Do you know Nakamoto ? The origin of Blockchain

The origin of the blockchain is in the Bitcoin, this virtual currency created in 2009.

As a matter of fact in 2008, after the financial crisis, the still unknown designer of the cryptocurrency Bitcoin, acting under the pseudonym of Satoshi Nakamoto, thought about a currency that would be usable without the intermediary of financial parties (banks).

The biggest challenge for this was to protect this (virtual) currency from double spending : how to give confidence to users that the money is not used more than once ? In the Bitcoin White Paper (1) Satoshi Nakamoto explains he worked “on a peer to peer model that timestamps the transactions, by hashing them into an on-going chain, forming a record that cannot be changed”. This chain of recorded transactions is known as the Blockchain.

It is safe thanks to the “proof of work” that is required to validate each new transaction that “enters” the chain of previous transactions.

The proof of work is described by Primavera De Filippi in her conference in Paris (2), as a mathematical problem that has to be solved. This problem is similar to finding the opening combination of a padlock : “you have to test all combinations to find the solution but it is very easy for anyone to check the solution is the right one”.

People who put their computing capacity at disposition to solve those mathematical problems are the miners. Once a miner finds a solution he proposes it to the network that can easily check his solution is the right. Then the transaction is validated en enters the chain of transactions already approved.

Through this proof of work, the Bitcoin has been able to unlock the issue of “trust” raised by this new virtual “peer-to-peer” currency.

As Bettina Warburg says in the introduction of its Ted’s Talk (3), blockchain is about “increasing trust between individuals to facilitate value exchanges”.

Source : Blockgeeks

Let's be clear at that stage, as detailed in the HBR by Michael J. Casey and Pindar Wong (4) the blockchain technology is about encryption of datas : “With blockchain technology, the core system that underpins bitcoin, computers of separately owned entities follow a cryptographic protocol to constantly validate updates to a commonly shared ledger”.

Some people see the blockchain as the most important invention since internet itself, which strengthens probably the need to understand more about it.

Want to know how this can impact Procurement operations ? Please browse our articles on this blog

KEY WORDS TO REMEMBER : Proof of Work - Trust

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