SESSION A211 2021/2022

BWBB3013 COMMERCIAL BANK OPERATIONS (GROUP B)

GROUP PROJECT = DIGITAL MUSEUM

PREPARED FOR = DR. MUHAMMAD MUHAIZAM BIN MUSA

PREPARED BY = GROUP 6

NO STUDENTS NAMES MATRIC NUMBERS

1 SRI NAGA SANTHANAVARTHINI A/P 281096
SANTHANASAMY

2 NUR DIYANA BALQIS BINTI SHARIR 280503

3 NUR HAZIRAH BINTI YASHAK 280515

4 MUHAMMAD REZA BIN SHAMSUL 280138

TABLE OF CONTENT

PAGES
 ACKNOWLEDGEMENT

First and foremost, this assignment cannot be completed without the effort and
cooperation of our group members, Muhammad Reza Bin Shamsul, Nur Diyana Balqis Binti
Sharir, Nur Hazirah Binti Yashak, and Sri Naga Santhanavarthini A/P Santhanasamy. With
our full commitment and responsibility, we always work hard to produce a good assignment.
We are all willing to make time sacrifices to prepare for this assignment and give it our all.

Not to be forgotten, we would like to express our heartfelt gratitude to our lecturer,
Dr. Muhammad Muhaizam Bin Musa, for encouraging us to carry out this project. The
responsibility assigned to us to carry out this project demonstrates that Dr. Muhaizam's trust
and opportunity were not squandered. We would also like to express our gratitude to him for
instructing us in this course.

Last but not least, we would like to thank everyone who has contributed significantly
to the success of this virtual museum program. We'd like to thank the School of Economics,
Finance, and Banking (SEFB) for allowing us to complete this writing report assignment.
Finally, by completing the project's program, we learned a lot about the virtual museum that
was related to the commercial bank. It provides us with a thousand and one meanings in
terms of gaining knowledge.

VISION STATEMENT
Our vision is to make museums a medium to introduce Blockchain technology to the
community. The museums will be a resource for businessmen or others who are interested in
participating in leading international organisations. The museums will catalogue Blockchain-
related items for educational purposes and to benefit others.

MISSION

- To provide detailed relevant knowledge of blockchain technology.

- To provide awareness to the community about the existence of technology in banking.

- To reduce scammer cases of online financial.

In this museum we have provided complete information related to blockchain.

The information provided such as the introduction of Blockchain, Blockchain

functions, Blockchain system processes, Blockchain benefits and problems

encountered in Blockchain systems along with ways to solve those problems.

Therefore, everyone present will gain knowledge related to this Blockchain

technology.

The banking sector is advancing with the advent of technology. Blockchain is

one of the technologies used in banking and covers international organisations. Most

developed countries have implemented Blockchain to facilitate customer dealings

such as Switzerland which is the centre of Blockchain. So with the existence of this

museum people will be interested in using Blockchain technology and the Blockchain

system in the country can also be added and expanded.

 Now, the problem of scammers has become more widespread since the

development of technology. There is no denying that technology also has its

downsides. Various tricks created by scammers to scam others by saying that they

provide services like banking systems. So by using this Blockchain technology,

scammer cases can be reduced because the security features used are safe and easy for

customers to access information without the help of others. If there is a problem, they

can contact the bank for help.

OBJECTIVE OF THE MUSEUMS

1) As a resource centre for the community to get clear information related to the blockchain.

2) Help the banking sector introduce technology to the community and help HSBC banks

expand existing blockchain technology.

3) Provide complete and easy information to understand for the community to improve their

standard of living.

4) As a tribute to the banking sector that strives to develop the country with increasingly

sophisticated technology.
 INTRODUCTION OF BLOCKCHAIN

Systems such as Blockchain were proposed by Cryptographer David Chaum in 1982.

After that, ‘Computer System Established, Maintained and Trusted by Mutually Suspicious

Groups’ was established and became the basis for the development of Blockchain

technology. In 1991 Stuart Haber and W Scott Stornetta introduced a cryptographically

secure chain of blocks. In 1992 Haber, Stornetta and Dave Bayer worked together to

improve the efficiency of the system by allowing multiple documents to be grouped in one

block. The first Blockchain technology was conceptualised by someone known as Satoshi

Nakamoto in 2008 and he has made improvements to previous systems by using methods like

Hashcash without requiring a signature and introducing difficulty parameters to stabilise

blocks. So HSBC uses Blockchain to develop the technology as it greatly helps improve

efficiency, integrity and security across the entire network and will facilitate the various

parties involved in business transactions.

