywhere on the Internet are essentially based on this fairly complex 100% digital technology. If you often hear this term talked about without understanding its ins and outs, the next few lines will enlighten you with simple words and as few neologisms as possible!

Did you say blockchain?

A concept that appeared around fifteen years ago, blockchain is a technology that allows information to be stored and then shared in a secure and transparent manner. Unlike the traditional monetary model governed by the Bank of France, this blockchain does not depend on a central control body. Concretely, it is a non-modifiable database tracing the history of exchanges between all users of a cryptocurrency.

Blockchain is created to record transfers of assets, including exchanges of money and securities. These are gathered into blocks of information that can be verified by all members of a network. This technology makes it possible to trace transactions in an independent economic system. The execution of smart contracts also falls into this mechanism.

A system of values ​​without a central body

Its decentralized architecture characterizes the blockchain. Unlike banks, blockchain-based internet currencies do not have servers grouped together in a single building. They owe their existence to the validation of users who recognize them. This distributed database is accessible to all users and minors. At the heart of this ecosystem, cryptography prevents you from going back on confirmations already made.

Invented in the second half of the 2000s, the blockchain made it possible to launch Bitcoin. Moreover, this technology is created by the initiators of this very first virtual currency. Users can thus carry out exchanges without resorting to banks and standard monetary values. However, the operations require the work of minors. These users with a special status have the role of verifying transactions between people who exchange assets.

Mining, validation and non-fungible tokens

Blockchain professionals, miners have computer hardware powerful enough to analyze transactions between members of a network of cryptocurrency users. They provide information to authenticate the exchanges. These people use specific algorithms dedicated to mining. They are paid in Bitcoin. The work provided gives even more credibility to the virtual currency.

While traditional money relies on oil or company stocks, online money relies on alternative values ​​such as NFTs. Non-fungible tokens refer to unique digital images belonging to their owner. This person even holds a tamper-proof certificate of authenticity, as for certain master paintings. NFTs are exchanged for virtual currencies and all consider themselves assets.

NFTs are a game changer

Currently, non-fungible tokens are primarily traded against Ethereum. This virtual currency plays a major role in the digital economy after a failure of Bitcoin. It is not just a parallel mechanism. Blockchain and NFTs also make real dollar millionaires. This is the case of the artist Mike Winkelmann aka Beeple who sells a work 100% created on computer at a price beyond imagination.

Beeple sold a digital photo called “Everyday: the first five thousand days” for more than $69 million. This transaction took place at the respectful Christie’s auction house in New York. The NFT in question can be downloaded at will on the Internet, but only the person who acquired it very officially can boast of being the true owner. In any case, the collection of NFTs is a separate economic sector weighing a few million dollars.

A cryptocurrency with a very volatile value

Blockchain was invented at the same time as Bitcoin. Their mysterious creator, Satoshi Nakamoto, has imagined an encrypted payment protocol. Cryptocurrency was born and became accessible to everyone in 2008. Bitcoin is managed with a virtual wallet and allows you to purchase certain goods and services offered online, especially on the darkweb. It is also possible to exchange it for currencies.

That said, the general public’s enthusiasm for Bitcoin quickly put the system to the test. Targeted by speculators, the cryptocurrency gained uncontrollable value before a dizzying fall. The course simply remains unpredictable. In France, the company Paymium allows you to exchange Bitcoins for euros. The volatility of this blockchain-based currency is such that it can gain and lose 20% of its value overnight.

Some limits of the digital monetary system

At the beginning, the blockchain was designed to bring authenticity to Bitcoin. However, the system repeatedly shows its shortcomings. In 2017, the general craze for cryptocurrency allowed it to gain 1000% of its value. The AMF or Financial Markets Authority had to warn investors about the volatility of cryptocurrencies. For its part, the Prudential Control and Resolution Authority or ACPR warns the public about the dangers of Bitcoin.

The volatility of the value of Bitcoin leads to its exclusion from regulated markets. Despite the maturation of blockchain technologies, investors have no guarantees. Regulators have attracted the attention of savers, but some countries have taken the step of official recognition. In Japan, Bitcoin has become a legal means of payment since April 1, 2017. In November of the same year, the cryptocurrency was worth the equivalent of 191 billion dollars.

