Blockchain is the new buzzword in the tech world. All sectors are starting to work on concrete use cases. However, few players can claim to have developed revolutionary solutions. For good reason: blockchain technology is still very complex to understand.
The blockchain (whose translation in French is chain of blocks) is a technology that allows store and of transmit information transparently, secure and without a central control body. It looks like a big database that contains the history of all exchanges made between its users since its creation. Blockchain can be used in three ways:
- For transfer of assets (currency, securities, shares, etc.)
- For a better traceability of assets and products
- For automatically execute contracts (of “smart contracts”).
The great particularity of the blockchain is its decentralized architecture, that is to say that it is not hosted by a single server, but by a part of the users. There is no intermediary, so that everyone can check the validity of the chain themselves. The information contained in the blocks (transactions, title deeds, contracts, etc.) is protected by cryptographic processes which prevent users from modifying them afterwards.
NFTs refer to non-fungible tokens in English, i.e. non-fungible tokens in French. They represent a single object that is not interchangeable, like a work of art (photography, digital painting…). The NFT designates a digital file, associated with an unforgeable certificate of authenticity. It is designed using blockchain technology. The latter makes it possible to register proof of ownership of the asset in a digital register. I’Ethereum is the platform on which the majority of NFTs are distributed.
In 2021, American artist “Beeple” (Mike Winkelmann) sold a digital photo named “Everyday: the first five thousand days” for more than 69 million dollars by the auction house Christie’s in New York. This digital photo in NFT can however be consulted and downloaded by all Internet users who wish. In vogue on the art market, NFT reassure collectors of the risks of counterfeiting, but they raise concerns NFT transactions from wallets linked to illegal transactions increased in 2021, reaching $1.4 million in the fourth quarter, according to chain analysis.
Bitcoin is the best-known use case of blockchain. It was created in 2008 by an unknown person whose pseudonym is Satoshi Nakamoto. It designates both a secure payment protocol and anonymous and a cryptocurrency. Anyone can access this blockchain (it is public, therefore open to everyone) and therefore use bitcoins. To do this, simply create a virtual wallet, downloadable from the application stores. Cryptocurrency is used to buy goods and services and can be exchanged for other currencies.
Some platforms offer the conversion of dollars, euros or yuan into bitcoins. This is the case of Paymium, a French company that allows you to exchange bitcoins for euros. Bitcoin has a very volatile price. It can increase or decrease by 20% in just two days. This volatility is linked to the strong speculation around this currency and the absence of a regulatory authority. At the beginning of December 2017, the price of bitcoin exceeded 15 for the first time. 000 dollars. It increased by more than 1000% over the year 2017. Faced with this surge, the Financial Markets Authority (AMF) and the Prudential Control and Resolution Authority (ACPR) warned investors about the risks associated when buying bitcoins.
“This valuation may as well collapse in the same way. Buying/selling and investing in bitcoin to date takes place outside of any regulated market. Investors are therefore exposed to the risk of loss. very high in the event of a downward correction and do not benefit from any guarantee or protection of the capital invested”, indicates the two regulators in a press release. The latter would be increasingly solicited by savers on this subject. In Japan, the bitcoin was recognized as a legal means of payment on 1er April 2017. The capitalization of the first cryptocurrency reached 191 billion dollars in November 2017.
The Ethereum blockchain has become as popular as bitcoin. Created in 2014, Ethereum also uses its own cryptocurrency: ether. Its price is lower (around 2,300 euros in February 2022, compared to 33,000 euros for bitcoin). Unlike bitcoin, which only allows simple transactions (mainly payments), Ethereum goes further. It allows you to run “smart contract“, autonomous programs that automatically execute actions previously validated by stakeholders.
Ethereum and its smart contracts are of interest to banking and insurance players, but also to the legal professions. These actors will be able in the future certify transfers of ownership in a more secure way or automatically pay compensation. Axa was the first insurer to release blockchain-based insurance. In September 2017, he launched a automated insurance for aircraft flight delays. Based on the Ethereum blockchain, this insurance is actually a “smart contract”, an intelligent contract that triggers automatic reimbursement once the delay has been noted. This offer called Fizzy was developed with the start-up Utocat, which publishes a platform to accelerate the design of blockchain prototypes.
