How does blockchain technology work and how is it applied?

Blockchain is a set of technologies that enable the maintenance of a distributed ledger of data (Distributed Ledger), structured as a blockchain containing transactions. It is often defined as an “incorruptible digital ledger of economic transactions that can be programmed to record not only financial transactions, but virtually anything of value.”
To validate changes to be made to the registry, in the absence of a central entity, the nodes must reach consensus (at least 51 percent of the nodes, ideally). Think of a system where two people make an agreement: witnesses are needed to validate it, and the same thing happens in blockchain.

The more nodes there are, the more the security of the system increases!

Table of Contents:
How does blockchain work?
What are the features of blockchain technology?
Blockchain: from Bitcoins to the Internet of Value
Tokens
Digital Citizenship
Cybersecurity and blockchain
How does blockchain work?
Although it sounds complex, how blockchain works is actually quite simple:

• Each block usually includes a hash, which is a fingerprint of the newly authenticated block that is impossible to mutate or change later. This hash, then, uniquely identifies the block and allows it to be linked to the next block through its identification.
• Each block contains several transactions, a hash that records information about the referenced block and another hash with information about the previous block.

In this way, it is possible to create a chain by binding one block to another: if someone attempts to modify the data, the hash and the entire chain break.
The transaction contains information about the public address of the receiver, the characteristics of the transaction, and the cryptographic signature that guarantees security and authenticity of the transaction.

In essence, the blockchain is a public and shared ledger consisting of a series of clients or nodes: it is organized to automatically update itself on each of the clients participating in the network, and each transaction must be automatically confirmed by all individual nodes through cryptographic software guaranteeing their digital identity.

A great deal of computing power is required to encrypt the transactions performed since more and more blocks are required to authenticate transactions: the nodes that provide the computing power are called miners and earn a fraction of new cryptocurrency (never before owned by others and not present in past transactions already recorded) for each block in which they participate.

What are the features of blockchain technology?

The blockchain has several features:

• Data digitization: information and data are digitally transformed and stored;
• Decentralization: information is distributed across multiple nodes to ensure security;
• Disintermediation: no intermediaries are needed to handle transactions;
• Transparency and verifiability: the content of the registry is transparent, searchable and verifiable by anyone;
• Immutability of the registry: the data in the registry cannot be changed without the consent of the network;
• Traceability of transfers: each item in the register is traceable and can be traced back to its origin;
• Programmability of transfers: every operation can be scheduled.

Blockchain: from Bitcoins to the Internet of Value
The birth of Bitcoin defines the first blockchain-based transaction in 2009. It consists of a protocol built to implement peer-to-peer electronic payment system capable of functioning without financial intermediaries.
Bitcoin is the first cryptocurrency to use a new type of distributed ledger to keep track of all transactions, always rewarding in Bitcoin those who provide computing power to generate new blocks for authentication.
In these transactions, the exchange of value is thus decentralized, secure and programmable.

To date, the benefits of blockchain technology fall in all areas where certification of information is required such as financial transactions, accounting assets, wills, and money transfers. Prominent sectors include:

• Token
• Digital citizenship

In Blockchain technology, the digital asset is unique and cannot be duplicated. Thus, the Internet of Value defined as a digital network of nodes that transfer value to each other through a system of algorithms and cryptographic rules that allows consensus to be reached, even in the absence of trust, on changes to be made to a distributed ledger that keeps track of unique digital asset transfers is born.

An example of Blockchain used not only for cryptocurrencies, but also for other types of information, is Ethereum.

Token
A token is a set of digital information, recorded on a distributed ledger, that grants a property right to an asset and to the information itself recorded on the blockchain, which can be transferred via a protocol. Tokens can be fungible or non-fungible.

• Fungible tokens: can be replaced with something identical and are related to cryptocurrencies and digital currency. The ultimate fungible asset is money, since a banknote of a given currency and quantity, if authentic and intact, is always replaceable by another banknote of the same currency and quantity
• Non-fungible token (NFT): have an identification code that makes the property unique. Used for:

Digital identity management
Collectibles
Traceability projects (digital twin)
Supply chain process automation
Electronic voting
Digital citizenship
Not only in the crypto, artistic and digital spheres, the evolution of blockchain is also expanding to the state level, with the goal of streamlining document and practice management.

Developing digital identity systems through blockchain technology means that digital citizenship becomes shared and decentralized, and, identification systems must also be adapted.

Think, for example, of SPID, which can follow the SSI (self-sovereign identity) paradigm in which the user can decide what data to share of his or her identity. This makes it possible not only to ensure data security but also to improve privacy management.

Cybersecurity and blockchain
No computer system or new technology can be considered 100 percent secure. Although some of the functionality behind blockchain ensures the immutability and integrity of data, just like other systems there is a need for high security controls and standards, especially in the face of ever-evolving cyber attacks. Certainly, blockchain has opened up new opportunities for those companies embarking on a path of digitization. But how can this technology help the cause?

In addition to making networks more secure, it can also provide users with a “decentralized” digital identity, protecting personal data from breaches. In this way, users have digital “identity wallets” that store the original identity in a single location, from which access can be granted or denied to third parties. Identity wallets not only offer users the ease and security to share their information, but also allow users greater control over their data.