Introduction To Blockchain Technology

What Is Blockchain?

Over the past few years blockchain has really entered the mainstream consciousness.  Some people say it is the new internet and it will change how businesses will operate and how industries will emerge.  Yet, most people still don’t really even know what blockchain is. If you are one of those people, here is your quick guide.  

In a nutshell, blockchain is currently the most secure technology available to digitally store data and record transactions.  A Blockchain is a type of digital repository of data in which information is transferred and stored.  That last sentence basically described a digital ledger. So what is so unique about blockchain if it is simply a digital ledger?  Well, it is more than a digital ledger. With a digital ledger, data is confined to a specific type of central database (an Excel spreadsheet for example).  A Blockchain is not confined to specific type of central database because a Blockchain is a type of distributed digital ledger.  

What is Distributed Ledger Technology?

A distributed ledger is a digital ledger that stores, replicates, transfers and shares data in real time, across a synchronized network of digital databases (online computers) unlimited by their geographical locations, each of which has an exact copy of the data set.  

The three major components of a distributed ledger are the database, the network and the distribution.  The database refers to the ledger of data (or information) being stored and shared on the network.  The network consists of the collection of interconnected group of nodes (or individuals with computer and internet access) whom the database is being shared with for viewing and transacting.  The network essentially is all people using the database.  Distributed means that there (1) is no central database and; (2) all of the nodes are interconnected.

What Is Blockchain
A Blockchain is a type of digital repository of data
in which information is transferred and stored.

Now that you understand what a distributed digital ledger is, you are ready to understand what a Blockchain is.  Blockchain is a type of distributed digital ledger technology on steroids.  And that steroid is called cryptography.  


Cryptography is the process of using a mathematical algorithm to convert an input of data of any size into an output of a predetermined fixed length of characters representing that original input of data.  This is known as hashing.  The output characters will be a random alphanumeric string which is unique to only that original data input.  This specific output uniquely identifying the data is known as a hash value.  So if you change one element of the initial input of data, the entire output hash value will change.  A key characteristic of cryptographic hashing is that it is computationally impossible to reverse engineer the hash value in order to discover the original input.  So there is no way to take the hash value, “crack the code” so to speak and discover what the original input was.

Think of encryption but much more secure.  

For Example: Using cryptography, if I write “Christopher Mitchell wrote an excellent article on blockchain technology” the output may be something like this:


If I shorten the statement to just “Christopher Mitchell”, the output would be different but still the same length.  Maybe something like this:


If I take this entire article and create a hash it would still come out the same length of characters, but no way can anyone without access take the above set of characters, and discover the original statement.


So now when you take distributed ledger technology and add cryptography, you create Blockchain Technology.   Now I can give you a stronger definition:

Blockchain Technology is a form of distributed ledger technology that uses cryptography to secure, record and transfer blocks of time stamped and chronologically linked data across a shared network in a secure manner.

How does blockchain work?

Step 1:

An autonomous system outlining how the Blockchain will function is written in computer code.  This is known as the Blockchain Protocol.

Step 2:

A full input of data is created.  That data can be anything ranging from a series of transactions to the contents of a collection of books.  This input of data is called a block.

Step 3:

That block of data is given its unique identifier, again known as the “Hash Value”.  

Step 4:

Following the Blockchain Protocol, the Blockchain’s network of participants solve a mathematical equation to confirm the validity of the block of data.  A consensus of the network is required for the validation. This is also known as the “Consensus Protocol”

Step 5:

Once the the block of data has been validated, the block is time stamped and published to the network in real time.  This first block is known as the “Genesis Block”.

Step 6:

A new block is created, and that block is also given a hash value and then added to the block published immediately before it.  The new block while having its own hash value, references the hash value of the immediately preceding block.

Step 7:   

This process is repeated creating a chain of blocks- “Blockchain”, which are fixed in length and cryptographically secured.  

Now that you understand what Blockchain is and how it works, you may still be asking what all the fuss is about.  The reason people are so excited about Blockchain is because it is potentially the most secure technology we have today.  You will often hear the buzzwords “immutable”, “transparent” and “trustless” being mentioned in connection with Blockchain.  They are unique characteristics of a Blockchain that significantly contribute to its security.


If something is immutable it is not changing or is unable to be changed.  A Blockchain is “tamper evident” to the extent that any attempted change to a published block cannot go undetected.  If you remember from your lesson above- If any data on an individual block is changed, the hash value of that block will also be changed because it is currently computationally impossible to change data on a block and reproduce the same hash value for that original block.  Since each block references the hash value of the previous block, if the hash value of one block is changed, then the links between the blocks will no longer match. If they no longer match, then the entire network has the ability to discover that something “funny” occurred. This effectively breaks and invalidates the chain.


Transparency is another key security trait of a Blockchain.  As mentioned above, Blockchains are time stamped and in chronological order.  The entire transaction history of a Blockchain can be viewed by the public network.  Select transactions or data sets cannot be arbitrarily omitted from the blocks of a public Blockchain.  This provides the network participants with the security that they are viewing the complete block of data.   


A trust based system is created when there is a central authority or central intermediary that is needed to operate a specific infrastructure.  Trust is needed in the security of their database, in its ability to carry out the transactions, and in how the system’s data is handled and protected.  The consensus protocol and methodology of a Blockchain removes the need for a third party intermediary for which you need to place that trust. Trust is no longer placed in one central party or a third party infrastructure.  Trust is placed in the system itself. The lack of an intermediary removes the need for trust of one central authority, and the consensus validation protocol removes the need for trust in the individual network participants. That is why a Blockchain is called “trustless”.  


The distributed characteristic is mentioned last but it is actual the foundation of a Blockchain’s security.  What makes traditional network data insecure is a hacker’s ability to take down a central access point of vulnerability and gain access to an entire system of data.  Insecurity can also result from a system failure of a central access point which leads to making the stored data vulnerable or compromised.

A Blockchain has no central point of failure, no central point of access to the data and there is no central data storage.  On a distributed network nodes interact from many geographical locations. If there is any single point of failure, the network continues to operate through the other points of the network.  The majority of the nodes in a Blockchain network would need to suffer some type of failure or vulnerability in order to effectively compromise an entire Blockchain. As a result, devastation of a hack or system failure is significantly reduced.

Now you should understand what Blockchain is, how it works and why it has the chance to be so revolutionary.  

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