What is the Blockchain?...

To be perfectly honest, knowing what blockchain, or blockchain technology, is is not going to help you become a better trader or make more profit. However, knowing at least superficially what it is is going to help them to: 

1) Understand the fundamentals of the assets that will be executed with traders. A crude analogy would be that of a stock trader who does not know what a company's stock is or what it represents.

 
2) Familiarize themselves with the elements of a blockchain that they will use, such as sending and receiving cryptocurrencies, sharing their public key, safeguarding their private key, etc. 

3) Understand how this new asset class works, identify the elements from which its value could be derived and create your own opinion of the future of this industry. Here is a definition that is simple to understand and encompasses the main characteristics of this technology. Simplistically, blockchain can be defined as: 
A record of transactions grouped into blocks, which are secured by cryptography and is usually distributed.

If this definition seems a bit complicated to you, you could also understand it as follows:

Blockchain is like a giant Excel, or a giant notebook, that everyone has, where everyone can write, that is always updated, but that no one can modify what is already written.

Let us now look at each of the elements of the definition separately and in a very simplified way to better understand each other. It is a record of transactions since all the movements that occur at all times and all over the world are written there. If Alice sends money (or in this case cryptocurrencies) to Bruno, this act is recorded. If Bruno then sends it to Carlos, this is also recorded. Everything is always recorded. After a certain time, 10 minutes in the case of Bitcoin, all valid transactions are grouped into a block that, once created, can never be modified. Every 10 minutes on average a new block is created, which refers to the previous block, forming a chain. 

This entire process, from sending cryptocurrencies to "immortalizing" transactions in blocks, is secured by cryptography. 

Among the most relevant elements are public-private key pairs, elliptic curve cryptography, hashes and Merkle Trees. These are more advanced topics beyond the scope of this section.

What are Cryptocurrencies?

Just like the answer to what is blockchain, knowing the answer to what are cryptocurrencies is not going to make you a better trader, but it is preferable that you know it. Knowing what they are will help you understand how to send, receive, store, and safeguard your assets. Without further ado, here is one of the many definitions that cryptocurrencies can have:

Cryptocurrencies are a digital medium of exchange that uses cryptography to secure transactions.

This is an even broader definition than the one we saw previously for blockchain and this may be due to the fact that its development started only a few years ago. The first and best known cryptocurrency is Bitcoin, which was proposed in 2008 and launched in 2009. Little by little new cryptocurrencies were created until reaching the more than 2,000 that exist today. 

Cryptocurrencies are so new that even different central banks and international organizations such as the BIS, the IMF and the World Bank are still debating whether cryptocurrencies are really currencies, assets, commodities, securities... or perhaps a new asset class. 

Alejandro O. Asharabed Trucido

Neura.Blockchain@aol.com

+54911 5665 6060

Buenos Aires, 2021, 28 de julio

IMF, World Bank and BIS champion central bank digital currencies at G20...

A new report released by the triumvirate of global finance argues that central bank digital currencies will benefit worldwide development.

In a joint report, the International Monetary Fund (IMF), the World Bank and the Bank of International Settlements (BIS) have proposed to the G20 that a cross-border network of central bank digital currencies (CBDC), underpinned by efficient technological integration and proactive international cooperation, could be of significant benefit to the world economy.

The report focuses on broadening the horizon beyond central banks’ individual studies of CBDCs for domestic needs, emphasizing that it is crucial to coordinate work at a global scale and to find common ground between various national efforts to reap the full benefits of digital currency.

If tackled astutely, the IMF, the World Bank and the BIS believe that the creation of CBDCs could offer a “clean slate” that would enable the global financial system to significantly enhance the efficiency of cross-border payments.

The report paints a bleak picture of the current system for cross-border payments, which is beset by long transaction delays and high costs due to an excessive number of intermediaries operating across different time zones across the correspondent banking process.

Moreover, cross-border flows are often opaque and difficult to trace, presenting a problem for Anti-Money Laundering (AML) and combating the financing of terrorism (CFT) implementation. Over the past decade, the attenuation of cross-border banking relationships has left some countries struggling to integrate into the global financial system fully.

The report weighs the significant benefits that CBDCs could present for increased efficiency and enhanced economic inclusion against the potential global macro-financial implications and risks involved in the widespread use of CBDCs for cross-border flows.

