This lesson provides a systematic understanding of blockchain as the foundational technology for cryptocurrencies and its applications in digital banking.

4.1 Understanding Blockchain Technology
Blockchain is a distributed ledger technology that enables secure, transparent, and immutable record-keeping without a central authority . Its key characteristics include:

• Decentralization: No single entity controls the network

• Immutability: Once recorded, data cannot be altered

• Transparency: All transactions are visible to network participants

• Security: Cryptographic hashing ensures data integrity

4.2 Cryptocurrencies and Bitcoin
Cryptocurrencies are digital or virtual currencies that use cryptography for security . Bitcoin, the first and most well-known cryptocurrency, operates on a proof-of-work blockchain. Students learn how Bitcoin works, the concept of mining, and the risks associated with cryptocurrency investments .

4.3 Smart Contracts and Ethereum
Smart contracts are self-executing contracts with the terms directly written into code . Ethereum popularized the concept of a programmable blockchain, enabling developers to build decentralized applications (dApps). Key applications include:

• Decentralized Finance (DeFi) platforms

• Automated insurance claims processing

• Tokenization of assets

4.4 Central Bank Digital Currencies (CBDCs)
CBDCs represent a new form of digital money issued by central banks . Unlike cryptocurrencies, CBDCs are centralized and backed by the state. Major economies are exploring CBDCs to:

• Enhance payment efficiency

• Reduce the cost of cash management

• Provide a digital alternative to physical currency