What is Blockchain?


So you have heard ‘Blockchain’ and curious about it.

Before delving deep into blockchain, let me clear out a widespread confusion:


Bitcoin is a cryptocurrency, whereas blockchain is the underlying technology that makes it possible. In a nutshell, blockchain is a “distributed, decentralized, public ledger”. Sounds complex ha?

Let’s decomplex it (not sure if ‘decomplex’ is a word, but who cares!)

  • Distributed: it’s scattered throughout different systems
  • Decentralized: there is no central authority governing it
  • Public Ledger: recorded transactions are available for everyone to see

Blockchain was first introduced by Satoshi Nakamoto in 2008 when he wrote the white paper on Bitcoin – a digital, peer-to-peer cryptocurrency. It is interesting to know that Satoshi Nakamoto’s identity has never been revealed. Some believe that Satoshi Nakamoto is not a person, but a pseudonym for a group of people who collectively invented Bitcoin. Since the birth of bitcoin, many have claimed to be Satoshi, but none proved convincing.

How Traditional Database Works

In a traditional database, information is stored, in a structured or unstructured way. This database is located on a server computer. And it is accessed via a client. In fact, many clients access a single database. Users accessing this database have different privileges. Some are authorized only to read the data, whereas others have permission to write into or change the database information. There is a central authority that allocated these permissions. The authority is called ‘Database System Administrator’.

This security setting generally serves well, but still have some shortcomings.

What if someone who does not have permission to access the database gains access, and modifies the database? What if the account of system administration is compromised? Here, we see at least two potential flaws in traditional database systems:

  1. Single point of failure
  2. A central authority governing it

With all the internet based on this architecture, these problems seem insurmountable, at least up until now. However, blockchain has a solution to these problems.

Blockchain is a special type of database which is installed on each user’s system.

Yes, you read it right!

A copy of the blockchain is installed on each user’s computer who uses blockchain. This is what makes it distributed and decentralized. In short, there is no such thing as database servers in the blockchain.

How A Transaction Takes Place in Blockchain

If a user wants to change his information, let’s say address, he will make the change in his copy of the blockchain. (Here, we assume that we already have a rule that says a user can change his/her information). Then, this change request is issued to all the systems/nodes in the distributed network. All the systems in the network must arrive at an agreement before that change is qualified as a valid change. This is known as consensus-based permission.

Once the change is granted by all the systems, a new block, containing the new address, is added to each user’s blockchain. On the other hand, if an unauthorized person tries to alter information in a blockchain, it will be rejected by other systems, and the change will not be recorded in the blockchain.

The blockchain is immutable. The blocks are added but can never be deleted. The change in the blockchain database is recorded as a new block representing that modification. This can be thought of as a financial ledger that captures all the transactions. For this reason, blockchain is sometimes referred to as a distributed ledger.

Additionally, each newly added block in the blockchain is dependent upon the previous block. So, if a hacker tries to change a block’s information, it will have to change each of its previous block’s information, in each of the systems of the blockchain network, all at the same time. This makes blockchain near impossible to hack, and the integrity of the database is well maintained.

In short, this new database called blockchain is distributed, secure, and authority to allow the change has been decentralized in it.

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