Technology in the sector of banking became more widespread and developed after the

fourth industrial revolution (IR4). Various types of technology have been used to look after

the welfare of employees as well as customers. Among its technologies is Blockchain.

Blockchain is a popular technology nowadays. Blockchain is one of the types of Distributed

Ledger Technology (DLT) where all the transactions will be recorded with cryptographic

signature. Blockchain is a technology used to store digital data through cryptography. The

data stored in the block depends on the type of Blockchain. For example the Blockchain for

Bitcoin contains information about the sender, recipient and the amount of Bitcoin to be

transferred. Every block also has a Hash as a security tool. Each Hash will identify a block

and all the info in it. So every time a block is created and there is a change to the block it will
cause a change to the Hash. Hash is a cryptography signature as an approval. Generally each

block contains data, Hash and Hash from the previous. All blocks will contain the Hash from

the previous block. This is a technique that makes Blockchain technology more reliable and

safe to use. To further strengthen Blockchain security using the proof-of-work concept to

slow down the manufacture of new Bitcoin-related blocks. Proof-of-work is a concept that

requires its members to solve an arbitrary mathematical puzzle to prevent the system from

being hacked.
 FUNCTION OF BLOCKCHAIN AT HSBC

1. Transforming Global Trade

Global trade is a trade that involves two countries and blockchain technology is an

appropriate system for crossing the trade ecosystem. HSBC uses blockchain technology that

offers a fast and secure alternative to letter of credit processing time from days to a matter of

hours. Since May 2018, HSBC has used the contour (open in new window) platform to

complete all the trade transactions involving over USD35 million. The platform operates

commercially, and HSBC expects to carry out regular network transactions beginning in early

2021. Contour will help accelerate and facilitate trade. It will drive the commercialization of

letter of credit and accelerate the adoption of digital commerce by all parties including

customers. HSBC is also part of eTradeConnect, Hong Kong's first blockchain -based trading

finance platform.

2. Simplifying Foreign Exchange Transactions

Foreign Exchange (Forex) is the system that deals with one institution with others in

exchange currencies with specific rates.HSBC provides international transfer & payment,

multi-currency account and HSBC Currency investment services that drive customers in

expanding wealth by investing in foreign exchange markets. From now till then, HSBC

realise that apart of their clients involved in foreing exchange market. HSBC FX Everywhere

handles this automatic payment through distributed ledger technology. It was offering the

enhancement of efficiency, minimising transaction cost and reducing risk. This is the type of

the blockchain that is the recorded transaction with the cryptographic signature called

hash.HSBC FX Everywhere managed to settle over 2 million trades on the ledger thus far and

expected wider deals eligible for settlement on this platform.

 3. Streamlining Payment Settlement

HSBC streamlines the payment process for all users by using a blockchain -based system to

be able to transact in multiple currencies. HSBC successfully implemented a cash solution to

digital bond issuance in collaboration with Singapore Exchange (SGX) and Temasek

Holding, HSBC successfully simulated fully digital bond issuance from traditional issuance

which can save time and make the process more efficient. HSBC has partnered with

technology partners to implement digital bonds to facilitate the proceeds transfer process to

issuers. The existence of this digital bond is a solution for payments in the next generation

asset network. HSBC will ensure that the blockchain technology used is fast, smooth and

secure.

4. Standardising Private Placement Information

Private placement is a platform to issue or sell securities for investors to generate capital.

their transaction records are not easily converted from paper and electronic formats due to

lack of standardisation. HSBC has provided a platform called HSBC’s Digital Vault based

on the use of blockchain technology that allows each user to access information related to

their assets. This can facilitate all users through an online platform that does not require a

search of records on paper. HSBC also emphasises the demand of customers who want to

know the main terms of the transaction including coupon rates and payment dates. Now, for

the future, HSBC is planning to issue digital tokens instead of using paper certificates.
 PROCESS OF BLOCKCHAIN

Step 1 — Transaction data

The Bitcoin blockchain, for example, is the world's oldest blockchain. Each Bitcoin

blockchain block contains about 1 MB of data. At the moment of writing, it has around

525,000 blocks, which equates to approximately 525,000 MB held on this blockchain. The

data on the Bitcoin blockchain is made up entirely of transaction data from Bitcoin

transactions. It is a massive log of all Bitcoin transactions, dating back to the very first

Bitcoin transaction. Assume that, like the Bitcoin blockchain, a blockchain holds transaction

data.

