What is blockchain ?

What is a blockchain? ” This is the first question that should be clearly answered before jumping into the complicated world of ‘crypto’ space that today include multitude of different elements such as digitization or one might call it tokenization of assets or equity, attempts to create alternative digital money or digital gold as store of value, trading digital assets on crypto exchanges, smart contracts and many more.

All of that emerged after the introduction of blockchain’s first successful application which is: “Bitcoin: A Peer-to-Peer Electronic Cash System“. Some like to argue that blockchain and bitcoin are two completely different animals and one can exist without the other. Today it is true that blockchain technology can exist without Bitcoin as a separate ‘organism’ but before announcement of the white paper by mysterious author called Satoshi Nakamoto in the fall of 2008 and around the time of successfully running the Bitcoin software that created its first block on January 3rd 2009 there was no such thing as blockchain without Bitcoin. You will not find the exact word “blockchain” in the original whitepaper as the closest to that term that appears is “chain of blocks” or “chain of hash-based proof-of-work”.

A blockchain is…

People learn in different ways and have different backgrounds so one explanation can be perfectly clear to some while to the others it might not explain anything at all thus it’s very useful to bring many different sources to answer it.

The answer to what is a blockchain can be simple or very long and complicated if you want to go into all of the technical details. I say that so you know that there’s more to it than just a simple explanation and if someone is interested there is a vast knowledge behind the whole what’s blockchain, but let’s start simple by providing variety of definitions:

1: Blockchain or distributed ledger technology (DLT) is a type of database containing a number of transaction records (log of transactions) wrapped in bigger containers called blocks. All blocks are linked together and each new block have information about all previous blocks. The idea is that by distributing this database in a peer-to-peer fashion (like torrent network) between multiple participants of the network, state of the correctness of database can be publicly verified by each member of the network as each participant have its own copy of the database or one can call it a shared ledger or blockchain. That leads to decentralisation of records providing lack of single point of failure. The verification is done through running software that checks the validity of current state against preprogrammed rules that all of the participants must obey leading to global consensus upon the current state of blockchain.

In essence blockchain provides decentralised record of any type of information that is easily auditable.

2. Lightning network whitepaper explains :

The blockchain is a gossip protocol whereby all state modifications to the ledger are broadcast to all participants. It is through this “gossip protocol” that consensus of the state, everyone’s balances, is agreed upon.

3. Bitcoin.org explains:

The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. It allows Bitcoin wallets to calculate their spendable balance so that new transactions can be verified thereby ensuring they’re actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.

4. PwC created an infographic as well that might shed some light into what a blockchain is.


5. Very simple explanation from the article “Blockchain is the censored word for Bitcoin” by @Rhythmtrader :

“…the term “blockchain” in the literal sense just means a “chain of blocks”, a list of records, called “blocks”- quite similar to that of a spreadsheet. The pages of this spreadsheet are cryptographically linked together, one after another. This concept goes back nearly thirty years in cryptography and computer science, but the term and technology have been made popular recently due to the way the Bitcoin Network has emerged…’

6. For those who like watching or listening here is a very informative video explaining the whole concept at different levels of complexity:

7. And one more visual explanation by Amanda B. Johnson :

Additional explanation

By design it should be very difficult to alter once something has been written to blockchain. Integrity of stored data can be verified by all participants that are running it by simply following the hardcoded rules and checking the state of their database against other participant’s databases. Appending of data to this database comes in a form of blocks. Each block contains multiple records which amount is capped by the size of the block measured in bytes. Anyone running this software can add their record and after specified period of time all of them are finally wrapped in a form of data block. For bitcoin that time is approximately every 10 minutes. That means that a blockchain is a database where records are kept in blocks of certain size (1MB for Bitcoin blockchain). By running the software all participants have their own copy of the database which they can check against all other participants to validate correctness of the global state of the blockchain. If all the records are identical then the consensus is kept and blockchain is running as it is supposed to. Each newly added (mined) block to the network contains information about all the blocks that came before itself thus alteration of any data that was stored earlier than in current block would change the ‘signature’ of all the previous blocks and integrity of the network would not be kept. That in turn would immediately reveal incoherence to all the participants that keep their copy of blockchain database.