What Is Blockchain All About? (For Dummies)

With the recent crypto frenzy that has taken over the world's financial system, there's a high chance that you've heard the word "blockchain" at some point to the other.

The irony is, while "blockchain" seems to be turning into a cliche term today, it is still quite vague to most people today. This is why it is important for what blockchain is to be understood in the simplest possible form.

If you are new to Blockchain, then you've come to the right place to get firm foundational knowledge. In this article, you will learn what Blockchain technology is, how Blockchain works, why it’s important, and how you can use this field to advance your career.

What Is A Blockchain?

Imagine that you had a little book, where you wrote down every dollar or naira you were given, or that you gave out/spent. You'd want that book to be kept safely, wouldn't you? The problem is, your little book could get tampered with, stolen, or even damaged.

A blockchain is that record book in a way that can't be burned or touched by anyone. So you no longer have to be scared it'll get lost or that someone can rewrite what you've already written. It is a structure of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.

How does this work? Well, let's use your little record book again. If you wanted to be sure you had everything you wrote in it safe, what would you do? Perhaps make several copies and have them distributed to several locations. At least, that way, you'd make it difficult to lose tour records. The problem is, how many copies can you make? What if you had to make new records every day? Would you transport new books every day? That would be way too much work just to keep your little record book safe. But what if you could have all that work done in a matter of minutes, and not even work? That's exactly what blockchain is about!

A blockchain is essentially a digital ledger (record book) of transactions, also known as the block, that is duplicated and distributed across a network of computer systems, known as the chain. Each block in the chain contains several transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. 

If you wanted to ensure nobody could tamper with any copy of your little record book, you'd want it to have something that authenticates it, like a signature. But there are only so many copies you can sign before burning out. However, every transaction in the ledger is authorized by the owner’s digital signature on the blockchain, which validates the transaction and safeguards it from tampering. Hence, the information the digital ledger contains is highly secure.

We could also look at it this way: this ledger is like a Google spreadsheet shared among several computers in a network. But in this case, the transactional records are stored based on actual purchases. 

The fascinating angle is that anybody can see the data, but they can’t corrupt it. If one block in one chain was changed, it would be immediately obvious it had been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain.

What’s The Hype All About?

Suppose you need to transfer money to your family or friends from your bank account. You would log in to online banking and transfer the amount to the other person using their account number. When the transaction is done, your bank updates the transaction records. It seems simple enough, right? But there is actually a problem — these kinds of transactions can be tampered with very quickly. As a matter of fact, third-party payment applications evolved in recent years because of this problem. This is one of the major reasons why blockchain technology was created.

More so, there have been several attempts to create digital money in the past, but they always failed, trust being the prevalent problem. For example, if someone creates a new currency called the X dollar, how can we trust that they won't give themselves a million X dollars, or steal your X dollars for themselves? Bitcoin was designed to solve this problem by using a specific type of database called a blockchain. Most regular databases, such as an SQL database, have someone in charge who can change the entries (e.g. giving themselves a million X dollars). Blockchain, on the other hand, is different because nobody is in charge; it’s run by the people who use it. What’s more, bitcoins can’t be faked, hacked, or double-spent – so people that own this money can trust that it has some value.

Most people assume Blockchain and Bitcoin can be used interchangeably, but in reality, that’s not the case. Blockchain is the technology capable of supporting various applications related to multiple industries like finance, supply chain, manufacturing, etc., but Bitcoin is a currency that relies on Blockchain technology to be secure.