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What is a Blockchain?

Tuesday, October 26, 2021 04:23 PM | Neal Farmer
What is a Blockchain?

The term "blockchain" is seemingly attached to all kinds of new technology. The term gets thrown around frequently, and frequently without a lot of understanding about  exactly what it is.

A blockchain can become incredibly complicated but as a base concept, it is simply a type of database.

While a database is typically made up of separate tables for easy filtering, a blockchain stores data in blocks that are then chained together. Hence the name, block-chain.

Structure of Blockchain

A blockchain collects data in groups called “blocks” that each hold a specific set of information. Once that block reaches its storage capacity, it is attached to the previously filled block. This chain of blocks, each filled with its own collection of data, forms a blockchain.

A crucial factor of this database design is that once blocks are filled and attached to the blockchain, it is set in stone. The data cannot be changed and each block is given a timestamp when added to the blockchain. This creates a complete timeline of data across the blockchain that cannot be edited or manipulated (theoretically at least).

Using Bitcoin as an example, whenever a new transaction is entered, the transaction is sent to computers (nodes) globally that then have to solve an exceedingly complex math problem to verify the transaction. Once a transaction is verified, it is combined with other transactions into a block. Each block is then chained together, creating a complete timeline of transactions on the Bitcoin blockchain that cannot be edited while still being seen by anyone.


This process for transactions is what gives currencies like Bitcoin three huge value propositions: transparency, decentralization, and security. The ability to see a complete timeline of transactions gives Bitcoin extreme transparency but the blockchain also gives a decentralized structure to the coin.

Bitcoin needs a group of computers, or nodes, to store its data just like most databases. However, the difference is that all these nodes are spread across the globe and are managed by independent people. In a typical database, the computers are all held under one roof and managed by a central figure. For example, Apple’s database would be managed at Apple’s datacenters and operated by the company itself. For Bitcoin, each person who has a computer on the Bitcoin network stores the data.

This storage structure is what also gives Bitcoin its security advantages. In addition to computers having to solve a complex equation for each transaction that then must be approved by at least 51% of all nodes on the network, blocks of data are extremely difficult to modify.

In order to alter the contents of a block, 51% of nodes must again approve the modification. This is because each block contains its own hash and the previous block’s hash. Then if any information is adjusted, the hash code also modifies.

In practice this means that if a hacker adjusts the blockchain and wants to steal Bitcoin or another currency, then the altered copy would have to align with every other node's copy. When the computers cross reference with each other, the hacker’s copy would not align and therefore not be valid. In order for a hacker to be successful, they would need to control 51% of the copies of the blockchain (51% of nodes) to make their copy valid and agreed upon by the network.

Wrapping Up

All that said, a Blockchain boils down to a unique version of a database with its primary focus to allow digital data to be recorded and accessed, but not altered.

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