BLOCKCHAIN

Blockchain is an emerging technology capable of improving transaction security. Born with the crypto revolution, it is the technology coding system behind the virtual currency, underlying its entire structure. The term ‘blockchain’ is very illustrative to how it works. With blockchain technology, transactions are publicly recorded, keeping the identity of the participants in it anonymous. It completely decentralised and independent, making it unique.

The blockchain is created by individual ‘blocks’ of data that are made up in the digital ledger, also described as the ‘chain’. When new data is added to the network, new blocks of data are created and attached into the chain.

Cryptocurrencies (BTC, ETH, LTC…) are virtual currencies built on the blockchain, so both terms are usually related to each other. However, over the years, blockchain has been identified as having great potential for application in other areas because it has immense possibilities to offer.

This technology enables distributed log infrastructures, which can be used to save time recording transactions, eliminate costs associated with intermediaries and reduce the risk of fraud and manipulation. Blockchain use cases can be classified into two main categories: Recordkeeping, static records of data about high-value assets, and transactions, dynamic records of the exchange of tradable assets.

It allows the transfer of digital data through encryption in a completely secure way. Just like in a company’s ledger, inflows and outflows of money are recorded, but this time, through a digital ledger of events. Additionally, it includes a remarkable innovation: the information is distributed among independent nodes that record and verify data without the need of a centralised intermediary that certifies the information.

Information cannot be deleted or modified once the data has entered the blockchain. Only new records of data can be added.

KEY QUESTIONS

How does blockchain work?

Blockchain technology is based on four fundamentals:

1. The shared recording of transactions (ledger)
2. Consensus to verify transactions
3. A contract that determines the rules for the operation of transactions
4. Cryptography

Once the business network has been created, the transactions and processes that the blockchain will use as a basis are defined. All the nodes must approve and verify the information, which will then be added to the blockchain in a permanent way. Each block contains a hash of the previous block, a timestamp, and a transaction data.

Is it valuable?

By combining blockchain technology and cryptography cryptocurrencies enable a faster, cheaper, and more successful transactions. Cryptocurrencies can be exchanged on a peer-to-peer basis, without intermediation by an external entity, as they are decentralised, and they are not subject to control by third parties. Not only can users transact directly with each other at any time and from anywhere, but they do so autonomously.

Additionally, with blockchain technology, any transaction is available for anyone to see at any time. All transactions are recorded, authenticated, and shared across a wide network of devices.

Is it safe?

Digital assets, or cryptocurrencies, use blockchain technology and cryptographic encryption to guarantee its ownership and ensure the integrity of transactions, therefore limiting the creation of additional units or making copies. With blockchain technology, transactions are recorded in blocks and timestamped. It is a complex technical process, but the result is a digital record of cryptocurrency transactions that is difficult for hackers to manipulate.

In addition, transactions require a two-factor authentication process. Users may be asked to enter a username and password to initiate a transaction. They may then need to enter an authentication code that is sent as a text message to their mobile device.

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