Blockchain is being deemed as the technology that could change the entire landscape of the internet and how information is being distributed and utilized. The term blockchain has become synonymous with “get-rich” schemes on the one hand and all types of shady internet dealings on the other.

This goes to show that there is still a lot to be learned about the blockchain and how it works.


A blockchain is not as alien a concept as you might be led to believe.  To understand blockchain, you can think of any information that can be shared between multiple people with changes made and updated by anyone in this community of people.

Microsoft Word vs. Google Docs

An example of such a system that everyone can relate to is a Google Doc. This analogy was used by William Mougayar, a blockchain specialist to explain how a blockchain works. Before Docs, the conventional way of sharing documents between users was sending a Microsoft Word file back and forth from one person to another.

This involves a tedious process of sending a document and then waiting for it to get updated after which you would receive it before you can even see or make any other changes as you want. This is how traditional databases work where a record can only be worked on by one party and remains locked for all other parties in that time period. All banks operate in this manner where the bank closes access to funds when a transfer is being made. Following this, the other side is updated, and then access is reopened.

With the use of Google Docs (or Google Sheets), all parties have access to the same version of the document at the same time which is always visible to everyone. This system is a much better way to handle documents because all confusion about versions will be eliminated and all parties are aware of any changes. There is no need for a third party to validate changes either as in the case of a bank.

How does this relate to Blockchain?

The blockchain is a technology that facilitates the distribution of information across a network of users.  When we say blockchain, we literally mean a chain consisting of a series of blocks of information.


It is a distributed ledger of transactions where new transactions can be added, but older ones cannot be edited or changed. It allows the users of the peer-to-peer network, or nodes, to keep track of all transactions without the need for a central authority.

To understand this better, let us look at the example of sending some information (contracts, records, cryptocurrency) from one person to the other using a blockchain.

  • You request a transaction on the blockchain.
  • The transaction is broadcast over the network which consists of the nodes.
  • Each node gets a copy of the blockchain that is downloaded automatically.
  • The transaction, as well as the user’s status, is verified by the nodes using certain algorithms.
  • Once the transaction has been verified, it is combined with other transactions to create a block of data for the ledger.
  • This block is, then added, the blockchain such that it cannot be altered in the future.


Blockchain was developed by an individual or a group of individuals calling themselves Satoshi Nakamoto in the year 2008 as the basis of the cryptocurrency Bitcoin.  It was made by using a combination of three already existing technologies.

  • Private Key Cryptography

Private key cryptography is required to authenticate the identity of an individual and proving authorization. A private key is a proof of ownership. This is even more important for a currency that is digitized and has no physical token of identity.

  • Peer to Peer Network

A distributed peer-to-peer network is necessary so that the correct transaction amount and type is broadcast over multiple nodes. By using a distributed network, the chances of information being hacked is reduced.

  • Blockchain Protocol

The blockchain protocol has its own rules for recordkeeping and security. Key features of the blockchain protocol are digital signatures, hash functions, private and public keys, and a proof-of-work consensus algorithm.

All these technologies need a more thorough understanding and will be explained in subsequent articles.


The blockchain is not limited to Bitcoin or any particular cryptocurrency. It has applications ranging from copyright protection to smart contracts, from the music industry to healthcare. All we need is a good understanding of how blockchain works to start reaping its benefits.  

Blockchain Infographic