Bitcoin and Blockchain: What it is, How it Works and How to Invest?

What is Blockchain

Blockchain means a chain of blocks. It is a system with which you can secure transactions between people worldwide without the need for intermediaries.

Blockchain was born out of the need to eliminate intermediaries such as banks in financial operations. These institutions are necessary to make transactions of value because they are in charge of certifying that we are who we say. In exchange for providing us with this service, banks or electronic platforms such as PayPal keep user data and trade with them. This restricts privacy and, with it, freedom.

Blockchains came to change this. And it is that with this technology, it is not a single participant who has the information but millions. It is a large database in which many nodes keep a copy of the information. Blockchain bases the certification of consensus information. That is, if we all have the same information, it means that this information is true.

Each transaction that is made is added as a block to a chain. Therefore, the records are linked and encrypted to protect both the security and privacy of transactions. This also means that such transactions are anonymous. The system only knows that you want to transfer a certain amount to another from a digital wallet, but the people’s data is unknown.

The key elements of a blockchain

  1. Distributed ledger technology
  2. Immutable records
  3. Smart contracts

How Blockchain Works

Everything starts when A wants to make a transaction for B. In the network, this transaction is represented as a block. This is transmitted to all parts of the network, that is, to the connected nodes, so that they approve its validity. Once this is done, the block can now be added to the chain, becoming a transparent and memorable record. Finally, the money moves from A to B.

In this process, the nodes confirm that whoever wants to make the transfer has sufficient funds. If so, everyone ‘notes’ the transaction and certifies it can become part of the transaction block. This block is going to get bigger to the point where it no longer supports any more transactions.

The block’s capacity will depend on the structure of the Blockchain and the size of each transaction. Once you have reached your limit, it will be time to validate it, which occurs when users do mining. This work consists of carrying out a series of quite complex calculations that, in addition to time, require a lot of electricity.

Once this is done, the blocks will be permanently registered on the Blockchain. This means that they cannot be modified without altering the other blocks linked to them, something practically impossible. To carry out such an operation, most of the nodes would need to validate it.

Advantages of Blockchain

Blockchain is a large ledger where all transactions are recorded. With this technology’s appearance, many fintech was born, that is, startups that offer their clients innovative financial products and services through ICTs, information, and communication technologies.

These fintech companies, especially financial ones, take advantage of Blockchain for their business. They have also started using regtech (technology regulation) solutions to reduce risks, increase security, protect their data, among other things. But beyond what has emerged with the arrival of blockchains, it is important to know what specific advantages their use offers.

– Allows you to make financial transactions safely and reliably

– A fast and fraud-free payment alternative

– It is transparent and, at the same time, private

– The data is impossible to falsify

– It is an immediate process

– Information is never lost

– No mistakes

– The transaction cost is low

– Encourage globalization

Security and transparency at the service of banking

The Blockchain is a new reality that promises to change forever how we manage our information in the digital world. This technology allows transferring data and capital in a completely secure way thanks to sophisticated coding and encryption. Aware of the change that this disruption can have in the banking world, at Santander, we want to be pioneers in applying it to our services.

The Blockchain or ‘chain of blocks’ is a technology that allows creating networks of devices without a central and localized server’s need to connect them. It could be said that it works like an account book, where the operations of purchase, sale, or any transaction are recorded. For these movements to be recorded, they must have been approved by the rest of the participants in the ‘block’ network, that is, the users of this technology. Once the information is entered into them, it can no longer be deleted; only new records can be added.

Why is Blockchain so secure?

Since it is a distributed technology, each node of the network stores an exact copy of the chain, the information is still available. If an attacker wanted to trigger a denial of service, they could destroy all nodes on the network since the information would be accessible from at least one of them.

On the other hand, as it is a consensual registry, where all nodes contain the same information, it is almost impossible to alter it, ensuring its integrity. If an attacker wanted to modify the Blockchain information, he should modify the entire chain in at least 51% of the nodes.

Finally, since each block is mathematically connected to the next, the chain becomes immutable until a new one is inserted. When a block is changed, its connection to the chain is broken. To put it in an alternative way, all of the knowledge stored in the blocks is unchangeable and eternal.

Blockchain technology helps us to store information that can never be lost, changed, or removed in this way.

Application of Blockchain

The financial sector and the world of cryptocurrencies are not the only ones that can benefit from Blockchain technology. Many sectors see this technology’s potential, which, added to others, can be very useful.

Concerning the financial sector, the World Economic Forum has ensured that we will witness the Blockchain revolution in the coming years, as it will eventually end up becoming the “heart” of the global financial system.

Banks already use this technology to streamline payments, transfers, and the sending of remittances and lower the costs associated with these processes. Stock markets like Nasdaq use it too. There are some of the other places where this technology is being used.

– Distributed cloud storage

– Decentralization of the Internet of Things (IoT)

– Identity management

– Data registration and verification

Examples of Application of Blockchain in Different Sectors

The Blockchain represents a major innovation that is used in particular in the banking sector. Indeed, historically, blockchain technology has developed to support transactions carried out via cryptocurrencies / crypto-assets (including bitcoins that are the most well-known form) and have the main characteristic depending on an organization. Centralizing (like a central bank) and being international.

1 – Legal

2 – Logistics

3 – Government

4 – Food

6 – Retail

7 – Health

8 – Insurance

9 – Travel

10 – Education

How to invest in Blockchain

If you wonder why, it is worth investing in Blockchain, the answer is only one: future technology. It is a technology that is revolutionizing the world. Every successful investor knows that the key to succeeding in business is to invest in projects with good prospects for the future since they are the ones that bring the most benefits in the long run.

If you are thinking of investing in Blockchain, you should know that there are many ways to do it. These are the most used options.

