# Blockchain and Smart Contracts for Insurance: Is the Technology Nature Enough?
## 2 How Blockchain Works
[PERSON] makes a statement in which she specifies the amount to be transferred as well as the recipient of the transfer, and validates this message with her credentials (for sake of readiness, the image reports users' names instead of their addresses). Then, she broadcasts the message to the network. Network nodes verify if the message's sender was actually [PERSON] (by verifying if the message was correctly validated using her credentials), and check if she possesses the amount to be transferred. In order to perform this check, they use their local copy of the blockchain and analyze incoming and outgoing transactions from [PERSON]'s wallet address that are stored in previous blocks. If the message sent by [PERSON] is valid and she is entitled to spend the money, they add [PERSON]'s transaction, together with other transactions occurring in the same time frame, to a block. In order to add the block to the blockchain, they then start solving a complex mathematical problem, where they have to find a random number that, combined with a numeric summary of the previous block, provides a given result. During this (mining) process, the fastest node receives a monetary reward. When a valid result is found, the new block is added to the blockchain. As a result, [PERSON] receives the money. The above example should have allowed the reader to get better acquainted with the main characteristics of the blockchain, which make it a disruptive technology:  
* Decentralized validation: the validation of transactions is performed by network nodes without the need of intermediaries;
* Data redundancy: each network node has a local copy of the blockchain, which prevents data losses;
* Data immutability: data stored in the blockchain could not be modified or deleted;
* Trust: cryptography enables trust between parties, since a transaction that has been validated using user's credentials cannot be repudiated;
* Transparency: everyone could read the blockchain and the transactions stored in it. Though the example in Figure 1 refers to a transfer of cryptocurrency, application possibilities of the blockchain are not limited to monetary assets, but could encompass a wide variety of use cases. Among the early application scenarios that were explored for the blockchain, it is worth recalling the notarial context. In fact, since the blockchain is immutable and publicly available, researchers suggested using it for storing public records and attestations [1]. Another domain where the blockchain has been recognized to be able to bring significant benefits is intellectual property protection. In this context, blockchain technology could be used to prove/certify the existence of a document at a given time [24]. In contexts where, e.g., freedom of thought is threatened, blockchain technology could be used to store information in order to avoid censorship [25]: in fact, everyone can write information on the blockchain and read it. As time has passed, researchers have realized that the blockchain could also be used to store other kinds of assets, including pieces of code. It was the birth of \"smart contracts\", i.e., small programs stored in the blockchain and programmed to autonomously behave in a given manner when some conditions are met. The idea of a smart contract has been known since the 90s [26], but it was only with the blockchain technology--and, in particular, with the Ethereum blockchain (probably the most famous blockchain after Bitcoin)--that smart contracts were able to unleash their full potential [27]. With a smart contract, a person could, for instance, encode his/her will in the blockchain in the form of a set of rules. In case of death, the smart contract could then automatically transfer the testator's money or other kind of assets to the beneficiary. The testator may also provide additional constraints, such as enabling the transfer only when the beneficiary reaches the age of majority, when he/she obtains a diploma, etc.