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Ethereum brings some improvements

Ethereum and Ethereum classic (ETC) coins

Cryptocurrency invented in 2014, Ethereum has surpassed all others in terms of popularity. In the first quarter of 2003, 1 Ether was valued at €2,300 compared to €33,000 for 1 Bitcoin. The latter is limited to payments, while Ethereum offers much more. Its blockchain centered on the “smart contract” automatically executes actions validated by stakeholders. These smart contracts have attracted the interest of banks. Insurance companies and lawyers have also looked into this mechanism.

With Ethereum, transfers of ownership are done securely with payment of compensation to the verifiers. Axa was the first to offer blockchain coverage. From September 2017, with the help of the start-up Utocat, it set up an Ether compensation system for flight delays. Reimbursement of the aircraft item is made automatically once non-compliance with the schedule has been verified by the blockchain specialist.

Towards general recognition

Despite a certain reluctance towards cryptocurrencies, banks are starting to place their trust in the Ethereum blockchain. Financial institutions are even looking to develop projects using this technology. Large companies such as Boeing have also been interested in the registration and authentication system. The American aircraft manufacturer has filed a patent on a blockchain created to strengthen the reliability of the GPS of its devices.

Boeing’s patent application was filed at the end of 2021. The manufacturer wants to be the sole owner of an emergency on-board GPS. This technology aims to prevent any attempt at location theft through computer hacking. As early as 2020, the aeronautics giant entered into a contract with Honeywell. The deal worth a billion dollars. Concretely, computer scientists will ensure the authenticity of the parts constituting the devices using the blockchain principle.

A question of traceability above all

Blockchain makes it possible to follow the traceability of a good or service exchanged between Internet users. Some applications outside the scope of cryptocurrencies are currently already operational. There is in particular the one which helps to recognize the journey of foodstuffs. Carrefour is a pioneer in this field by launching a QR code which gives all the details on the products offered on the shelves. This system mainly concerns meats for which consumers are demanding.

Blockchain is also of interest to the world of video games. Tokens allow gamers to buy or sell weapons or equipment in their favorite entertainment. Exchanges take place without the intervention of the publisher. In a completely different sector, layer-by-layer verification systems appeal to traders. In the advertising market, advertisers have also expressed their interest.

Open or closed system

A blockchain can be private or public. The first is reserved for a restricted circle while the second can be consulted by everyone. Which means that an Internet user carrying out a transaction can check whether it is indeed registered in the tamper-proof register of transfers of value. This person can also know in detail the rules governing this blockchain. This principle applies to Bitcoin and Ethereum platforms.

For private blockchains, the protocol can be modified according to the wishes of a minority. The consultation often remains open to all, but there are sometimes authorizations to be obtained for registrations. In short, these closed systems are most of the time experimental or reserved for the internal use of a company. A variant called blockchain permissioned exists. This is the case of the Rippe project. The start-up behind this name itself chooses the transactions to validate on its own network.

Kesako consortium blockchains?

A consortium blockchain is owned by several mandated decision-making actors. A simple majority can make changes or modifications, but unanimity is not required. It is sometimes financial institutions that opt ​​for this semi-flexible organization. In most statutes, at least 8 entities are needed to decide on the fate of a blockchain. This is different from a private system where approvals are taken by hand-picked participants.

The consortium blockchain is a hybrid model appreciated by professionals in the financial sector. It mainly corresponds to regulated environments. The identity of the participants is well known. The most cited example is the R3. This gathering brings together 100 banking institutions including BNP Paribas. As of May 2017, R3 weighed 107 million euros.

What does French law say about blockchain?

The legal definition of blockchain is that of the creation of titles and cash receipts. An order dated April 2017 stipulates that a company can obtain consideration for a loan granted to a beneficiary from a crowdfunding platform. Article L 223-12 of the Monetary Code designates the blockchain as an electronic recording device intended for authentication. Specific titles can be exchanged there in the form of minibons.

A Council of Ministers in December 2017 resulted in an order authorizing the transfer of properties and financial titles via blockchain. The Minister of the Economy at the time explains that this innovative system will be faster and cheaper than others in addition to being transparent and secure. Finally, the European Union has an observatory dedicated to this technology. With the participation of the start-up studio ConsenSys, the Commission is preparing directives concerning cryptocurrency assets. Continental authorization procedures are well underway.