What is Blockchain? We explain the technology of blockchains

April
21, 2021

6 min read

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As a secure, distributed ledger, well-designed Blockchain technology not only eliminates intermediaries, reduces costs, and increases speed and reach, but also offers greater transparency and traceability for many financial processes.

In this regard, PwC produced a report ( Blockchain is here. What’s your next move? ), For which 800 high-level executives from financial institutions were interviewed: banks, payment companies, insurance companies, hedge funds and other companies. investment between July and August 2020. Companies were required to have recorded at least $ 1 billion in revenue in 2019 to participate, including Latin American companies, who are part of this global trend.

40% of respondents from top tech companies around the world currently have a blockchain development in production. Meanwhile, 90% of executives think that Blockchain will be more important in the next three years. Meanwhile, Blockchain technology will increase global GDP by $ 1.76 trillion in the next decade.

In fact, Latin America has already reached 77.1 million dollars of investment in Blockchain during 2020, and it would maintain a sustained growth until 2023 of 45%, at which time it would reach 232.9 million dollars, according to the State of the art of Blockchain report. in the Spanish company , prepared by Ametic, with the collaboration of ICEX and Realsec.

In the specific case of Mexico, the country has one of the most developed financial systems in the region, and it is a very fertile space for the blockchain to prosper. This nation was precisely one of the first to successfully carry out a sandbox within the framework of the Fintech Law .

Likewise, it should be noted that remittances sent by Mexicans living abroad, mainly from the United States, increased 11.4% in 2020 compared to the previous year despite the pandemic, reported the Bank of Mexico (Banxico). Of that percentage, crypto exchanges have so far managed to cover up to 10%, but the goal is to reach at least 20% of all cross-border transfers that cover the basic needs of 1.6 million Mexican households. This without a doubt is a vital point on the agenda of local financial actors, and it is only possible on blockchain developments.

Thanks to these cheaper technological solutions such as those offered by the Koibanx platform, adopted by both the public and private sectors, citizens in general could benefit from managing their financial assets at lower costs than they can today . In this way, the spectrum of sectors that can be included in the financial system is amplified.

Now, what is Blockchain, the new wave of technological transformation?

The ABC of Blockchain

^{Image: Depositphotos.com}

The blockchain is a constantly growing list of information. That information is in blocks, and all these blocks are linked together. Each block matches the preceding and following, and the information that the middle block contains is encrypted by an algorithm using a cryptographic function called hash. This makes this information inviolable. It is a secure, open and public database.

To illustrate how the blockchain works, the metaphor of a ledger distributed among many people is often used. It would be a great book where digital events are recorded. The fundamental thing here is that this book is “distributed”, that is, shared between many different parts (nodes). It can only be updated from the consensus of the majority of the system participants and, once entered, the information can never be deleted. The Bitcoin blockchain , for example, contains an accurate and verifiable record of all the transactions that have been made in its history.

In other words, the authenticity of the Blockchain is not verified by a third party, but by the consensus of the whole: it is the same network of users that participates in it. Once entered, the information is recorded in multiple backups and cannot be deleted or modified. The only thing that can be done is to add new information, since the blocks are connected to each other, as we said, as if it were a path of lego blocks. This gives the system great reliability: as it is unalterable, the information is inviolable.

The potential of Blockchain technology is practically limitless. And it has long since transcended the field of cryptocurrencies (in terms of the creation of them or the enabling of APPIS and channels that allow financial institutions to give their customers access to cryptocurrencies). Transparency, security, distribution and traceability are some of the many attributes for which the blockchain arouses an increasing interest in the most diverse sectors, such as those related to health, law, state, etc., in addition of, of course, the finance industry in general.

Likewise, in combination with other technologies such as Artificial Intelligence and Big Data , the Blockchain promises to achieve colossal achievements influencing the most diverse spheres, from the Fintech ecosystem to the energy sector, from digital identity to logistics operations, and even in the regarding electoral processes over the Internet.