Step 2 — Chaining the blocks (with a hash)

Three blocks, for example, each holding some transaction data. It is comparable to certain

solitary word documents that just outline what transactions occurred and how they impacted

particular balances. Source 1 would then chronologically explain the initial transactions that

happened up to 1 MB, following which source 2 would detail the next transactions up to

another MB, and so on. These documents are the data blocks. These blocks are now

connected (also known as chained) together. To do this, each block is assigned a unique

(digital) signature that matches the precise string of data in that block. If anything within a

block changes, even if it is only a single number, the block will receive a new signature.

Assume block 1 records two transactions, transaction 1 and transaction 2. Assume that these

transactions total 1 MB in size (in reality this would be much more transactions). This data

block now has a signature for this specific string of data. Assume the signature is 'X32.'
A single digit modification to the data in block 1 results in an entirely new signature. By

appending the signature of block 1 to the data of block 2, the data in block 1 is now linked to

the data in block 2. Because it is contained in the string of data in block 2, the signature of

block 2 is now partially dependent on the signature of block 1. The signatures connect the

blocks, forming a chain of blocks. Consider adding a third block to this chain of blocks: block

3. This is what it looks like:

Consider what would happen if the data in block 1 was changed. Assume that the transaction

between Damian and George has been changed, and Damian has now allegedly sent 500

Bitcoin to George instead of 100 Bitcoin. The data string in block 1 has changed, which

means the block has a new signature. This new collection of data requires a new signature,

which is no longer X32. Assume it is now 'W10' instead. What occurs now is as follows:
The signature W10 no longer corresponds to the signature that was previously appended to

block 2. Blocks 1 and 2 are no longer regarded to be linked to each other. This informs to

other users of this blockchain that some data in block 1 has been changed, and because the

blockchain is supposed to be immutable, they reject this modification by returning to their

earlier record of the blockchain, where all of the blocks are still chained together (the record

where Damian sent 100 BTC to George). The only way for an adjustment to go undiscovered

is for all of the blocks to remain linked to each other. This indicates that in order for the

change to go unnoticed, the new signature from block 1 must replace the old one in the data

from block 2. However, if the data in block 2 changes, the signature in block 2 will change as

well. Assume that the signature of block 2 is now 'PP4' rather than 9BZ. Blocks 2 and 3 are

no longer connected by a chain.

The blocks on a blockchain are open to the public. So, if a modification is expected to go

undiscovered on a blockchain, all of the blocks must be correctly chained (otherwise, people

would notice that some blocks aren't properly linked to one another). This means that

changing a single block necessitates a new signature for every subsequent block all the way

to the conclusion of the chain. This is thought to be nearly impossible. To understand why,

you must first understand how signatures are generated.

Step 3 — How the signature (hash) is created

So, consider the following block: block 1. Block 1 is a single-transaction record. David

receives 100 Bitcoin from Thomas. A signature is now required for this specific string of

data. A cryptographic hash algorithm generates this signature on the blockchain. A

cryptographic hash function is a complex algorithm that transforms every string of input into

a unique 64-digit string of output. You might, for example, enter the phrase 'Jingle Bells' into

this hash function (there are various hashing methods, but we'll use this one for now).

Each unique block's digital signature is generated using the cryptographic hash function.

There are many other hash functions, however the SHA-256 hashing algorithm is the one

employed by the Bitcoin blockchain. But how do the signatures prevent someone from just

entering a new signature for each block after modifying one (a change goes unnoticed if all

blocks are correctly linked, and users won't be able to identify there was a change)? The

explanation is that on the blockchain, only hashes (signatures) that match particular criteria

are allowed.

Step 4 — When does the signature qualify, and who signs a block?

