Blockchain simple explainer

What is a blockchain?

A blockchain is a very specific type of database which is distributed. It’s not just sitting at one place, but copied amongst literally thousands of different locations on thousands of different computers.

The blockchain is also protected. It’s very hard, if not impossible to hack, and once data is recorded in the database it can’t be changed (or at least that’s the theory).

A blockchain is a chain of blocks. On the Bitcoin blockchain, what’s in the chain is a list of Bitcoin transactions. If I send money from my address to your address, its recorded in the Blockchain. What makes the recording of this transaction so secure is the concept of hashing.

A hash is like a fingerprint. If you take a piece of digital data (like a song lyric for instance), and run it through a hash algorithm, it will produce a unique number. This is meant to be a simple explanation, so we won’t go into quite HOW the hash algorithm creates an entirely unique number. Suffice to say, complicated mathematics are involved.

Back to the block…you’ve got a block of transactions. The entire block of transactions is hashed. So an entirely unique fingerprint is created which identifies that block of data. That unique fingerprint can’t identify any other block of data, just that data.

This unique fingerprint is added to the block of data, which we’ll call block A.

When the NEXT block in the chain is created, (we’ll call it block B), we put block A’s fingerprint on it as well. When block B’s transactions are hashed, they’ll include block A’s hash fingerprint as well, and so on.

So these are unique numbers. Let’s imagine that we go down into a block and we change a transaction. Say we change the fact that I transferred 1 BTC to you in 2017, and we change it to me transferring 2 BTC to you.

The unique fingerprint no longer matches because all you have to do is to change one character in the original data’s text, and the hashed fingerprint will no longer match. So you’ve broken the chain of blocks of data in the blockchain. So in a chain of 100’s of different blocks, if you change just one character in the original block, it ripples all the way through the blockchain and the chain no longer works.

So that’s one way that the blockchain is secured. The other way is that it is duplicated across 1000’s of computers all around the world. So if one, ten or even a thousand computers holding duplicates of the blockchain were destroyed, there’s still be thousands more around the world which would still hold the blockchain data.