What is blockchain or chain of blocks?

What is blockchain? Basically, a digital innovation expected to move around 1.76 trillion dollars by 2030 . It is a technology that took its first steps more than 30 years ago, although it is a concept that has been especially discussed over the past decade. 

In 1991, scientists Stuart Haber and W. Scott Stornetta laid the foundations of what is now known as blockchain, a digital solution for processing and preserving documents so they could not be altered by unauthorized parties. Thus, a system structured as a chain of blocks that stores encrypted information was born. 

Years later, all this initial theory would be formalized and registered. “Bitcoin: A Peer-to-Peer Electronic Cash System,” a document developed by Satoshi Nakamoto, expanded on what was outlined in 1991 to deepen the idea of a distributed ledger system and a decentralized cryptocurrency. It laid the foundations of what blockchain is today—principles and concepts that the reader will learn about in the following sections. 

How does blockchain technology work?

The operation of blockchain technology is based on a system that records, stores, and shares transactions . Below is a step-by-step breakdown of the process: 

1. The so-called ‘blocks’ record transactions. Each one is linked to the previous one through a unique code and generates another one to link to the next. 
2. Teams that verify transactions. These are called ‘miners’ and are systems responsible for storing and distributing copies of the chains. Each newly created block is added to the network. 
3. A historical record of information and data is generated, which is accessed by authorized professionals/teams. 

 The key point regarding how blockchain works is that each new block strengthens the security and authenticity of the previous one. It eliminates the possibility of manipulating the chain itself, which forms the blockchain, the foundation of this technology. A fully reliable transaction ledger is created for all participants in the network. 

Types of blockchain

What began as a technological innovation continues to evolve, as operations are improved and new updates and advances are introduced every year. This optimizes the functioning of the blockchain. Over time, different types of blockchain have been developed to meet different needs and to take advantage of this technology’s potential.

• Public blockchain

Accessible to anyone with a computer and internet access. Its weak point is that it requires special security measures, since the more users access it, the higher the risk of system breaches and, therefore, of compromising the stored information and data. An example of a public blockchain is Bitcoin, the most well-known cryptocurrency today.

• Private blockchain

Exclusive access for specific organizations, companies, and/or professionals. These cases are often referred to as a blockchain consortium. Access is only granted with prior authorization from a central authority. Examples include Hyperledger or Quorum by JPMorgan.

• Hybrid blockchain

The best of both approaches. It is not available to everyone and offers the security and transparency of a private blockchain. It is customizable, allowing selection of which operations are more open and who can participate.

For those interested in exploring these transformations further, the Master in Finance and the Master in Financial Management offer training focused on mastering key tools and ensuring competitiveness in the financial and technological sector, with a practical approach based on real cases. 

Advantages and disadvantages of Blockchain

The potential of Blockchain technology is remarkable. As mentioned at the beginning, the consulting firm PwC recently published a report which, after analyzing the use of this technology and its capacity to generate value, estimates that it could increase global GDP by up to 1.76 trillion dollars by 2030. This figure is staggering and shows that this is a system that is here to stay.

It has its own strengths and weaknesses—advantages and disadvantages of Blockchain—which must also be considered to understand the scope of this innovation and the aspects that may generate uncertainty and vulnerability for users, both corporations and professionals.

Advantages of Blockchain

• Security: validated transactions are immutable and permanently recorded. No one can delete an operation already in the system.
• Trust: users can be sure that records are confidential and cannot be tampered with.
• Efficiency: like a shared accounting ledger, it speeds up transactions.
• Low operational cost: intermediaries are removed, reducing expenses associated with commercial operations.

Disadvantages of Blockchain

• Scalability challenges: as the network grows, issues may arise regarding operation, system speed, and transaction efficiency.
• Specialized professionals: it requires trained experts to manage it. A lack of qualified technical personnel can be an obstacle to adoption.
• Developing regulation: the regulatory framework is not yet fully defined, which may lead some companies to reject this approach.

What are smart contracts?

Smart contracts are smart contracts , or self-executing contracts, which are self-executing computer programs deployed on the blockchain . They function as digital agreements that automatically execute when predefined conditions are met, without the need for intermediaries. 

These tools ensure transparency and security in transactions , since once deployed, they are immutable and stored in a distributed manner. Smart contracts have the potential to revolutionize sectors such as finance, law, and supply chains because they automate complex processes, reduce operational costs, and minimize the risk of human error. 

Blockchain examples

As can be seen, there are still aspects to study and factors to improve for blockchain technology to continue advancing. The outlook for the future is truly interesting, and the best proof is that more and more successful use cases of blockchain are being adopted by companies across different sectors.

• Financial sector

Highly recognized institutions such as BBVA and Banco Santander are beginning to rely on this technology and have implemented blockchain systems for certain transactions.

• Healthcare sector

Improving efficiency in patient care and increasing operational performance and profitability. The IBM Blockchain Platform is already present in healthcare centers with promising results.

• Food and agribusiness

Raw Seafoods has trusted IBM Food Trust to record catches made at sea and track how they are distributed to supermarkets and restaurants. This data allows the company to analyze operations and propose improvements that impact financial performance.

Blockchain technology is a reality, which is why it is included in training programs for professionals interested in developing their careers in finance and business management, and in better adapting to the transformations of the current financial model .