A signature is not always sufficient. A block will only be accepted on the blockchain if its

digital signature begins with a consecutive amount of zeroes, for example. Only blocks

having a signature that begins with at least 10 consecutive zeros, for example, are eligible to

be added to the blockchain. However, each string of data is associated with a single unique

hash. To find a signature for a block that fits the requirements, the string of data in the block

must be altered repeatedly until that precise string of data leads to a signature beginning with

10 zeros. Because the transaction data and metadata (block number, date, etc.) must remain

unchanged, a little piece of data is added to each block that has no use other than to be
modified repeatedly in order to discover an acceptable signature. The nonce of a block is the

name given to this piece of data. The nonce is a fully arbitrary sequence of integers.

Step 5 — How does this make the blockchain immutable?

As previously explained in step 3, changing a block will unchain it from the future blocks. To

be accepted by the remainder of the network, an updated block must be linked to the

succeeding blocks once more. As previously stated, this necessitates that every block that

follows it receives a fresh signature. And that signature must fulfil the specifications. Giving

all of these blocks a new signature will be highly expensive and time-consuming, but it does

not appear to be impossible.

Because there are millions of users mining on the Bitcoin blockchain, it can be assumed that

a single bad actor or entity on the network will never have more computational power than

the rest of the network combined, implying that the network will never accept any changes to

the blockchain, rendering it immutable. Once data is put to the blockchain, it cannot be

altered again. However, there is one exception. In practice, however, a 51% attack on the

Bitcoin network would be significantly more expensive to carry out than it would produce in

return. It would not only necessitate a massive amount of hardware, cooling equipment, and

storage space for the computational power, but it would also carry the risk of prosecution

and, more importantly, would severely harm the ecosystem of the corresponding blockchain,

causing the potential returns in Bitcoin to plummet in value. Attempting a 51 percent assault

is essentially fighting all of the other users on a blockchain by yourself. This is also why, as

more people engage in the mining process, a blockchain becomes more secure.
Step 6 — How is the blockchain governed? Who determines the rules?

The Bitcoin blockchain follows a democratic governance model, thus it updates its record of

transactions (and consequently the Bitcoin balances) based on what the majority of its users

agree is true. Because it considers that this chain is represented by the majority, the

blockchain protocol performs this automatically by always following the record of the longest

blockchain it possesses. After all, the longest version of the blockchain necessitates the bulk

of processing resources. This is also how the majority of the network automatically rejects a

changed block. The majority of the network automatically rejects a changed block since it is

no longer connected to the longest chain.

All transaction histories and wallet balances are available on the Bitcoin blockchain. Anyone

can check up every wallet or transaction that has ever taken place, all the way back to the first

transaction ever done. Although wallet balances are publicly accessible, the proprietors of

those wallets are mainly unknown.

Step 7 — Where does this leave cryptocurrencies?

Cryptocurrencies are essentially modified versions of Bitcoin. Most cryptocurrencies are

constructed on their own blockchain system, which may differ from the Bitcoin blockchain in

terms of rules. Bitcoin is intended to be a currency, which means that it is intended to act as

money. Monero is a cryptocurrency that performs the same function, but its blockchain

system has certain additional constraints that make it a more private currency (transactions

are much harder to trace). Cryptocurrencies, on the other hand, can be assigned any value,

depending on the issuer. They might be considered 'tokens.' These tokens can grant their

owners the right to something,' which might range from a gaming licence or access to social
media to outright energy or water. A 'cryptocurrency' token can have any value tied to it. All

of these cryptocurrency transactions are recorded on different blockchains and may be

swapped online via cryptocurrency exchanges like Binance. It is the internet's new currency.

The stock market is an excellent example of an industry that might be affected. There is a

strong likelihood that in the future, corporation shares and other property rights will be

registered as tokens on a blockchain. Blockchains have the capacity to securely store data

such as medical information, identities, historical records, tax records, and much more.
 BENEFITS OF BLOCKCHAIN

1. Reduced Costs
Businesses today spend a lot of money to improve the administration of their current system.
As a result, the company wants to decrease expenses and devote cash to the development of
something new or the upgrading of existing operations. HSBC believes that firms may cut
many of the costs connected with third-party suppliers by embracing blockchain. Because
blockchain lacks an inherited centralized player, there is no need to pay supplier fees.
Furthermore, less interaction is required while verifying a transaction, reducing the need to
spend money or time on tedious procedures.