These challenges include dealing with the sudden capital flow reversals enabled by more frictionless cross-border flows and the potential impact on countries’ ability to manage their exchange rates. If the foreign currency becomes easier to obtain, store and spend, widespread currency substitution could potentially undermine states’ monetary policy independence and pose risks to both issuing and receiving countries.

A worldwide push for CBDC issuance, the report notes, would therefore require tight integration of multiple CBDCs and uniformity of design choices, alongside specific measures designed to mitigate these macro risks.

The groundwork would not only be conceptual and design-focused but would imply coordinated strategies, standardized practices and a degree of structural integration, ranging from the creation of new international payment infrastructures to targeted policies. The latter, for example, could include introducing limits on foreign CBDC holdings or transfers.

Related: UK chancellor names CBDC on list of financial reforms for Treasury

In addition to extensive infrastructural cooperation on technological interoperability and payment system access, there would need to be a similar level of regulatory coordination, implying the alignment of supervisory and oversight frameworks for cross-border flows and the coordination of AML and CFT measures.

While most countries are studying or developing pilots for CBDCs, central banks have taken a wide variety of distinct approaches to CBDC design and have paced their research and development efforts differently. China’s digital yuan is well ahead of the international game, and multiple countries have piloted CBDCs for cross-border use, including France, Switzerland, Singapore and Bahrain, to name just a few.

Alejandro O. Asharabed Trucido

Neura.Blockchain@aol.com

+54911 5665 6060

Buenos Aires, 2021, July 18

How does Blockchain work?

In order to explain in a summarized way the functioning of Blockchain, first of all, it is necessary to know the main elements that integrate it. Thus, the main components of a blockchain system are the following: 

1.0) The blockchains where the transactions that take place on the network are noted. 

1.1) The blocks are sequentially linked to each other, through functions called hashes (cryptographic digests), forming a chain. Each block has a certain maximum capacity and is like a page of an accounting ledger, in fact it is the accounting ledger, practically infinite, in which everything that has been written can no longer be erased or altered, which gives it absolute immutability.

2.0) The nodes are simply the computers, i.e. each user, that store the copy of the accounting ledger, i.e. they store the blockchain. To be configured as a node, each computer must have the corresponding software and in case of being a permissive network, obviously with the relevant permissions. 

3.0) Digital wallets or wallets, which are mere applications or interfaces through which users make transactions and manage their digital identity (ID) in order to operate. It is a simple app that can be downloaded to the user's device, through which the private key and the public key with which each user can operate are available.

3.1) On the other hand, there are also so-called miners, especially in cryptocurrency networks, who are the nodes that authorize the addition of blocks to the chain and, to do so, they must solve a mathematical problem following a consensus protocol. 

For this effort (which involves having great capacity and using a lot of energy) they receive rewards in digital currency that come both from new coins, which are created by mining the transaction, and from the commissions paid by those who order the transactions. 

In cryptocurrencies, mining can primarily use Proof of Work (PoW) or Proof of Stake (Proof of Stake) systems.

The operation of a common blockchain transaction begins with the sending of a digital asset from one digital wallet or wallet to another digital wallet of another user. 

These transactions have to be endorsed by several nodes and grouped with other transactions and then be taken by the miners as a job that they have to solve in exchange for a reward. 

The miners choose a set of transactions that can be different for each group of miners and compete with each other to obtain what is called a value (nonce) that solves the puzzle or mathematical challenge that authorizes the miner who solves it, (logically in a mechanized way through his computational capacity) to propose his block with the transactions that this block contains, to be added to the blockchain. 

This proposed block also includes the identification and hash of the previous block, thus establishing the linearity of the chain. All blockchains are distributed, i.e., they run on computers volunteered by people around the world, so there is no central database that can be attacked. A potential attacker would have to have at least 51% of the network to try to achieve his goal. 

For example, in the Bitcoin Blockchain, every ten minutes, all transactions made are checked, sorted and stored in a block that is joined to the previous block, thus creating a chain. If you want to steal a bitcoin you have to rewrite the entire blockchain in full view of everyone, which is practically impossible.

The encryption system is essential in blockchain. In 1976, Whitfield Diffie and Martin Hellman created the algorithm that bears their name, with which they proposed to break encrypted keys into two keys, so that there would be a public and a private one. The public key can be used to encrypt a message, but the private key is needed to decrypt it. 

