How to Understand Blockchains (A Beginners View)

What’s this?

Yet another learning curve?

The only thing with this topic is that it’s likely here to stay. So we’ll probably need to learn about it eventually – like it or not – so why not start sooner than later?

How to Understand Blockchains

Initially, blockchain was only another computer science term for nerds on how to share and structure data. But now, blockchains are seen as the ‘fifth evolution’ for the entire computer movement.

Blockchains represent an exciting new approach to the distributed database. What’s innovative about it is how it incorporates old existing technology in brand new ways. One way to view blockchains is they are distributed databases controlled by a group of people who store and share that information contained within.

Types of blockchains

As with most technological entities, there are several different types of blockchains and associated blockchain applications. Blockchain has become a technology that is all-encompassing and integrates with many platforms and hardware worldwide.

The term ‘blockchain’ refers to a data structure that allows for a digital ledger of data to be created and shared throughout a vast network of independent parties. Let’s look at the major types of blockchains.


Public blockchains

Bitcoin is an example of a public blockchain. They represent an extensive distributed network that is processed through a native token. These types of blockchains are entirely open for anyone to take part at any level. They are characterized by the open-source code that their community administers and maintains.

Permissioned blockchains

These blockchains are ones where the different roles that an individual can play are controlled within that particular network. They are typically large and distributed systems that also use a native token. And their core code could be open source, but this is not always the case.

Private blockchains

These private blockchains are usually much smaller networks and don’t use a token. Membership within these networks is very closely monitored and controlled. These types of blockchains are preferred by groups that have trusted members and who exchange confidential information.


These three types of blockchains are similar in that they use cryptography that allows participants within a given network to manage its ledger in a secure way. And a central authority to govern and enforce its rules are not needed.  This removal of a central authority from the database structure is the most powerful aspect of a blockchain.

Blockchains serve to create a record and history of a given transaction. The permanence of these records is determined by the permanence of their underlying network. Within the working paradigm of blockchains, this means that a majority of a given blockchain community must agree before any information and data can be changed.

Whenever data gets recorded in a blockchain, it’s pretty difficult to modify or remove it. And whenever someone attempts to enter a new record to a blockchain, the users of that network, who possess the proper validation control, must verify the transaction. This is where things can get sticky in a blockchain, as each one has a slightly different outlook on the way transactions should be verified.

What blockchains do

As we already mentioned, blockchains are a peer-to-peer system that has removed a central authority who manages the data and information flow. The primary way of removing this authority, while maintaining data integrity, is by having an extensive network of independent users. This cannot be accomplished without having numerous network computers at different locations. These different computers are typically called full nodes.

As a way to prevent corruption within a network, a cryptocurrency is used. Cryptocurrencies are digital tokens that have a market value at any given time. These cryptocurrencies are even bought and sold on exchanges in the same manner as stocks in the financial markets.

Each cryptocurrency functions a little differently for every blockchain. Essentially, the hardware is paid by the software to operate the exchanges. The software is located in the protocol of a blockchain. Several blockchain protocols are already well-known to many of us. We recognize them as Bitcoin, Ripple, Ethereum, Factom, and Hyperledger. A blockchain’s hardware is comprised of many full nodes that help keep the data secure within its network.

Why blockchains matter

This ‘fifth evolution’ of computing, as blockchains are often called, actually represents the layer of trust missing from the Internet. Experts have long maintained that Internet originators gave no thought to security when it was first constructed. As a result, there have been wide security gaps within its digital infrastructure. Many tech pundits are quite excited about the prospects of blockchain resolving this long-standing issue.

They believe that blockchains will instill trust in future digital data. When data and information are written in a blockchain database, it’s virtually impossible to remove or hack them. Such capability has never been available before.

This means that future data will be reliable and permanent within a digital format, and we can now perform business transactions online in ways that could only be done offline in the past. All things in the analog world, such as identities and property rights, can now be maintained online.

Final thoughts

Can we finally say bye-bye to these bureaucratic processes that have hampered progress for so long? Is blockchain an administrative system that is finally capable of moving side by side with the speed of today’s technology?

Supposedly transactions that took months in the past will only take minutes in the future with blockchain. It’s hard to comprehend how such a digital financial  system will affect the global economy.

Such a system is long overdue, I say.