The what, why, and how of ‘blockchain’ technology

5 min readFeb 3, 2022

If you are a techie then you probably would have heard a lot about the ‘blockchain’ technology in the past year. However, most of us only have a vague idea about it and often tend to get confused.

So What Is A Blockchain?

As the name suggests, a blockchain is a chain of blocks that contain information. Blockchain’s history dates back to 1991 when a group of researchers published the article ‘How to Time-stamp digital documents’ in the journal of cryptography. However, it became prevalent only when Sathoshi Nakamoto, the creator of ‘Bitcoin’ implemented it in the year 2009.

The blockchain resembles a digital ledger. Although this ledger can be accessed by everyone on the network, it is an uphill task to change the data inside it. This is because every block has the hash of the previous block apart from its own, and therefore it becomes tedious for a cybercriminal to change the data. Blockchain is not cryptocurrency. Many misunderstand the two terms and their concepts.

“Blockchain is the tech. Bitcoin is merely the first mainstream manifestation of its potential.” — Marc Kenigsberg, founder of Bitcoin chaser

To understand this better, let us consider blockchain to be a smartphone or a tablet. Bitcoin is like a software application on it and so are other cryptocurrencies. Therefore, blockchain can be used for various other applications as well such as healthcare, banking, etc. The bitcoin blockchain stores details about transactions such as the sender, the receiver, and the number of coins that were sent.

The image above indicates the three main elements of a block.

A block also contains a hash. The hash of the block is similar to a fingerprint i.e. it is unique for every block and its contents. As soon as a block is created, its hash value is calculated. When data is changed inside the block, it will also cause the hash to change. In other words, hashes are beneficial when we want to detect changes that are done to a block.

The third element inside every block is the hash of the previous block. This element creates a chain of blocks and it is this technique that makes blockchain so secure.

Why is it necessary now?

Blockchains have been around for a while. However, its true potential has been discovered only recently.

Here are some reasons why blockchains are becoming mainstream today:

  • Increased Digital Processing Power

Blockchains require high processing power by design. This is due to the redundancy of data, storage distribution, and cryptography. Modern-day computers have more processing power which makes this task much easier.

  • Rapid Growth In Cybercrimes

A multitude of cybercrimes is taking place lately. With the increase in these crimes, it becomes challenging to protect data. Blockchain technology provides a better solution for this problem with its high-security features.

  • Rise Of Bitcoin And Cryptocurrency

Blockchain technology allows the exchange of cryptocurrencies such as Bitcoin, Litecoin, Ethereum, etc. without any intermediaries.

How does it work?

Several characteristics are necessary for developing or using a blockchain. The value of a blockchain is entirely dependent on the distributed security system.

Here are some key concepts that underpin the blockchain:

  • A Cryptographic Hash

As mentioned earlier, a cryptographic function converts an input of any length into a fixed-length string of characters that resemble the original string. A small change in the input can create a huge difference in the hash value. Also, one of the most important features of the hash functions is that the conversion is irreversible.

  • Unchangeable Digital Ledger

Since the hash of the previous block is also stored in each block, it is almost impossible for hackers to tamper with the blocks. Even if they successfully tamper with one block, it is impossible to modify the entire chain. Therefore, the blockchain acts as an immutable digital ledger where data cannot be modified.

  • Nodes

Instead of using a central entity to manage the chain, blockchains use a peer-to-peer network. Everyone with a computer can be a part of this network. Each person on this network forms a node. When a new block is created, each node in the network gets a copy of it. Next, the node verifies the new block to ensure that it has not been tampered with. If everything checks out perfectly well, each node adds this new block to its blockchain.

  • Consensus Protocol

All the nodes in a network create a consensus. They agree about which blocks are valid and which are not by a method called proof-of-work. Blocks that are tampered will be rejected by the other nodes in a network. Therefore, to tamper with a block in a blockchain successfully, the hacker needs to tamper with the rest of the blocks as well. He/she will also have to redo the proof-of-work for each block and control at least 51 % of the P2P network.

  • Mining Or Block Validation

Block validation is done by every node in the P2P network. Every time a transaction takes place, it gets stored in a block. This block later gets verified and added to the chain by a certain hash value. In order to create a hash, the nodes in the network need to solve complex mathematical puzzles. This process of solving these complex puzzles and creating new hashes is called ‘mining’. Once a new block is required, all miners on the network will start solving the hash puzzle. The miner who solves it first, receives the mining reward. This happens on a first-come, first-served basis.


Even though the blockchain proves to be a beneficial technology, it has its share of disadvantages as well.

  • Blockchain is not easy to implement and some of the concepts are still new and evolving.
  • Although blockchain technology is secure, security issues might occur in case of a 51 percent attack. According to Satoshi Nakamoto, a 51 % attack is when an individual or a group has more than 50% of the mining power. This prevents other miners from creating blocks or transactions.
  • Setting up the initial blockchain infrastructure can prove to be expensive. Therefore, it is not a very cost-efficient technology as of now.
  • Performance is a major concern in blockchain technology. Every transaction is distributed in the network and requires the approval of each node. This may require more time.

Though the future of blockchain holds significant potential, only little can be achieved if proper precautionary measures are not taken against the above-mentioned challenges.




24| Cyber security enthusiast| I write about everything from cyber security to short stories.