2. Better Transparency
According to HSBC, one of the biggest challenges in the current industry is blockchain
transparency. To encourage transparency, organizations have sought to enact new regulations
and legislation. One aspect, however, precludes any system from being entirely transparent,
and that issue is centralization. With blockchain, HSBC may choose for a totally
decentralized network with no need for a single authority, boosting system transparency. A
blockchain is made up of peers that are in charge of carrying out and confirming transactions.
Although not every peer engages in the consensus approach, they do have the option of
participating in the validation process. To provide validation through decentralization, HSBC
adopts a consensus technique. Once the transaction record has been confirmed, each node
keeps a copy of it. In this way, HSBC's blockchain network can control transparency.

3. Enhanced Security
In comparison to previous platforms or ways of record-keeping, HSBC blockchain
technology provides improved security. Any recorded transactions must be agreed upon using
the consensus process. Furthermore, each transaction is encrypted and has an appropriate
relationship to the prior transaction using a hashing technique. The fact that each node in the
HSBC network has a copy of every transaction ever performed on the network increases
security. As a result, a malicious actor attempting to change the transaction will be unable to
do so because other nodes would deny his request to publish transactions to the network. The
HSBC blockchain networks are also immutable, which means that once data is written, it can
never be reversed. This is also the ideal solution for systems that rely on unchangeable data,
such as those used to track the aging of inhabitants.

4. True Traceability
According to HSBC, organizations may use blockchain to focus on establishing a supply
network that works with both customers and suppliers. Objects in the conventional supply
chain are difficult to trace, which can lead to a range of concerns such as theft, counterfeiting,
and commodity loss. Because of blockchain, the supply chain is more visible than ever
before. It enables each party to trace the commodities and ensure that they are not substituted
or mistreated along the supply chain process. Companies may benefit from HSBC's
blockchain traceability by using it in-house.

5. Improved Speed and Efficiency

Blockchain is used by HSBC to solve time-consuming operations and automate them in order
to enhance production. It also removes human errors through automation. HSBC offers a
digital ledger that enables all of this by keeping transactions in a single location. Process
streamlining and automation implies that everything becomes extremely efficient and quick.
HSBC explains how the use of a decentralized ledger makes it easier for everyone to trust one
another. In a nutshell, blockchain at HSBC employs a one-of-a-kind technique of data storage
to create a highly efficient process defined by trust, transparency, and immutability.

PROBLEMS AND SOLVING REGARDING BLOCKCHAIN

 1. Security Issues

We can separate this issue into two groups that represent some who do not believe in the

safety of the technology itself and do not trust others who are in the blockchain network.

Communities that apply this technology are sceptical about the potential of the blockchain

regarding the privacy and security of data stored and accessible. In fact, many building

companies now work based on privacy rules. For instance, HSBC executes blockchain on

their transaction products. This is because it will be easier for the client to make the

transaction especially in Foreing Exchange transactions. Users believe that all their personal

information and data is stored properly because it is sensitive. In fact, users are no longer safe

in this regard because although technology makes it easier to store databases, their

information is widely stored in public ledgers and it is clear that it is no longer privacy and

risking customer information to the public. In terms of security, although blockchain is safer

and more efficient than previous systems, it is more likely and vulnerable for hackers to hack

systems and businesses built on blockchain.

The company or bank that implies the blockchain technology needs to upgrade their security

systems so that the data and customer information are more safe and unleak. HSBC needs to

set the register option to limit the access to the data. The crucial aspect to increase the

blockchain privacy is by using private and public keys. This is able to identify the users that

make any transaction without requiring them to give their information. Asymmetric

cryptography is the system that is used in the blockchain that secures the transaction between

the users. This system works with private and public keys that are provided to each of the

users.

2. Public Perception
In fact, nowadays even though blockchain technology in HSBC is being expanded, the

majority of the user community is still unaware of the existence and potential in the use of

this technology. Furthermore, the community is more exposed to bitcoin information so much

so that they equate it with blockchain. Therefore, the community considers bitcoin to be the

only blockchain product that can be produced. HSBC is the one of the banks trying to

represent the potential blockchain to the community. Before this technology continues to

develop, communities need to familiarise themselves with the differences between bitcoin,

cryptocurrency and blockchain. When the community is already exposed to the existence of

blockchain, this technology can certainly grow because its use is already practised globally in

addition to facilitating community affairs in terms of more efficient and secure financial

transactions. In directly, HSBC will get more consumers that use their products that are

conducted from the blockchain technology.

