What is the Blockchain? What is a token? An Initial Coin Offering? A smart contract? A crypto-money or a crypto-active? A small lexicon of technical terms commonly used in this world fond of jargon and anglicisms.
The British weekly The Economist, visionary and daring, dared to make its front page as early as October 2015 on “the trust creation machine: how the technology behind Bitcoin could change the world”. Three years later, the promises of the Blockchain, with its complex ins and outs, have led some to dream of a “new industrial revolution” based on a new decentralized Web and have attracted criticism from skeptics denouncing an excessive enthusiasm for a technology that cannot be a panacea and remains immature, even overrated and even useless, according to its greatest detractor, economist Nouriel Roubini.
Here is a small lexicon of the terms most commonly used to find one’s way in this world fond of jargon and sometimes obscure anglicisms.
The Blockchain, literally “chain of blocks”, is a technology for storing and transmitting information: it enables decentralized, peer-to-peer exchanges, without any control body, and secure, thanks to cryptography, transfers of value or property, without possible duplication. This new-generation database technology is often compared to a forgery-proof, replicated, and “distributed” digital ledger: different copies exist simultaneously on different computers (the “nodes” of the network). Transactions are grouped in blocks and validated by the “nodes”, users called “miners” (in reference to gold diggers), sometimes grouped in “pools”, who have to solve complex mathematical problems using the computing power of their computers: the block is time-stamped and added to the chain of blocks. Miners are paid in tokens.
The Blockchain was born with the Bitcoin virtual currency, it is the virtual infrastructure on which Bitcoin is based: the very first transaction block of the Bitcoin Blockchain, called “Genesis Block” was created on January 3, 2009. The creator of Bitcoin, Satoshi Nakamoto (no doubt a pseudonym, perhaps a collective) wrote a series of numbers on the block, which is based on the title of the front page of that day’s Times, about the bank rescue plan, in a context of mistrust towards institutions in the midst of the financial crisis.
The best-known blockchains are public, open to all, such as the first one, Bitcoin, or Ethereum, which appeared in 2014, designed for decentralized applications and “smart contracts”, or Litecoin. There are also private (or consortium) blockchains, whose access and use are limited to a circle of authorized players: this is the case for all experiments by companies or institutions (international trade finance, interbank payments, etc.). The existence of a crypto currency is not indispensable in this case, since members do not have to be paid for validating transactions. This is sometimes referred to as Distributed Ledger Technology (DLT).
Example of a private blockchain: “How the Blockchain will digitize the international trade of raw materials”.
A crypto-asset is the term now commonly used to talk about “cryptocurrencies” such as Bitcoin, Ether, etc. – which are not currencies since they have no legal value -, but also all kinds of digital assets, also called “tokens”. The prefix “crypto” refers here to cryptographic techniques (the “hash” or conversion of data into a binary sequence, the asymmetric system of public/private key pair needed to sign any transaction).
A token is a digital asset issued and exchangeable on a Blockchain, usually in the form of a “smart contract” on Ethereum. It can be purchased in crypto-active form and sometimes in traditional fiat currency (in euros for example), which can be sold on an exchange platform. Bitcoin is the token of the Bitcoin Blockchain, the ether that of the Ethereum Blockchain.
Tokens are often issued as part of Initial Coin Offering (ICO): a new form of fundraising, an alternative to financing by venture capital, banks, or the stock market. The tokens issued may be similar to financial securities (“security token”) or grant a right of use (“utility token”), comparable to loyalty points (airplane miles) or pre-order.
Smart contracts or “smart contracts” are stand-alone computer programs embedded in the Blockchain. They are not contracting in the legal sense, but the software that automatically executes predefined conditions. Their execution is irremediable, and their code is freely verifiable by the network nodes. Vitalik Buterin, the gifted young programmer who created Ethereum, recently said on Twitter that he regrets having coined the confusing term and that he should have preferred “more boring and technical” language such as “persistent scripts”.
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