Blockchain in Banking Masterclass Assessment – 1

Blockchain technology was introduced to the world by the popular cryptocurrency Bitcoin. Since then various altcoin and blockchain platforms have cropped up claiming to solve a range of problems.

A Node is any active physical collection of computers and computing devices, in a group (or ‘Node’), attached to a blockchain network. These devices are capable of applying their computational power or sending, receiving or forwarding information; sometimes a combination of the above

A public blockchain network is as the name suggests a network open to everyone with very few restrictions. Similarly the blockchain ledger that keeps a record of all transactions that take place on the network can be viewed and verified by participants

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Ripple is a decentralised peer-to-peer network that provides a digital payment protocol to financial institutions. It enables seamless digital money transfer to send conventional funds in dollars or cryptocurrencies like Bitcoin.

An information leak, as a result of insecure data or data loss, can result in widespread harm to an organisation in many areas

Since no central administrator watches over Public blockchains, block rewards serve as the primary incentive for participants in the network. Blockchain contains protocols embedded in the architecture that provide incentives for distributed users to ‘discover’ new blocks in order to secure the network and ensure it continues to operate, securely

Bitcoin is a decentralised digital currency that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries, and uses blockchain technology

There are no specific restrictions to implementing blockchain technology. While it is preferable that the organiation understands the technology and has a clear goal and objectives these are not conditional

Mining is the process of creating new digital currencies, by solving complex calculations, the fastest, The winner is the node that solves the calculation first, and the reward for solving the calculation, is the right to create the next ‘Token’. In blockchain, the Mining Process confirms transactions on the cryptocurrency’s network and makes them trustworthy.

Bitcoin Mining, refers to the first bitcoin miner to solve the puzzle, who is then rewarded with the right to create a new bitcoin.

Blockchains are Digital by nature. There are generally two types of blockchain – Public and Private. Public blockchains are decentralised peer-to-peer networks. Private blockchains are centralised networks where authority and accessibility depends on the rules and permissions granted to participants.

Traditional methods of conducting businesses are being revisited. In the digital transformation movement we want to reduce the need for human mediation in multi-party transactions and create communication channels between entities that don’t necessarily trust each other

A block has only one parent block except for the genesis (originalor first) block which has no parent block

The data security provided by blockchain immutability transforms the auditing process into an efficient sensible and cost-effective procedure.

Blockchain is a very versatile technology. Its native use case recording financial transactions is just the tip of the iceberg.

“The goal of blockchain is to allow digital information to be recorded and distributed but not edited. Blockchain is used for immutable ledgers or records of transactions that cannot be altered deleted or destroyed HOWEVER it is technically possible to do this should a node get more than 51% control over the network. This is called a “”Proof of Stake”” attack”

Digital currency wallets are analogous to physical wallets however instead of storing physical currency the wallet stores the cryptographic information used to access Digital Currency addresses and initiate transactions

Blockchain is a system of recording information in a way that makes it difficult or impossible to change hack or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.

Blockchains can be programmed to record transactions automatically, and is most often used for self-executing Blockchain Contracts or “Smart Contracts”

Immutability describes the ability of a blockchain ledger to remain unchanged or for a blockchain to remain unaltered and indelible over time

This Consortium or Private Permissioned model is better suited more for Enterprise Use Cases as it can handle huge amounts of transactions and data that businesses usually process, but is closed and restricted to participants who may not necessarily have trust relationships between them, for example participants in a Trade Finance platform, involving Banks, Financiers, Businesses, Guarantors, Shippers and other distinct participants

Every participant of the blockchain gets a replicated copy of each block of information. This data is stored in their respective copies of the blockchain, along with a date and time stamp and unique identifier. Since no single entity can make any changes without the agreement or consensus of all others on the blockchain network, it is impossible to alter a record without the consensus of all nodes on the blockchain network (except in the case of a “51% attack”, which assumes that a single node effectively controls the network).

Bitcoin is a digital currency built with underlying blockchain technology. Therefore while all BitCoins are technically blockchain (based) not all blockchains are Bitcoin.

A blockchain fork refers to a change in the blockchain’s rules that effectively leads to a separation into two or more blockchains. Side chains are not to be confused with blockchain forks, which occur when a group of users on the network decides to split into a new blockchain altogether.

Proof of stake (PoS) protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings or stake in the blockchain

A miner is a special node in the network that allocates its computational power to the blockchain network, calculating complex algorithms,  usually with a reward for successful completion, in the form of a token, Bitcoin or other digital reward,

Typically the planning stage is the most important because the scaling, security and auditing components while important are an intrinsic part of the technology, and the budget usually follows

“There are a number of steps involved in this process and they are:

Requirement identification
Screen ideas consideration
Project development for Blockchain
Feasible study on the security
Implementation
Controlling and monitoring the project

Blockchain is sometimes called a “trustless” network — not because business partners don’t trust each other, but because they don’t have to.

Many banks around the world have implemented blockchain projects in KYC/ID Remittances and cross-border currency features and Trade Finance platforms.

When new data comes in it is entered into a fresh block once this block is filled it is chained to the previous block. This means that the data is chained together in chronological order.

Blockchains are typically arranged in a peer-to-peer network in publicly distributed ledgers, where nodes collectively adhere to an agreed protocol that communicates and validates new blocks.

A blockchain ledger like its Accounting namesake is a record to which data is added and updated in real-time via consensus of the different nodes running the software in the network.

Each block includes the cryptographic hash of the prior blockchain linking the two.

Smart contracts are basically lines of code that can execute different activities naturally while addressing specific conditions. So they are do not qualify as legal contracts. Smart contracts can be used to represent proof of whether certain conditions have been fulfilled or not. Smart contracts can serve as invaluable assets in driving digital transformation despite the confusing legal position.

Its possible to distinguish between public and private blockchains – Public blockchain allows any participant to join the system. A Private blockchain requires users to be have to be granted permission

There are total six steps involved in this process and they are:

• Screening ideas for consideration and identifying requirements
• Project development for Blockchain
• Feasible study on the security
• Implementation
• Controlling and monitoring the project

It is the immutability of blockchain that makes it so secure. When implemented in a decentralized nature blockchain produces an irreversible timeline of data in which ‘filled’ blocks are unchangeable.