Companies and banks need to provide compelling attractions for the community to use and be

more confident in the potential of blockchain technology that is global in nature. HSBC needs

to provide a simple and secure alternative to convince users to perform transactions based on

a blockchain system. This is to avoid users feeling the existence of blockchain technology is a

heavy burden to accept. Then, this can drive advanced -minded and intellectual users in line

with technological advances. With that, HSBC can reach and hit up their target to achieve

more users in foreign exchange transactions to use distributed ledger technology.

3. The Speedity of Blockchain is not Constant

The blockchain is a complicated system. As a result, processing transactions takes longer.

Furthermore, the system's encryption makes it considerably slower. Even while they claim to

be speedier than traditional payment methods, they can't always deliver. Even HSBC that

allows their client and customer to do the foreign exchange transaction, it also will be stuck

and jammed because of the technology unable to accommodate the dumping of customers to

go through money transactions at one time. The concept should theoretically apply to

blockchain networks that aren't used to hold currency. In the IoT environment, for example,

tracking transactions or interactions. loT simply is an interconnection of ordinary computer

gadgets and things that allows them to receive and deliver data through the internet. It only

decelerates when there are a lot of users on the network at one time. The slower it gets, the

more it expands.

In fact, in terms of speedity will be associated with connection and system of technology. In

order to recover the lack of speedity, the companies and banks should provide advanced

engineering and speed up the process of transaction. With the change, users can make

transactions smoothly and there is no issue of overlapping money transactions due to a down

system. In addition, the bank and companies cannot control users to make transactions, so

with the advanced technology, it will allow users to use it without restrictions. HSBC itself,

they need to be aware if there are any complaints or feedback from the users according to the

transactions in foreign exchange business

4. Lack of Adequate Skill

The company that implies blockchain needs qualified staff to administer blockchain

technology in addition to software and hardware. As you may be aware, blockchain

technology is still in its early stages. This is the bigger challenge for HSBC because even if

they try to execute the blockchain technology to the community, they also must have good

workers and bankers that are able to manage the technology thoroughly. Few people now

possess the necessary abilities to support such technology. There is a huge demand for these

types of qualified personnel. So, if you want to hire experienced workers, you'll have to pay

them a luxurious salary. It will cost you money to hire the proper individuals.The blockchain,

like any other technological advancement, will continue to evolve. The difficulties may

occur, but they are not impediments. New regulations and standards must be implemented.

Facing the developing world with blockchain technology, companies and banks need to

provide courses and programs to develop skills from their own staff to operate systems based

on blockchain technology. Therefore, HSBC needs to make sure their staff are trained and

accept the blockchain and new regulation itself. This also needs to be learned in school. This

can develop students who are able to adapt to the rapid development of technology. The

companies and banks need to have qualified personnel to manage the blockchain thoroughly.

Therefore, this will help blockchain technology develop more advanced with the availability

of skills in this particular system.

CONCLUSION
To summarise, Blockchain is the technology that underpins Bitcoin. The distributed ledger

feature of BlockChain, together with its security, makes it a particularly appealing solution

for solving existing financial and non-financial business concerns. In terms of technology, the

cryptocurrency-based tech is either on the downhill slope of inflated expectations or in the

trough of disillusionment. There is a lot of interest in BlockChain-based commercial

applications, and there are a lot of start-ups working on them. As previously said, the

adoption is facing significant headwinds. Large financial organisations like as Visa,

Mastercard, banks, NASDAQ, and others are investing in the exploration of current business

models' implementation on BlockChain. In fact, several of them are looking for new business

models in the BlockChain realm. Some would prefer to keep ahead of the curve in terms of

BlockChain's altered regulatory settings. 11 To summarise, we anticipate that BlockChain

will be adopted slowly owing to the dangers involved. The majority of startups will fail, with

only a few exceptions. In a decade or two, we should see widespread adoption.