How to Store Billions of Dollars Without Anyone Being Able to Steal Them? The Inviolable Safe?

But how does it work?

This innovative technology that uses bitcoin as a unit of value to:

Carry out person-to-person transactions with confidence worldwide 24/7;

store our values;

keep a history of all transactions in a transparent manner;

is called the blockchain.

Each block contains a series of 500 to 2,000 transactions on average.

A transaction is an exchange of value between two accounts. As in a classic bank payment, a value is transferred from an X account to a Y account.

In fact, it is the status of each account after the transaction that is recorded in the blocks. It is therefore the balance of what each account can still spend.

The blockchain protocol takes care of checking the validity of each transaction, i.e. it checks whether the account that wants to make a transfer has sufficient funds to do so. It also checks that a value is not spent twice.

This protocol and the database of transactions grouped in blocks is distributed to thousands of computers around the world.

Every 10 minutes, a new block of validated transactions is added to the existing chain. This new block, which is time-stamped, also contains an encrypted image of the previous transaction block.

The blockchain is therefore a kind of accounting ledger that records all transactions between all accounts in a secure, transparent and chronological manner. It does this recording in blocks of several hundred transactions.

Let us take an example.

Alice must pay 1 Bitcoin to Bob.

Alice’s account (her wallet in the jargon of cryptocurrencies) contains 3 bitcoins and as she decides to send one, the transaction can be validated. Once the transaction has been validated, it will be impossible for Alice to spend more than 2 Bitcoins (3 minus the one sent to Bob) from her account (wallet).

The transaction request is validated by the protocol and is sent to a pool of all the transactions to be added to the blockchain. The blockchain is distributed to thousands of computers around the world, each of which will compete to create a new block.

Every 10 minutes or so, a block containing 500 to 2,000 validated transactions is added to the chain of previous blocks with an encrypted link containing the “picture” of the previous block.

As you can see, the new block is composed of the updated balance of each account. The database is now ready to validate new transactions.

The important points

This database is:

• Made up of time stamped blocks containing 500 to 2.000 transactions.
• Each of these blocks is linked to the previous block through an encrypted link, this link is an encrypted image of the previous block.
• Updated with a new block of transactions every 10 minutes.
• Is distributed on thousands of computers around the world, so it is the most secure information in the world.

In our example:

• The transaction between Alice and Bob is validated and time-stamped.
• The transaction enters a pool containing all the other transactions that have also been validated.
• Validated transactions are collected in blocks of +/- 500 to 2,000 transactions.
• Each new block of validated transactions is added to the chain of existing blocks via an encrypted link (this one contains the image of the previous block).
• Alice and Bob’s wallet balances are up to date and ready for a new transaction.

How are transactions validated?

This is the consensus among thousands of computers around the world. This consensus between all these computers allows one of them at a time to add a new block of transactions in the blockchain.

These computers are called miners.

How does this consensus work?

Each of these computers (miner) gathers between 500 and 2,000 validated transactions in a block. Among these thousands of computers spread around the world, only one is selected to add its new block of validated transactions. The selection is done through a contest that consists in finding the answer to a mathematical puzzle by trial and error.

The computer that finds the answer first is selected to add a new block to the existing chain. To do this it sends the correct answer to the puzzle to thousands of other computers around the world. These computers verify that the winner has the correct answer. They add the new block to the chain with an encrypted link.

The consensus is reached, and we move on to the next block.

The miner (computer) that has been selected to add the new block is rewarded with bitcoins and fees (commissions), that’s how bitcoins are created as you go along.

Important points to remember

• Bitcoin is an (the first) application of blockchain technology.
• A blockchain is a transparent and secure database containing all transactions since the first one that took place on January 3, 2009.
• This database is distributed and continuously updated in an encrypted manner on thousands of computers around the world.
• The more minors there are, the more secure the system is. It takes more and more computing power to win the competition and be the first to find the solution.
• There is no head office address, no shareholders, no staff to make Bitcoin work, it is a protocol that works autonomously with its own economy. There is no one left to control our values, we become masters of what belongs to us.

The blockchain allows us to make our transactions:

• From person to person without any intermediary
• Transparently and securely
• 24/7
• At a minimal cost

No one has ever managed to steal a single bitcoin from the blockchain. The technology developed by Satoshi Nakamoto has thus remained unimpaired after more than 10 years of activity. The potential bitcoin booty is worth 255 billion dollars today (31/10/2020)!