Learning Objectives:

  • Explain how a blockchain works and describe the contents of a block.

  • Outline the four types of blockchain: public, private, hybrid, and consortium.

  • List the applications of blockchain technology beyond cryptocurrencies.

3.1 What is a Blockchain?

A blockchain is a digital ledger that records transactions on a public or private peer-to-peer network . It is a decentralised, distributed, and immutable ledger that enables the secure transfer of value and data without a central authority. Blockchain technology is best known for facilitating cryptocurrency transactions, but it has many applications beyond financial circles .

3.2 How Blockchain Works

A blockchain consists of a chain of blocks, where each block contains a set of transactions, a timestamp, and a cryptographic hash linking it to the previous block. The contents of a block typically include :

  • Block header: Contains metadata such as the block version, timestamp, and the hash of the previous block.

  • Transaction data: A list of transactions included in the block.

  • Hash of the previous block: Links the block to the blockchain.

  • Nonce: A number used in the mining process to find a valid hash.

The immutability of the blockchain is ensured by the cryptographic linking of blocks and the consensus mechanism that validates new blocks.

3.3 Types of Blockchain

The HKSI course outlines four types of blockchain :

  • Public blockchain: Permissionless, open to anyone to participate (e.g., Bitcoin, Ethereum).

  • Private blockchain: Permissioned, restricted to a single organisation.

  • Hybrid blockchain: Combines elements of public and private blockchains, allowing for selective transparency.

  • Consortium blockchain: Permissioned, but controlled by a group of organisations rather than a single entity.

3.4 Applications of Blockchain

Beyond cryptocurrencies, blockchain technology has numerous applications :

  • Supply chain management: Tracking goods from origin to destination.

  • Identity management: Secure digital identity solutions.

  • Healthcare: Securely storing and sharing patient data.

  • Voting systems: Ensuring transparency and immutability.

  • Intellectual property: Managing digital rights and ownership.

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