Why is blockchain transforming the digital finance industry? From Bitcoin to DeFi

Blockchain is not a new concept, but most people are still confused about how it works, why it is important, and what it can be used for. Today, we will understand this topic step by step.

Blockchain (Blockchain) is a system that changes everything

Simply put, blockchain is a technology that allows us to send data and money from one person to another without the need for banks or any intermediaries, while ensuring security and accuracy.

The name “blockchain” comes from its mechanism—data is stored in a (Block), which are linked together in a long (Chain) in an orderly manner. Each block is connected to the previous one via a “Hash” (Hash), which acts as a unique fingerprint.

Three major functions that make blockchain stable

1. The fingerprint of each block (Hash Code)

When a block is created, it has a Hash that identifies it. This Hash consists of three parts:

• Data (Data): stored in the block, such as Bitcoin transactions indicating who sent how much to whom
• Unique Hash: serves as an ID; no two blocks have the same Hash
• Previous Block’s Hash: creates a secure chain

Example: If block 1 sends 5 BTC from Golf to Poo, its Hash is A24. Block 2 must reference A24. If someone tries to modify block 1, the Hash will change, making block 2 and subsequent blocks invalid immediately.

2. Network consensus mechanism (Consensus Mechanism)

In addition to linking via Hash, there is a second layer of security—using a consensus system, such as Bitcoin’s “Proof-of-Work (PoW)”, which takes about 10 minutes to solve complex puzzles and add a new block.

If a hacker wants to alter the system, they must change the Hash of all previous blocks before a new block is added. Since Bitcoin has hundreds of thousands of blocks, this makes such an attack practically impossible.

3. Peer-to-peer network with no “control” (Node)

Blockchain has no single intermediary—everyone running the software becomes a “node” ###Node(, storing a full copy of the blockchain and verifying transactions.

When a new block is created:

1. It is broadcasted to all nodes in the network
2. Each node verifies and confirms
3. When the majority agrees, the block is added to the chain

To control the system, one would need to control more than 51% of the nodes in a short time—this is practically very difficult and nearly impossible.

Types of blockchain networks

There are not just one type of blockchain; there are four main types:

) 1. Public ###Public(: Open to everyone Examples: Bitcoin, Ethereum, Solana No permission needed. Anyone can join, verify, and participate in transaction validation. Promotes transparency but may be slower due to the need to confirm transactions.

) 2. Private ###Private(: Controlled access Examples: Hyperledger Fabric Controlled by a single organization. Only authorized members can read, write, or verify. Faster and secure but carries centralization risks.

) 3. Hybrid ###Hybrid(: Mix of both Examples: XinFin Stores sensitive data privately, while other parts are open for verification. More complex to manage but balances privacy and transparency.

) 4. Consortium (Consortium): Collaborative control Examples: Corda by R3 Multiple organizations jointly control, reducing risk and costs. Requires coordination among members.

Strengths that make blockchain special

High security: Data stored in blocks cannot be altered, deleted, or modified anymore.

Transparency: No single entity controls everything; everyone can verify.

Cost efficiency: No middlemen needed; only transaction fees on the platform.

Traceability: Can track the history of data from the beginning to the present.

Efficiency: Eliminates human errors, making systems fast and accurate.

Challenges of blockchain that are still unsolved

Scalability: Current blockchain systems cannot handle a large volume of transactions simultaneously, but development is ongoing.

Theoretical hacking: Controlling over 51% of the network theoretically allows control, but practically, it is very difficult.

High energy consumption: Especially with Proof-of-Work systems.

Lack of regulation: Traditional institutions like banks and government agencies are still hesitant to endorse this technology.

Where can blockchain be used?

Digital financial transactions

From Bitcoin to DeFi products, such as the Thai central bank’s digital Baht project or JFIN by JMART used for credit scoring.

Supply chain

IBM’s Food Trust Blockchain allows consumers to trace the origin of raw materials. Other examples include import/export tracking, where customers can verify origins accurately and cannot be falsified.

Voting systems

Blockchain can prevent vote tampering because altering results is nearly impossible, providing transparency that allows process verification. It is faster and more cost-effective than traditional manual verification processes.

Summary

Blockchain is a technology that changes how data is stored and value is transferred. It is designed to be secure, transparent, and decentralized. Despite some limitations, ongoing technological advancements show that blockchain is a real and promising innovation that many industries are exploring. Now, everyone should understand how blockchain works and its benefits.