What is blockchain, and how does it work?

What is Blockchain

So what is blockchain? Quoting from the movie The Wolf of Wall Street — is it a fugayzi fugazi, fairy dust? Some say that this technology can change the world as we know it. But what is it really? At its core, a blockchain is a permanent shared spreadsheet that anyone can access and verify information such as financial transactions or health records. And just like a physical spreadsheet, once information is written down, it can’t be changed or deleted.

Example of How Blockchain Works

Imagine you and your friends are playing a game where you each have a notebook and a pen. Whenever someone does something in the game, they write it down in their notebook. Then, they show their notebook to everyone else, and if everyone agrees that their action in the game and what they have written down match, they all write it down in their notebooks too.

Let's say one of your friends tries to cheat and goes back into their notebook to change something they have written previously. When they show their notebook to everyone else, it will be evident that they cheated because their notebook doesn't match everyone else's.

This is kind of like how a blockchain works. Instead of a notebook, it's a computer network, and instead of writing things down, it's recording transactions. And instead of everyone agreeing that what's written is true, the network uses a bunch of math to ensure everything is on the up and up.

Let's say you want to send your friend some money using a blockchain. You tell the network, "Hey, I want to send my friend ten tokens." The network checks to make sure you have enough tokens and that you're allowed to send them. If everything looks good, it puts your transaction in a block and adds it to the chain of all the other transactions that have happened before.

Now, let's say someone tries to cheat and goes back and changes the transaction to say they sent their friend 100 tokens instead of 10. The network would be like, "Hey, that doesn't match the math we did before; something's not right." And just like in our game, the cheat would be caught, and the network would ignore their fake transaction.

And that's basically how a blockchain works! It's a way for a bunch of people to keep a record of things that are secure and can't be messed with. Now that we have understood how blockchain works on a high level, let's understand the key features of this game-changing technology.

Blockchain is decentralised

Just like how we have illustrated in our earlier example where you and your friend each have a notebook, instead of just an entity keeping track of everything, there are lots of individuals(validators) in the network, and each of them has a copy of the list of transactions. This makes it very hard for anyone to cheat or make a mistake because there are so many copies of the same list. This makes it decentralized - no one person or group has control over it.

Blockchain is permanent and secure

Because there are many computers with the same list of transactions, this makes it extremely difficult for anyone to alter or delete the transactions that are recorded, therefore, tamper-proof. Similar to how a spreadsheet works, where a new data row is added to the end, records stored on the blockchain have blocks of transaction constantly added to the end. But unlike a spreadsheet where previous data can be altered or deleted, a block of transactions can only be added to the blockchain. This is because the blocks in a blockchain are connected to each other in a specific order, like a chain. Each block contains a "hash", which is a unique code that represents the block. The hash of a block is created using the information contained in the block and the “hash” of the block before it, this unique formula ensures the integrity of the blockchain.

Blockchain enables true ownership

Let’s say you upload images or videos onto a social media platform. That digital asset is stored in a database owned by the social media company, but they gave you the right to update or delete that asset. You don’t technically own it. Another example is health records, the data is owned by where it’s being stored, and the owner of the database can deny providing that information to you. Blockchain technology enables true ownership by allowing for the creation of digital assets that are recorded on a decentralized, immutable ledger. This means that ownership of these assets can be easily transferred and tracked without the need for a centralized authority, such as a bank or government.

A question you might ask is, “How does the network know if a person’s request for an asset transfer is truly the owner of the account? Couldn’t someone just impersonate or fake their identity to chat?”. Well, this is where public and private key comes in.

In the blockchain, a public key and a private key are like a lock and key for a digital safe. Similar to how a bank account works, the public key is the address to the digital safe which is something that you can share with anyone. The private key is like a password which only you should know as it is used to open the safe and access what is inside. So, when someone wants to send you something, they can use your public key. But only you, as the holder, with your private key, have the right to withdraw the funds from your account.

Blockchain is transparent

All transactions recorded on open-source or public blockchains such as Solana or Ethereum are visible to everyone. And because everything is out in the open, this makes it easier to spot any mistakes or fraud. However, since it is transparent and visible to everyone, storing sensitive data such as medical records might not make sense. But note that blockchain is still nascent, and there are new technologies, such as zero-knowledge proofs, which allows for data privacy, despite the data being on the blockchain.


Blockchain is a decentralised database managed by a network of computers which records the movement of all assets. Therefore, you can see exactly who owns what, when, and how much. And since the blockchain uses cryptography to create a unique hash for each block using the content within the block and the hash of the block before it, all transactions on the blockchain are permanent, transparent, and tamper-proof. Keen to learn more about the amazing technologies and applications of blockchain? Join our blockchain certification course where we will uncover the fundamentals and emerging trends of blockchain and web3.0!

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