What is a Blockchain and How Does it Work?
A Beginner's Guide
By now you’ve most likely heard words and phrases like, Bitcoin, Cryptocurrency, and Blockchain in conversation or on the web.
If you’re like most people, you may also be wondering what exactly they mean.
You may also hear regularly from that one guy in your social circle who seems to always bring up the latest crypto-investment news—
Did you see what Cardano did this morning?
Man, my eth is blowing up!
If you find yourself continually nodding and smiling, whilst not having a clue what any of these statements mean, this post is for you.
What is a Blockchain?
Simply put, a blockchain is a public, digital financial ledger, “that makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.”
Confusing?
Let’s break apart this definition and put it into words that sound more… human, so to speak.
We’ll begin with the first half:
A blockchain is a digital financial ledger that is public.
Think about the spreadsheets your work may use to record transactions, or, by the same token, a written ledger a retail company would use to record their transactions from the register at the end of the day.
Easy, right?
Therefore, the key difference between a regular ledger and a blockchain is that a blockchain ledger is electronic and public.
In other words, think of a Google Sheets Document for recording transactions that anyone can view.
Now, let’s move on to the second half of the sentence.
“…that makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.”
Err… what?
Rearranged, we get:
Through the use of decentralization and cryptographic hashing, the history of any digital asset is unalterable and transparent.
Connecting this back to our analogy above—a blockchain is akin to a public Google Sheets Document that anyone can view—how do decentralization and cryptographic hashing come into play?
First, let’s figure out what both of these terms mean.
What is decentralization?
According to our friends over at Investopedia, decentralization is…
[a] market…which allows buyers and sellers of securities to deal directly with each other instead of meeting in a traditional exchange.
Pretty simple, right?
An example of this in action would be selling something you own at a garage sale, versus buying it from a seller on Amazon.
What is Cryptographic Hashing?
In layman’s terms, Cryptographic Hashing is essentially what creates the resulting data that fills the next available spot—or block—on the blockchain ledger, which is made up of a series of numbers and letters.
It is the mathematical function that builds the transaction data for all to see onto the blockchain and is, as aforementioned, what creates the blockchain.
We’re Almost there.
How do All of These Concepts Ultimately Come Together?
A Blockchain is a digital, public decentralized ledger made up of unalterable and transparent data points that are linked together in a chain.
It’s worth noting that the term blockchain derives from the results of the cryptographic hashing above.
The blocks of data are, literally, linked together in a chain.
Thus, Block-chain.
A quick look at Blockchain.com’s BitCoin Explorer not only illustrates the origins of the name in action, but also the entire concept of a Blockchain.
Pour Conclure
At first glance, especially for ‘non-tech individuals, the crypto world can appear to be downright terrifying and confusing.
However, by tackling each bit of the definition of Blockchain one by one, we were able to successfully define the term in an easy-to-understand manner.
Until next time.
Your Pal,
Alexander
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Sources
Blockchain Technology Defined by Built In