Friday, 24 November 2023, 07:27
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Blockchain technology has had a significant impact on the financial sector in recent years. According to fintech expert Sergey Kondratenko, blockchain acts as a decentralised digital ledger. It enables secure and tamper-proof transactions without the need for intervention from banks and other financial institutions. This innovation has had a significant impact on fintech companies in various industries.
According to analysts, the volume of the global blockchain market in fintech will reach $580.97 billion by 2032, compared to $2.12 billion in 2022. This growth is due to several factors: the active adoption of blockchain technology by financial institutions, growing requirements for security and transparency of transactions, as well as the increasing popularity of cryptocurrencies.
Sergey Kondratenko is a recognised specialist in a wide range of e-commerce services with experience for many years. Now, Sergey is the owner and leader of a group of companies engaged not only in different segments of e-commerce, but also successfully operating in different jurisdictions, represented on all continents of the world. The main goal is to drive new traffic, create and deliver an online experience that will endear users to the brand, and turn visitors into customers while maximizing overall profitability of the online business.
Sergey Kondratenko: What is blockchain and how is this technology used?
Blockchain technology is based on a structure that stores records of transactions (blocks) in multiple databases (often called chains) on a peer-to-peer network.
Each transaction in this system is authenticated using the digital signature of the owner, which guarantees its authenticity and protects against forgery. This ensures a high level of security of information in the digital registry, explains Sergey Kondratenko.
Blockchain technology at its core is a sequential chain of blocks, each containing a certain amount of data. These blocks are closely linked to each other using cryptographic methods and form a chronological chain of information.
According to Sergey Kondratenko, one of the key components of the blockchain is blocks.
Blocks. Each block in the blockchain contains these three main components:
- A header with metadata such as a timestamp, which is generated using a random number during the mining process, and a hash of the previous block, ensuring the integrity of the chain.
- Data section. Basic information is stored here - transactions and smart contracts. This data is relevant and important for the functioning of the blockchain.
- Hash. Finally, each block has its own unique hash. It represents a cryptographic value that is used to verify the integrity of a block. This hash ensures the security of the data on the blockchain.
Block time is another component of the blockchain. This is the interval required to create a new block in the blockchain, the connecting link.
Different blockchains may have different lock times, ranging from a few seconds tominutes or hours. Shorter blocking times help confirm transactions faster, but may result in more conflicts. On the other hand, longer blocking times increase transaction confirmation times but reduce the likelihood of conflicts, reports Sergey Kondratenko.
Hardforks, decentralisation, completeness and openness are the characteristics of the blockchain that Sergey Kondratenko pays attention to.
Hard forks. In the world of blockchain, a hard fork is a situation where an uncoordinated change to the blockchain protocol occurs, causing the chain to split into two separate branches. This happens when network nodes cannot reach consensus on changes. Hard forks can lead to the creation of new cryptocurrencies or the splitting of existing ones, and their resolution requires the consent of network participants.
Decentralisation is a key characteristic of blockchain technology. In a decentralised blockchain system, there is no central control authority, and decisions are made collectively by network nodes. They jointly verify and approve transactions that will be entered into the blockchain. Decentralisation increases transparency, trust and security, and reduces the risks of data manipulation.
Completeness means that transactions once approved and included in a block become immutable and cannot be reversed. This blockchain feature ensures data integrity, security and prevents double spending.
Openness. Blockchain technology makes it available to anyone who wants to participate in the network, subject to the rules of consensus. It promotes inclusivity, transparency and innovation by allowing for the participation of different stakeholders in the system
How does blockchain technology work?
In recent years, many companies around the world have been integrating blockchain technology. Sergey Kondratenko says that it combines three important components:
- Cryptographic keys are the most important part of the blockchain. They include public and private keys that provide security and authentication for transactions between participants.
- Peer-to-peer network with shared registry. The essence of blockchain is a peer-to-peer network where many participants have access to a common ledger. It contains information about transactions and records of the network.
- Blockchain uses computational means to store, validate transactions and records on a network.
Cryptographic keys play an important role in providing secure digital identities. In the context of cryptocurrencies, this allows participants to authorise and control transactions using a digital signature.
Sergey Kondratenko: Technical Basics and Security in DeFi
DeFi, or decentralised finance, is a new and rapidly growing field in the world of cryptocurrencies and blockchain. Sergey Kondratenko draws attention to the fact that DeFi provides the opportunity to create and manage financial instruments and services without the involvement of traditional intermediaries such as banks and brokers.
The expert draws attention to the following technical features of DeFi:
Blockchain. DeFi is based on blockchain, which is a distributed and reliable ledger of transactions. Ethereum is one of the most popular blockchain platforms for DeFi, but there are others such as Binance Smart Chain, Solana and others.
Smart contracts. Ether smart contracts are the basis of DeFi. These are program codes that are executed automatically under certain conditions. Smart contracts ensure the autonomy and reliability of DeFi platforms.
Decentralised applications (DApps). DApps are built on top of the blockchain and use smart contracts to provide various financial services such as exchange, lending, staking and others.
Sergey Kondratenko also says that DeFi projects are susceptible to various threats, including smart contract hacking attacks, attacks on the blockchain consensus mechanism, phishing and others. Attackers can steal user funds and manipulate markets. For example, in 2022, a significant portion of the stolen funds, amounting to $3.1 billion, were associated with DeFi protocols, which made up 82.1% of the total assets stolen.
In order to prevent this, the specialist suggests listening to a number of relevant tips when using DeFi
Audit and testing. Before launching a DeFi project, it is extremely important to conduct an audit of smart contracts and thorough testing to identifyvulnerabilities and errors in the code.
Whitelists and multi-signature wallets. Many DeFi projects use whitelists to restrict access to certain features or addresses. Multi-signature wallets also provide an additional layer of security by requiring the consent of multiple keys to complete transactions.
Decentralised forums and auditors. The DeFi community is actively collaborating in identifying and fixing vulnerabilities. Independent auditors and agencies also help ensure safety.
Training and awareness. DeFi users should do their research on the project they are investing in and only use trusted and secure platforms.
The world of banking and fintech in general is in the process of constantly introducing dynamic innovations. Banks and neobanks, fintech startups, tech giants such as Google, Apple and Amazon are forced to constantly adapt to change. Blockchain and DeFi help with this. Sergey Kondratenko emphasizes that their decentralised and immutable nature makes their use in banking an attractive prospect for financial institutions. They have the opportunity to improve transparency, security and inclusion of financial services.
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