Learning Objectives:

  • Define blockchain technology and understand its fundamental components.

  • Explain the architecture of a blockchain, including blocks, hashes, and Merkle trees.

  • Understand the key properties of blockchain: decentralisation, immutability, transparency, and security.

  • Describe how cryptographic tools enable secure transactions.

1.1 What is Blockchain?

A blockchain is a distributed, decentralised digital ledger that records transactions across a peer-to-peer network. As Seneca Polytechnic’s FNT103 course on Blockchain/DLT and Cryptocurrencies describes, “Blockchain technology is one of several distributed, decentralised ledger database systems” . The critical innovation of blockchain is that, unlike traditional ledgers maintained by a central authority, it relies on cryptographic consensus across a network of participants to validate and record transactions.

The UCL module on Blockchain Technologies aims to teach students “the mechanics of the blockchain technologies” and provide “an understanding how these technologies can be applied to solve businesses problems (with a focus on the financial services industry)” . This includes understanding “the basics of the most used consensus algorithms (e.g., Proof of Work, Proof of Stake)” .

Core Components of a Blockchain:

  • Blocks: Containers that hold batches of validated transactions, a timestamp, and a cryptographic hash linking it to the previous block, forming an immutable chain.

  • Hash Functions: Cryptographic algorithms that convert input data of any size into a fixed-size output (hash). Hash functions are fundamental to blockchain security because they are deterministic, one-way, and collision-resistant. The UCL course covers “basic cryptography tools and concepts including private/public keys, digital signatures, hash functions and Merkle trees” .

  • Merkle Trees: A data structure that efficiently summarises and verifies the integrity of large sets of transactions within a block.

  • Digital Signatures: Cryptographic mechanisms that prove ownership and authorise transactions without revealing private keys. The UCL course includes “digital signatures” as a core cryptographic concept .

1.2 Key Properties of Blockchain

Decentralisation: No single entity controls the network or the ledger. The Seneca course evaluates the “disruptive impact of cryptocurrencies” and how they challenge centralised financial systems . This decentralisation reduces single points of failure and censorship resistance.

Immutability: Once recorded, data cannot be altered without network consensus. This property is ensured by the cryptographic linking of blocks and the consensus mechanism that validates new blocks. The World Economic Forum notes that banks are adopting “blockchain infrastructure” as a durable, long-term shift, moving away from hype cycles .

Transparency: Transactions are visible to all network participants, creating auditability and trust. The Seneca course requires students to “Explain, in non-technical terms, how conventional banking business functions can be converted into distributed ledger applications,” including “Know Your Client compliance (KYC), Protecting a repository of personal data permission access using DLT, Client Lifecycle Management (CLM), Anti-Money Laundering (AML)” .

Security: Cryptographic security makes blockchain resistant to tampering and fraud. The Frost & Sullivan analysis notes the growing use of “distributed ledger technology (DLT), and blockchain-based solutions for securing international transactions” as a key trend . The UCL course examines “limitations of public blockchain protocols and potential solutions to improve scalability, privacy and security” .

1.3 Types of Blockchain

The UCL module requires students to “Distinguish between different types of blockchain (private vs public, permissioned vs non-permissioned)” as a core learning outcome . The Hong Kong Peak course covers “Blockchain Interoperability: Collaborative Solutions” as part of its curriculum .

Public (Permissionless) Blockchains:
Open to anyone to participate, with full transparency of transaction data. Examples include Bitcoin and Ethereum. The UCL course covers “the features of the most popular cryptocurrencies and platforms, including Bitcoin, Ethereum and XRP Ledger” .

Private (Permissioned) Blockchains:
Restricted to authorised participants, with controlled access and visibility. These are often used by financial institutions for applications where privacy and regulatory compliance are paramount.

Consortium Blockchains:
A hybrid model where a group of organisations jointly maintain the blockchain, balancing decentralisation with control.

Key Differences:

  • Access: Public (open) vs. private (restricted).

  • Transparency: Public (all transactions visible) vs. private (controlled visibility).

  • Consensus: Public (Proof of Work, Proof of Stake) vs. private (voting, majority agreement).

  • Speed and Scalability: Public (slower, less scalable) vs. private (faster, more scalable).

1.4 Application Areas in Banking and Insurance

The Hong Kong Peak course covers multiple application areas for blockchain in financial services, including “Enhancing Efficiency, Security, and Transparency,” “Streamlining Underwriting, Risk Assessment, and Fraud Detection,” and “Blockchain Identity Management: Know Your Customer and Anti-Money Laundering” .

The Seneca course specifically lists how “conventional banking business functions can be converted into distributed ledger applications” including :

  • “Know Your Client compliance (KYC)”

  • “Protecting a repository of personal data permission access using DLT”

  • “Client Lifecycle Management (CLM)”

  • “Anti-Money Laundering (AML)”

The World Economic Forum notes that “Settlement, custody and payments are shifting from batch processes to always-on rails,” and “Tokenization pilots are now in production” . The Asian Banker reports on the convergence of AI and blockchain, noting that “the convergence of AI, blockchain and digital assets” is reshaping finance .

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