What is a Blockchain and how does it work?

A Blockchain is a database in which all Bitcoin transactions carried out since 2009 are registered: a sort of accounting ledger based on peer-to-peer technology, which as well as being accessible to all via the web, enables its users to establish network nodes.

This verification system does not require the approval of financial institutions to carry out transactions and can be used in any setting which involves interaction between several groups or individuals.  It can be used in place of a notarial deed, to ensure correct procedure is followed in the brokering of stocks and shares and to guarantee the validity of ballots (because the node network monitors the transactions).

This protocol is in fact so strong, secure and unassailable that it has convinced numerous banks (25 so far to be precise) to invest in the R3 Start Up, which specialises in the creation of Blockchains for the financial sector and its traditional credit circuits.

In order to understand the how this database works, suffice it to say that all transactions pass through nodes used to authenticate them. The transactions are inputted into a free block and a special time stamping system ensures that that quantity of Bitcoins will not be used to make any other purchases and that no-one else can modify the transaction.

The Bitcoin is essentially a source of information to be accessed and in each block there are 25 Bitcoins. Each one of these is freed by the so-called miners, which have the calculation capacity to resolve the formula designed to protect them.  Furthermore, the greater the calculation power used to resolve the formulae, the greater their complexity increases.

Every time someone frees a block they earn 25 Bitcoins which are released onto the market to earn profits. The nodes which control and confirm the transactions also make a small amount of profit from them.  In practice, the system described above is able to function for the simple reason that every participant stands to earn something.

All this has led to the emergence of a new professional figure known as a Blockchain engineer and those moving into this sector are usually graduates in IT Engineering who are familiar with leading open source platforms and are well-versed in the field of cryptography.

These new professional figures are very capable programmers and experts in the use of JavaScript as well as Python. Only last year demand for their skills rose by 200% and career opportunities for such individuals are increasing steadily.

In Italy the average annual salary of a Blockchain engineer ranges from 40 to 50 thousand Euros before tax, but in other countries the figure can be much higher, for example 130 thousand dollars in the USA.  Furthermore, according to a study by TechCrunch, every 24 hours the Blockchain sector creates job openings at a rate of 14 vacancies per programmer.

From an academic point of view, various institutions have set up courses to train people in these skills. Examples include MIT, Stanford University and the University of Princeton. In Italy, the Polytechnic University of Milan has launched a course on the application of this technology to digital transactions.

Ethereum and Hyperledger Fabric are perhaps the best-known Blockchains and both specialise in the development of instruments for Start Ups as well as for multinationals. So far, this technology has already been embraced by companies such as IBM, Unilever and Nestlé, with demand expected to rise considerably in future years.

Translated by Joanne Beckwith