The Building Blocks of Blockchain


One of the experts spearheading the understanding of blockchain in the credit union space is Catalyst Corporate Vice President for Correspondent Services Justin Lutes.

“Blockchain is not Bitcoin,” said Lutes, noting that these terms are often intertwined, but not synonymous. “It’s easier to think of blockchain as a smartphone, and Bitcoin as an app on that phone.”

Blockchain is a continuously growing list of digital records, called blocks, which are linked and secured to each other using cryptography. And what exactly is cryptography? “It’s the computerized encoding and decoding of information,” said Lutes.

“We are very much in the early stages of blockchain,” Lutes said, “but its potential to revolutionize the way we conduct business both professionally and personally is evident.”

He adds that while still in its infancy, now is the time for credit unions to start learning about blockchain to see where and how it can provide value to members in the future.

Although traditional payment methods typically require an intermediary, blockchain does not. Using an intermediary is a proven, viable system, but blockchain aims to improve issues inherent in traditional payment methods, such as processing speed, cost and fraud.

“Blockchain is a distributed ledger,” Lutes explained. “Confirmed transactions are included in the blockchain. The integrity and the chronological order of the blockchain are enforced with cryptography.”

Blockchain also contains a signature designed to prevent transactions from being altered once they have been issued. Confirmed transactions are packaged in a block that fits very strict cryptographic rules. These rules prevent previous blocks from modifications, as modifying transactions would invalidate the following blocks.

The advantages of blockchain include:

  • Disintermediation;
  • Durability;
  • Reliability;
  • Immutability;
  • Ecosystem simplification; and
  • Lower operational costs.

However, there are some disadvantages. “Blockchain has an uncertain regulatory status, which may induce security and control concerns,” said Lutes. Traditional blockchain lacks a central issuing or regulating authority, opting for a decentralized system to record transactions and manage the issuance of new units.

Currently, there are many major blockchain initiatives underway.

“Projects are in the works to address use cases, such as clearing and settlement, payments, digital identity and smart contracts,” Lutes said. “Credit unions may benefit by researching current use cases and prospective projects to better understand the value proposition of blockchain.”

To learn more about blockchain and other payment trends, attend the Payments Forum portion of Catalyst Corporate’s 2018 Future Forums. Register today by


Questions about our Strategic Link partnership with Catalyst Corporate? Contact NWCUA’s Vice President, Strategic Resources, Jason Smith, at

Posted in GoWest Solutions.