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    The functioning of blockchain technology
    16-06-2020

    The functioning of blockchain technology

    In the known monetary system, electronic money is nothing more than the availability of purchasing power registered in an account with a bank.

    A payment in electronic money, for example for the purchase of an asset, does not involve the physical transfer of money, but simply the reduction of the balance of the buyer and the simultaneous increase in the balance of the seller by a corresponding amount. The transfer of scriptural money is perfected through simple writing. In any case, the presence of a bank as an intermediary, in this scheme, is fundamental since it is up to the same bank to certify the actual availability of the funds for the buyer, to receive and execute the payment order, debiting the account of the buyer and crediting the seller's account,

    The inventor of Bitcoin instead proposed an electronic payment system based on evidence of encryption, rather than trust, allowing the parties to negotiate directly with each other without the need for a third party.

    Bitcoin's fundamental innovation, as the technology supporting the payment system, consists in distributing the keeping of accounts: the accounting book where all transactions are recorded is no longer kept by a single bank or by the banking system as a whole, but by each of the users in their local storage. In this way, in addition to being decentralized, the register is also distributed in a network in which no node is central. This distributed ledger is what is called a blockchain. The blockchain is therefore both a distributed database that contains all Bitcoin transactions from the beginning (January 3, 2009) is a method to protect this database. If you have bitcoin account then for trading go to bitcoin-up.live.

    In summary, it is, therefore, a secure transnational register, shared by all parties operating within a given distributed computer network.

    Validation of transactions through mining

    The mining of bitcoins is nothing more than the series of mathematical calculations that computers connected to the network Bitcoin process to confirm transactions and increase security. As a reward for their services, "miners" are entitled to commissions on the transactions they verify, in addition to a prize consisting of newly created bitcoins. The activity of mining is a specialized and competitive market, in which the rewards are redistributed in proportion to the amount of computation provision (Guttmann, 2014).

    One out of the several benefits of the mining mechanism was to reward the first Bitcoin users for supporting their network. This was particularly important in the beginning when Bitcoin started quite prominently. In fact, since Bitcoin did not have a company that supports it, marketing needed a somewhat "viral" development and this would have been impossible without the support of the first users. Establishing a prize for "miners" was a way to "enrol" them, through a word of mouth network (Franco, 2014).

    The merit attributed to Nakamoto was that of having avoided, in a monetary system without a central authority, that a sum of money is spent twice, as this would in fact amount to the creation of new money.

    In a system like that of credit cards, as we have already noticed, this would not be a problem: since there is a central authority that presides over all transactions, the first expense that is received is the one that is recorded and the second is rejected.

    The system that governs bitcoin transactions, on the other hand, is decentralized and involves servers and PCs distributed all over the planet which, due to normal Internet latency problems, may disagree on which of the two costs is the legitimate one (Faccini, 2017). To get out of this impasse, the Bitcoin protocol provides an ingenious stratagem, called proof-of-work (proof-of-work) which, in order to record (therefore make effective) a certain number of bitcoin transaction operations, requires that "strenuous" work be done first. In computer terms, it is a job that involves a huge amount of calculations by many computer processors who compete to discover a mathematical "secret". The search for this "secret" is none other than ' mining '. Whoever finds the "secret" first is the one who definitively records a block of new transactions in the public register (the blockchain).

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