On the banking side, many projects are underway. Other industries are experimenting with blockchain, such as Boeing. The American manufacturer has filed a patent application for a blockchain-based system that would strengthen aircraft GPS systems. The application published on December 14 by the United States Patent Office mentions a “backup and anti-spoofing (GPS location spoofing) on-board GPS system” that could be used in the event of a malfunction in the main system of an aircraft.
Blockchain technology is still young. However, some applications are already operational. One of the most common is food traceability. Carrefour is one of the precursors with its QR code affixed to several types of food (chicken, tomato, egg, etc.) which allows you to know everything about the origin of the product (origin, name of producer, date of packaging, etc.). .). Automatically trigger compensation is an application of great interest to insurers. This is made possible via smart contracts, autonomous programs that run automatically following pre-defined conditions.
Axa, for example, makes it possible to compensate passengers for a flight that is late. Finance has also made good progress in the field of blockchain, especially in the field “security tokens”, digitized financial securities and recorded on the blockchain. For the issuer of the token (or token), there are only advantages: fewer intermediaries, almost immediate execution and settlement and cheaper process.
The gaming world has found a use case in blockchain: digitize features. Thanks to a system of tokens (or tokens), players actually own their objects (and no longer the publisher) and can therefore buy, sell and exchange them as they wish. There are many others like the securing commercial transactions in trade finance or even disintermediation in advertising.
What differentiates the private blockchain from the public blockchain is its degree of openness. The public blockchain can be viewed and used by anyone. Anyone can send transactions to it and expect them to be recorded in the ledger (if they follow the rules of that blockchain). This is the case of the Bitcoin and Ethereum blockchains. In the private blockchain, an organization can change the protocol whenever they want. No one can participate without being authorized but everyone can consult it.
Private blockchains are used a lot by companies for internal experimentation. They can also make it possible to connect different information systems that do not speak well within the same organization. There is also the “permissioned” blockchain in which an entity has control authority over the network. This is the case, for example, of the Rippe blockchain because it is a start-up (of the same name) that determines who can validate transactions on the network.
The “consortium” blockchain brings together several actors who have rights and the decisions are made by the majority of the actors. For example, a dozen financial institutions could agree and organize a blockchain in which a block should be approved by at least 8 of them to be valid. So it is very different from the private blockchain and the public blockchain. Not only are participants in the approval process limited and selected, but majority rule is no longer required.
This hybrid blockchain is a real advantage for players in the financial sector, because they operate in regulated environments and are notably obliged to know the identity of the participants (which is not the case in the public blockchain). The best-known blockchain consortium is R3. It has around 100 financial institutions including BNP Paribas. In May 2017, he raised 107 million euros.
In France, the blockchain has a legal definition since the order of April 2017 relating to cash vouchers as part of the creation of securities issued by a company in return for a loan granted on a crowdfunding platform. This ordinance modifies the article L 223-12 of the monetary and financial code which defines the blockchain as a “shared electronic recording device allowing the authentication of operations on specific securities, intended to be exchanged on crowdfunding platforms: minibons”.
At the beginning of December 2017, the Council of Ministers adopted an ordinance allowing the transfer of ownership of certain financial securities via the blockchain. This is a first in Europe. “Using this technology will allow fintech and to other financial players to offer new solutions for the exchange of securities, faster, cheaper, more transparent and safer solutions”, rejoiced the Minister of the Economy, Bruno Le Maire.
For its part, the European Union has launched an observatory and a forum dedicated to the blockchain in partnership with the start-up studio ConsenSys, created in 2014 by the co-founder of Ethereum, Joseph Lubin. In the first half of 2022, the European Commission must submit a directive on crypto-asset markets, called the MiCA directive. Only certain cryptocurrencies could be authorized in the European Union.
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Blockchain: definition, bitcoin… Everything you need to know
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