These authors, together with Ralf Merkle, creator of the Merkle Trees and Ron Rivest, Adi Shamir and Leonard Adleman, creators of the RSA algorithm that allows the encryption and decryption of messages, constitute the group of creators of public key cryptography.

To make fraudulent modifications to the operations would require launching a simultaneous computer attack on the various databases. If, for example, an attempt were made to modify the contents of one of the blocks, the rest of the network devices would respond instantly, corroborating that the altered data does not match the rest and reverting it to the original. In this way, a healthy record is kept of operations in cryptocurrency networks and problems such as double spending or other malicious actions are avoided. 

Alejandro O. Asharabed Trucido

Neura.Blockchain@aol.com

+54911 5665 6060

Buenos Aires, 2021, July 18

What is Blockchain?

This was the usual question asked by everyone.... When this enigmatic anglicism was first heard, it was from the day Satoshi Nakamoto, the father of Bitcoin, published his White Paper on October 31, 2008, the day the world's first cryptocurrency based on the Blockchain was born. But it was not until, between 2014 and 2016, that this term or anglicism began to become popular in certain circles and business areas, defining itself, exponentially, towards a growing diversity of social, economic and institutional environments.

Blockchain, translatable as "blockchain", is a technology that is part of the field of so-called distributed ledger technologies or DLT (Distributed Ledger Technologies). It allows managing data, orders, transactions, assets and tokens, through an ingenious distributed or decentralized registration system that is recorded in blocks of information that are sequentially concatenated creating a chain of blocks or immutable and unalterable records, collaboratively shared among all members of each blockchain network, and which are verified by these members of the network, acting as "nodes" of the same.

In this way, a registration procedure is created, which works by means of consensus cryptography, equivalent to a ledger, but in this case digital, of which there are as many identical copies as members of the network. The cryptographic consensus used ensures that there is a single auditable and unmodifiable version of the data stored and of each movement or transaction, which introduces a sort of decentralization of the concept of trust, now based on P2P (peer to peer) collaborative relationships that do not require the existence of a central authority, as has been the common denominator to date.

In contrast to the traditional centralized databases housed in a central institution or on its servers, a distributed, decentralized, shared and replicated database can be created using blockchain, which can be public or private, permissive (accessible only to those who are admitted as members of the network, as occurs with a private or closed blockchain that could be created, for example, by a business group, a government organization or a network of military bases) or non-permissive (freely accessible to any user who wishes to do so by installing the appropriate free software).

The data or transactions recorded in the distributed ledger or accounting database must be immutable, auditable, have cryptographic protection and be equipped with a system for verifying their veracity, a task performed by the so-called validator nodes. This procedure allows the registration of different transactions on a decentralized basis, facilitating the exchange of information between parties in an efficient, open and verifiable manner.

Blockchain is known as the Internet of Value, also the Internet of trust, as opposed to the current Internet of information, since it allows the transfer of value or digitized assets between users, as opposed to the classic Internet that only allows sending information or copies of assets. A simple example can help to understand this difference: Currently, copies of a photograph can be sent from one device to all desired users, while with blockchain, ownership of the photograph can be transmitted to another user. The same idea works for countless applications that are currently being developed: transfer of property titles, financial assets, etc.

An essential element of blockchain is that it allows users who do not fully trust each other to maintain a consensus on the existence, status and evolution of a series of shared factors; in other words, the network itself acts as a guarantee of faith, introducing systems of trust between strangers. From a technical point of view, this trust and consensus-based system is built from a global network of computers managing a gigantic database.

There are currently several blockchain networks operating worldwide, somewhat like different operating systems. For example, bitcoin, the famous cryptocurrency, which is configured as the first effective and globally widespread application of blockchain, is one of them. Another of the most prominent is Ethereum, which is formed by thousands of nodes distributed around the world and that form a platform on which you can move or develop many specific applications, given its versatility, being especially useful for the development of so-called Smart contracts, with the ERC-20 protocol for the creation and exchange of tokens.

In fact Blockchain, is the network that is being implemented in the world, of semi-public or public character requiring the identification of the participants and multisectorial, in which companies of all types and sectors participate, from small start-ups to the majority of technology companies, consulting firms, recognized law firms, various universities, banks and private and public institutions.

Alejandro O. Asharabed Trucido

Neura.Blockchain@aol.com

+54911 5665 6060

Buenos Aires, 2021, July 18