Lately, there has been a lot of talk about Blockchain, or rather “Cryptocurrencies”, but how many people really know about this technology? How many have gone beyond the speculative and media aspects of this technology to fully understand its origins and potential?
Focusing only on the monetary aspect risks making us lose sight of the true potential and social revolution that this technological innovation could trigger, leaving us unprepared when, in the society of tomorrow, we inevitably find ourselves dealing with Wallets, Smart Contracts, and Gas fees.
What is necessary to understand even before the technological aspects is the “philosophical thinking,” the vision of a different society that lies at the origins of this technology.
The first Blockchain born, that of Bitcoin, was born in fact in 2008, in the midst of the global financial crisis, when the failure of “Lehman Brothers” revealed to the world the fragility of a centralized economic and financial system and how dangerous it was for the entire world to place such great power in the hands of a few people.
In a society dominated mainly by economic dynamics, it became dramatically clear how such a failure could put the social model itself in crisis, with a devastating impact on people’s lives, especially those of the weakest groups.
It was thus that under the pseudonym of “Satoshi Nakamoto,” presumably a group of philosophers, mathematicians, cryptography scholars, and computer scientists, devised a system capable of representing an alternative to centralized systems of value transfer, a system that, through a digital currency, allowed people and companies to carry out financial transactions independent of traditional circuits, a system whose intrinsic characteristics were completely antithetical to central systems, i.e., Secure, Decentralized, Transparent, and Independent.
Thus was born in 2008 one of the most important technological revolutions of the last decades, on a par with the Internet, one of those technological revolutions for which there will be a before and after.
Like all great innovations, Blockchain also initially presents itself in a rather ephemeral way, its potential is not immediately understood, but already a few years later, this technology begins to be widely used in the video game industry to buy and sell skills.
This first concrete application within the “digital worlds” represented by video games, which often reconstruct traditional social dynamics in games, makes it clear to many that this technology could really revolutionize future society.
Bitcoin, the cryptocurrency linked to the first Blockchain, thus goes from a few cents in 2009 to being worth over $67,000 in 2021.
But what is Blockchain and how does it work?
At the base of the Blockchain technology is a Distributed Database of Transactions structured in Blocks (Block), connected to each other like a Chain (Chain).
This “link” of the blocks guarantees the immediate traceability of any changes from block 0 to the last one in the chain.
The Blockchain database is shared among all nodes in the network, which automatically receive an updated copy with each new block of transactions.
Any “malicious” modification of the database by a node is immediately overwritten based on the principle of “dominant copy”.
The most widely distributed database in the network is considered the “valid” one, and the system automatically overwrites “invalid” copies present in the nodes of the network.
This mechanism, managed automatically by the protocol, guarantees the immutability of the transaction database. A malicious user would have to corrupt thousands and thousands of nodes scattered around the world in a few seconds to make an unauthorized change to the database, a practice that is virtually impossible, a bit like guessing the combination of a safe with thousands of combinations in a few seconds.
And so, a few years after the birth of the first blockchain in history and the proliferation of other first-generation blockchains, this technology further evolves giving rise to “Second Generation Blockchains” which, in addition to managing simple transactions, allow for the creation of “Smart Contracts”, i.e. intelligent digital contracts through which different parties can establish agreements and delegate their execution to this infrastructure, where the technology, in an absolutely impartial way (since it is incorruptible and unalterable), guarantees the parties according to the same principles of Security, Decentralization, Transparency, and Independence, effectively assuming the role of “Digital Notary.”
For the first time in modern history, a technological system is born that is not managed by a central entity but by the internal community of subjects (nodes) who freely and democratically participate in it, a system that offers citizens and companies around the world the possibility of transferring value and entering into contracts at low cost and with very high guarantees.
It is precisely the Second Generation Blockchains that explode the world of Decentralized Finance (DeFi), an ecosystem that provides financial services such as loans, investments, and payment services through Smart Contracts, which until a few years ago were only possible through traditional banking systems.
That’s why simply talking about cryptocurrencies and speculation without deeply understanding the scope of this innovation risks leaving us a step behind, especially in the business world.
Despite the fact that blockchain was born to manage financial transactions, today it has evolved and is able to manage any type of transaction and is therefore applicable to any context in which the principles of immutability and transparency are elements of value, such as the world of supply chain, traceability of the supply chain, digital art, and many others.
Thanks to these advances, the social impact of this technology is now known even to the powerful people in the world who will inevitably begin to attempt to regulate this ecosystem. This will be a decisive moment in its evolution.
Regulating a system implicitly means recognizing and accepting it, and although at first, this may appear as a defeat for the technological community that has supported it since its inception, it actually represents a great opportunity for growth that could quickly lead to mass adoption.
This technology is so revolutionary that imagining now the quantity and types of services that it will enable in the near future is anything but trivial, it would be a bit like imagining at the dawn of the Internet the birth of E-Commerce and Social Networks, but it is not difficult to envision a near future where it will be increasingly common to exchange value through these alternative systems that are faster and more economical than traditional ones, such as subscribing to smart contracts to activate, for example, an electricity supply, or seeking more competitive financing offers in the DeFi ecosystem, where private citizens make their liquidity available to finance a socially fairer ecosystem in the distribution and access to wealth.
Thanks to these potentialities, many strides have been made in terms of adoption in recent months.
Just think that in the course of 2021, El Salvador, through its president Nayib Bukele, adopted Bitcoin as a legal tender, alongside the US Dollar.
In a country where 90% of the population does not have a bank account or a credit card, and does not have its own currency, subject to the monetary policy of another state (the United States), Bukele and his government realized that this technology could give citizens a chance for social redemption.
Not having access to a bank account and a simple credit card in 2002 meant being cut off from the world, deprived of the opportunity to take advantage of the new digital economy that has revolutionized the global economy through the Internet.
Without considering the burden that Salvadorans who emigrated had to bear to send some of their earned money abroad to their family members who remained in the country. The absence of a bank account forced them to use cash international money transfer services, incurring very high fees, especially in relation to the amounts being sent.
Today, every citizen of El Salvador has a State-issued “Digital Wallet,” a next-generation bank account through which they can send and receive money and access services and purchasing opportunities that were previously impossible.
All of this was impossible before the advent of Blockchain!
Of course, this technology is not the solution to all problems. It also has ample room for improvement and needs to mature significantly by overcoming its major challenges in order to expand.
Bitcoin and cryptocurrencies in general are still very volatile assets, risky if one is not able to manage them and lacks the necessary culture and education.
It is a technology still in its infancy and therefore subject to attacks and misuse. After all, humans have always been skilled at using things incorrectly, especially with great inventions, and history is witness to this, from Fermi’s discovery of nuclear fission chain reaction to the invention of the Internet, and Blockchain will be no exception.
But Blockchain is not just cryptocurrencies, it is a formidable technology that will undoubtedly revolutionize the world, just as all great inventions and discoveries have done.
What we can do today is to follow this evolution and take advantage of the opportunities that it will offer us during its development, to ride the wave of this new sea and not remain passive spectators of a world and a society that is changing.
Luca Battini
CTO and Blockchain Innovation Manager at Basis Information Technology luca.battini@basisgroup.com www.basisinformationtechnology.com
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