– Crowdfunding

Through crowdfunding, a collective financing network, it is possible to invest in the Blockchain. Many entrepreneurs want to make their technological ideas come true, and for this, they usually start a financing campaign. Many startups use Blockchain for their project, so you can decide to invest in this way. Of course, you must bear in mind that there is a high risk since these new companies often do not achieve the expected success.

– Stocks

One of the most familiar ways to invest in this technology is buying shares in startups that use Blockchain. It is a fairly reliable option, although it is important to know how to choose the right company to invest in. Companies that do not depend exclusively on the Blockchain are recommended because otherwise, you run a greater risk of losing your investment.

A good example of investment would be IBM since it is a technology company with a long history and other business initiatives. If the Blockchain succeeds as expected, IBM investors will win, but other projects such as artificial intelligence or the cloud computing service could be profitable if this does not happen.

– ICOs

This is another form of investment that could be beneficial, but you should be aware of it when investing. An ICO is an event created to sell a series of new tokens (cryptocurrencies) that are part of a Blockchain-based project. The investment is made with other already known cryptocurrencies such as Bitcoin or Ether. The objective is to raise money to carry out the development of the project in question.

It would help if you had the cryptocurrencies in a Bitcoin wallet, MyEtherWallet, or any other wallet you use to carry out the investment. Once you have registered for an ICO and have the funds available, you will need to send your cryptocurrency to the campaign address. Make sure you have the correct address, as they could find phishers or scammers posting fake addresses. In that case, you will never get your money back.

Once you have your tokens, you can keep them and receive dividends once the company successfully passes the ICO stage or negotiates them.

What you must remember

– Blockchain is a tool that allows information to be stored and transmitted in a reliable, transparent, and secure manner.

– It traces the history of all the exchanges that may have been carried out since the opening of a blockchain.

– You will find public and private blockchains.

– In a blockchain, all transactions are processed in blocks validated by network nodes before appearing in the Blockchain and visible to all users.

– Its transparency and security allow the Blockchain to be used in several applications that go beyond the scope of finance.


After the 2008 financial crisis, new technology was developed that quickly became a revolution. Satoshi Nakomoto (a pseudonym that has not yet been revealed) published the Bitcoin whitepaper and proposed a peer-to-peer electronic payment system that would allow online payments to be made over the Internet without the need for a bank or other institution must be interposed.

Bitcoin’s ingenious idea was to create a technology-based currency based on the principles of mathematics, cryptography, game theory, and social economy, to remedy many of the perceived grievances in the financial world. Bitcoin links unknown parties who want to conclude transactions with one another and reduces the incentive for corrupt people or organizations to control or skim off money at the expense of others. It became possible for the primary time to explicitly show and switch virtual amounts on the Internet without outside assistance.

Satoshi Nakamoto

Bitcoin is a cryptocurrency invented in 2008 with Satoshi Nakamoto’s aid and started in 2009 while its implementation changed into released as an open-supply software program. It is a decentralized virtual currency without a principal bank or single administrator despatched from user to consumer on the peer-to-peer bitcoin community without intermediaries’ want.

Bitcoin became designed around a decentralized peer-to-peer network for transactions with Bitcoin – the “token.”

The Bitcoin blockchain technology makes it possible to create a transparent general ledger that records all transactions and prevents any double booking of the digital currency. Node operators have been involved in the organization and administration of this cryptographically secured general ledger, securing the network and keeping it up to date.

When a transaction is initiated, it is cryptographically “signed” by the parties to the transaction so that the network can confirm that sufficient funds are available to carry out the desired transaction. Each transaction is given a timestamp and is therefore unchangeable. This transaction is then introduced to a block of different transactions recorded with the aid of the network.

The most important actors in keeping this protocol are the operators of the mining nodes. They have to use a lot of computing power to generate a new block and ensure the ever-growing blockchain’s integrity. You will be rewarded with newly minted bitcoins for this work. The maximum total stock of all Bitcoins that can be created is 21 million, and the reward distributed to the miners is regularly changed or “halved” every four years. The next halving of the Bitcoin block bonus will take place in early to mid-2020.

The aggregate of technical innovation and an applied decentralization idea made it feasible for everybody to transfer quantities throughout borders without intermediaries.

Transactions are validated using community nodes thru cryptography and recorded in a dispersed public entry called a blockchain. Bitcoins are designed as a reward for a method known as mining.

It for other currencies, merchandise, and services. Research produced via the University of Cambridge estimates that in 2017, there were 2.9 to five. Eight million specific users use cryptocurrency pockets, a maximum of them using bitcoin. Bitcoin has been criticized for its use in unlawful transactions, the massive amount of electricity used by miners, fee volatility, and thefts from exchanges. Some economists, including several Nobel laureates, have characterized it as a speculative bubble at various times.

Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin. Bitcoin was the first cryptocurrency to record transactions on a secure, decentralized blockchain-based network successfully. Launched in early 2009 by its pseudonymous creator Satoshi Nakamoto, Bitcoin is the largest cryptocurrency measured by market capitalization and data stored on its blockchain. The Bitcoin software is free and available online to anyone who wants to run a Bitcoin node and keep their copy of the Bitcoin blockchain.

As Bitcoin matures, engineers have designed additional protocols to improve the speed and privacy of Bitcoin transactions, including the Omni Layer, Lightning Network, and Liquid Network. Only approximately 21 million bitcoins will ever be created. New coins are minted every 10 minutes by bitcoin miners who help maintain the network by adding new transaction data to the blockchain.

There are no physical bitcoins. Only balances kept on a public ledger that everyone has transparent access to, along with all Bitcoin transactions – are verified by a massive amount of computing power.

Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Despite it not being legal tender, Bitcoin charts high on popularity and have triggered the launch of hundreds of other virtual currencies collectively referred to as Altcoins.

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