Blockchain

The blockchain, also known as blockchain, is a data storage technology used to maintain a decentralised and secure chain of records. Let’s say that Blockchain is a database a vast, interconnected network that comprehensively records all the information it receives from different parts of the world.

Although the Blockchain is not exclusive to the banking system, although it applies primarily to banking transactions and the field of cryptocurrencies.

How does blockchain work?

The Blockchain stores information in blocks which are linked together in a continuous sequence. Each block would function as a ledger. Each block would therefore consist of three elements:

• Information: If we’re talking about transactions, each block would contain the information relating to each bank transaction: the amount, the recipient, the sender, the date, the type of transaction…

• Hash: Each transaction would be assigned a hash – that is, a long string of numbers unique to each block. For example, each Bitcoin transaction block has a hash of up to 64 digits.

• Hash of the previous block: The most innovative and useful aspect of the blockchain is that each block contains its own hash and the hash of the previous block. This is why the blockchain is a sequence of blocks linked together, with the aim of making data storage more secure.

A practical example of blockchain

Imagine that you and two friends are taking part in an activity where you exchange small items. Instead of writing down the transactions on a piece of paper or relying on just one person to keep track of them, you decide to use the blockchain.

In this case, everyone has a sheet of paper on which all transactions are recorded. Each sheet has several boxes where the details of a transaction can be noted, such as who is sending and who is receiving the item, and the date.

Once the transaction has been agreed, it is recorded on each sheet of paper, in a specific box, together with a unique code to identify it. This forms a block of transactions.

Let’s illustrate this schematically:

• Block 1:

Information: Vase – plant swap

Simplified hash: 54534F

Simplified previous hash: XXX (we don’t know)

• Block 2:

Information: Swapping a chair for a table

Simplified hash: 789667H.

Simplified previous hash: 54534F

• Block 3:

Information: Lamp – mirror swap

Simplified hash: 908797U.

Simplified previous hash: 789667H.

What is blockchain used for?

Everything we’ve explained may well be crystal clear to you. But this whole encryption system would be pointless if there weren’t a significant underlying purpose. Blockchain serves as a means of cybersecurity which prevents confidential information from being extracted during cyber-attacks and security breaches.

If a hacker managed to break into a bank’s transaction database, they would not be able to view confidential information; they would first have to decrypt the hashes. Remember that hashes are unique numbers for each block and that, if even a single byte in a block were altered, the hash could change completely.

And if a hash changes, the entire sequence of hashes belonging to all the subsequently linked blocks is also altered. This whole system makes it far more difficult for hackers to extract private information.