Blockchain Broken Down

A beginner’s guide to blockchain, the technology that’s taking over the world by a storm, and it’s just the beginning.

Fatimah Hussain
Analytics Vidhya


Blockchain is essentially a chain of blocks. Like a chain, each of the blocks is interconnected to each other.

Each block is a transaction. A transaction is basically a trade; such as trading something of value with another thing of value.

Here’s an example: you want a hamburger from McDonald’s, you pay $5, and you get a hamburger. Here, you’re trading a hamburger for $5. That is a transaction.

So blockchain is a chain of transactions. Every single transaction. Including your McDonalds trip.

Faults With the Current System

The following week, you decide you want a hamburger. You take yet another detour to McDonald's and order a hamburger. You pay the money first and then receive the hamburger. Notice the order of events. None of us have really questioned why we would give the money first, and then receive our goods.

But why are we fine with this? It’s because we trust the system. We trust that the person serving us will give us our hamburger when we pay.

In the current system, trust plays a well-defined role in our economy. In every single transaction, trust is embedded.

But what if they don’t give you your hamburger? They say that the price had jumped up from $5 to $10, and you’ll need to pay extra.

At this point, you’re powerless. There’s nothing you can do. You can ask for your money back, but what if they don’t give it to you? After all, you did pay them and they can choose what to do with the money.

Let’s take it up a notch.

You take out a loan from a bank of $1,000,000. The interest is 10%, so you’d have to pay $1,100,000 to the bank.

It’s important to keep in mind here that you are trusting the bank. You are trusting that the bank keeps their initial agreement that both parties (you and the bank) agreed upon.

But the bank has the power to say, “Oh, no actually you will have to pay 15% interest” or “According to our records, you took a loan of $1,500,000 instead”. Not only is that trust between you and the bank lost, but you realize they have the supreme power of changing the records.

They are the ones who handle all the information. They are able to tamper, alter, and change the records as they wish.

Now, you can file a lawsuit and go down that path, but not only is that expensive and time-consuming, but there’s no guarantee that you’ll win.

You also realize that in all of these systems, there is always a middleman. Between you and your money, the bank was involved. Between your money and your burger, Mcdonald’s was involved. In both scenarios, McDonald and the bank was the middleman, with all the power.

The Hype Around Blockchain

Now that the bank has altered their records, you’re frustrated and there’s no way they are gaining back your trust. But then you hear about this fascinating new technology named blockchain.

Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with.

And that, my friend, is the essence of blockchain. Nobody can tamper or alter it. What’s done is done. The fact is the fact. You get the point. All you can do is add to the chain, aka make more transactions.

And the best part is, you don’t have to be forced to trust any sort of middleman involved!

The blockchain ecosystem handles and keeps all transactions, and is locked and secured in a way where nobody can tamper or change the transactions. This takes a whole lot of the power away from governments. This makes blockchain a decentralized system: where you don’t have to rely on a third party, and stores all transactions on the blockchain, which are immutable (cannot be changed).

And because of this, many people are actually starting to take their money out of banks and investing it into cryptocurrencies!


Remind you that blockchain is just a decentralized platform of interconnected links, aka transactions. Here are some of the most widely used applications that use blockchain.


Cryptocurrencies, crypto for short, is a digital asset designed to work as a medium of exchange where individual coin ownership records are stored in a blockchain and uses strong cryptography to secure transaction records.

By spreading its operations across a network of computers, blockchain allows Bitcoin and other cryptocurrencies to operate without the need for a central authority. This not only reduces risk but also eliminates many of the processing and transaction fees.

Smart Contracts

A smart contract is just your regular contract, but with ++ benefits. It is a computer program intended to execute and document legally relevant events according to the terms of an initial agreement.

This way, there is no conflict and all power is within the lines of code, where this is no middleman involved (such as for instance the bank if you were taking out a loan).

Everything is automated and settled, and you are the one making the agreement and validating the initial agreement.


Blockchain can also be used to improve IoT data security. The Internet of Things refers to the billions of physical devices around the world that are now connected to the internet, all collecting and sharing data. You might be thinking, “This is the perfect way of using blockchain technology!”, and you couldn’t be more correct! Since IoT is the interconnectivity of devices, there is a huge factor involved: security. IoT enables devices across the Internet to send data to private blockchain networks to create tamper-resistant records of shared transactions.

And many companies have started taking action.

IBM Blockchain enables your business partners to share and access IoT data with you — but without the need for central control and management.

It’s Just the Beginning

Blockchain is well on its way to changing our economy for the better when the governmental systems like it or not. Although blockchain has been fairly recent, we are starting to see many companies realize the potential of blockchain. With companies embedding this modernized technology into their systems, it’s a fact that the rise of blockchain has just begun.

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Fatimah Hussain
Analytics Vidhya

An AI+ML+CAD Software Design Enthusiast. Striving to Create an Everlasting Impact.