Deep diving into Fintech: What does Blockchain mean
Fintech has many areas of growth, but one that has caught people’s eye recently is Blockchain. If you have heard about block chain but don’t know what blockchain means, you are at the right place!
What does Blockchain mean?
A chain of blocks that contain information. That’s it? Not quite. It was created in 1991 to be used as digital time stamps, but never became into anything big, until Satoshi Nakamoto created Bitcoin in 2009!
Increased security through a chain of blocks
Each block has 3 things inside:
- Some data
- Its hash digits
- Hash digits for its previous blocks
A hash digit is a long chain of alphanumeric characters that are unique to that block (something like a URL that is only valid for one website). This hash is almost impossible to change and if something inside the block is changed, it alters the hash as well. This indicates the formation of a new block which can then be linked to the previous block. By having the hash of the previous block and its own, a block can create a chain of blocks.
This is where security is maxed because if one thing changes, it leads to the creation of another block and you can track when that change was made. Therefore, all changes are recorded and can be seen by others.
Increased security through a proof-of-work
“Proof-of-work” is a concept used by blockchain when producing new blocks. This mechanism slows the process of creating new blocks to around 10-15 minutes. Although this seems like a very slow process, it’s useful because if someone wants to hack into this system it will take them many minutes to alter the data in one block. But you can’t just alter the data for one block, because it’s a blockchain. Thus, it’ll take them a considerable amount of time to change the data in all the blocks in the chain, which would prevent such things happening.
Increased security through a peer-to-peer network
A question that comes to mind is, well who manages block chain? Who says this is correct and this is not? Who is the main authority behind this chain? The answer to all this is everyone! In a blockchain, the power is given to everyone who joins it. So for instance, if you are sending money to a few friends. All of your friends will share the blockchain and everyone can see it. When a new block is formed, it needs its hash digits to match the ones in the blockchain that everyone has. If it does, then it becomes a part of the blockchain. If it doesn’t, it is rejected and does not become a part of the blockchain.
Through this method, blockchains are monitored and governed by everyone using it. Thus, it also adds as another layer of security for when people are dealing with sensitive and important data.
Where is blockchain being used?
Blockchain can be used in many places around the world. Some are more famous than others, such as Bitcoin and cryptocurrencies. People are able to send money to each other without an intermediary like a bank. Just like this, it can also be used in supply chain where firms need to make sure when certain perishable items were actually produced, delivered, and received. As blockchains cannot be altered, one can know exactly when something was delivered and received.
Gaper.io is releasing its deep dive into Fintech with more details analysis and explanations for everything Fintech! Stay tuned for more articles in the coming weeks.