What exactly is Blockchain Technology?

A beginner’s guide. If you are completely new to the blockchain, this article is for you.

Photo by Shubham Dhage on Unsplash

Blockchain and cryptocurrencies have gained significant popularity in the last decade. However, many people don’t get how it functions because it’s pretty complex. It reminds me of when the internet was first introduced and how the world had to figure it out over time. Blockchain technology is still emerging, but it has a lot of technical words that might confuse the average person.

And this is where I come in.

Personally, I believe everyone should learn about the Blockchain. It’s much more than bitcoin, which is basically a digital currency that uses it. This technology can be used in different areas like healthcare, banking, identity verification, managing a supply chain and even voting systems. It has so much potential which I will write more in my future articles.

This is the first article, in a series of articles about the blockchain. I will simply break down the meaning of the technology. Don’t worry, I’ll break it down so well that even a 5-year-old can get it.

Kindly walk with me.

What does the Blockchain mean?

Photo by Shubham Dhage on Unsplash

I am an accountant. My job is to keep track of the money that comes in and goes out of the company. So anytime the company makes money from selling stuff or spends money when they pay bills and workers, I record them in a document on my computer called a ledger. Now, here’s a twist.

1. Everyone I work with, including my bosses, have a copy of this ledger on their computers. We all keep track of the money at the same time. In a way, we are all accountants.
2. Each time a transaction happens, we all see it at once.
3. We give it a special mark (like a fingerprint or your national ID number) to identify it.
4. After the identification, we store it with previous transactions in a batch or folder, which eventually goes into our ledgers.
5. Sadly, the batch can’t store endless transactions, so we have to create new ones regularly. But before we do, we check each transaction to be sure it is correct. If a majority or all of us agree that it is correct, we add it to the ledger.
6. Once a batch is in the ledger, we lock it with a secret code to stop anyone from changing or deleting it without our permission. However, if we reject the batch, it doesn’t make it to the ledger, and we move on to creating another batch and repeating the process. The transactions in the batches are permanently recorded.
7. Every new batch that is made is linked to the last one that was just closed, meaning that a new batch has a reference to the previous one. These batches form a chain in the ledger.

This, my friends, is what a blockchain is.

We, the accountants, are like computers connected to a big network. This network (public or private) is full of computers called nodes. Nodes can be in different locations around the world.

The batches we store our transactions in are called blocks. These blocks link themselves together to form a chain in the ledger, like a bond that can never be broken. The unique fingerprint placed on each transaction is called a hash. A hash comprises both letters and numbers. The agreement to add a block to the ledger is called a consensus. And locking up the blocks with secret codes, that’s known as cryptography.

In essence, a blockchain is a permanent digital database that records transactions and is monitored by a bunch of computers instead of one. It consists of blocks that are safely linked together, forming a continuous chain, where each block is a collection of data that occurred recently. These blocks can store any form of data such as contracts, product orders, employment records etc. In the case of a Bitcoin blockchain, the blocks contain transaction records of people buying and selling Bitcoin. They’re like receipts that serve as proof that a transaction is made.

So yeah, blockchain = blocks chained together or a chain of blocks.

Here’s another brilliant illustration from The Verge:
“You can think of a blockchain like an obsessive club filled with members who love to keep track of things. The club has a ton of complicated rules to make sure that every member writes down the exact same set of records about what happens each day (whether it’s bird sightings, or beer tastings, or flower sales) and that once data is recorded and accepted, it becomes exponentially more difficult to change as more and more records are added on top of it. Then, usually, outsiders can come by and check out all their records and go, “Oh, wow, a cardinal flew by at 10AM in front of Mike’s house. Cool.

To summarise, the blockchain is a secure, shared database that records transactions permanently.

If you read up to this this point, Congratulations! I do not take your attention for granted.

My next two articles will delve into the key characteristics and different types of blockchain technology.

Originally, this article covered all three topics, i.e the meaning, features and types of blockchain technology.

However, it resulted in a lengthy 10-minute read. I am sure it must have felt very overwhelming for anyone to read.

This is the reason I decided to split the subject into separate articles. That way, you can learn at your own pace and really get a handle on this whole blockchain thing.

So, thank you for reading! Hope you enjoyed this post and were able to learn a thing or two. And if you have questions and feedback, kindly hit the comment section. 😊

See you in my next article!